It is a great time to own and operate a 3PL warehouse, but it can also be difficult and challenging. There are not many available resources to answer questions and unknowns that are often encountered as a 3PL business owner or key decision decision maker. Owners and management often want to know how to increase revenue and profits in their 3PL warehouses, so we will go over the best options we know of to increase 3PL warehouse profits.
This list is not inclusive, and there is no one-size-fits-all solution. Evaluate your situation and take action on the items that seem most applicable to you.
6 Ways to Increase Your 3PL Warehouse Revenue and Profit
There are many reasons to focus on increasing 3PL warehousing revenue and profits. Some businesses may be negative and looking to turn around the ship, while other businesses may already be profitable and looking to improve existing margins. No matter the reason, consider improving your 3PL revenues and profits with one or more of these methods.
1. Better Use the Existing Resources At Your 3PL Facility
Every 3PL business has existing resources that are being utilized to generate revenue. The revenue your business generates today is directly correlated to the way your resources are being utilized. These resources are limited so the business must decide how to utilize each resource to maximize profitability.
How are our resources limited?
- If a forklift is being used for one job, then it cannot get used for another job at the same time.
- If 8 staff-hours are spent unloading a container, then those same 8 staff-hours cannot be spent doing anything else at the warehouse.
- Similarly, only 1 pallet can be stored in 1 pallet racking position so nothing else can be stored in that same spot.
2. Do More Jobs / Work At the 3PL Warehouse
After evaluating the use of the resources of the 3PL warehouse, there should be more available capacity for the team to complete more jobs with the same or similar resources. By freeing up some of the businesses resources, they will be able to do additional work that the 3PL then invoices in addition to the business’s existing revenue. The more work each resource completes, the more revenue the 3PL should be invoicing for. Ideally you are also targeting new business that is similar to your most profitable and ideal customers.
By doing more work of the same type as your ideal customers, your business will become an expert in a specific niche over time. By specializing in a specific niche, the 3PL offers more valuable to each of its customers and a compounding effect happens over time. That is, the longer you specialize the more value you provide to the customer and the more you get known for the specialization.
3. Store More Freight In the Warehouse
While evaluating the use of the 3PL’s resources, you may have created open space at the warehouse. The open space may be the result of more efficiently storing goods at the warehouse, from ending warehouse agreements with non-desirable warehouse clients, or taking on more square feet for your business.
Storing more freight at the warehouse is a sure way to increase 3PL warehouse revenues, and this often means your business can take on additional clients to fill the available space. Be selective in what clients you work with in the new space, and be sure that the clients filling the space will generate enough revenue to support the space and overhead costs. As previously mentioned, it would be recommended to fill the open space with more clients that are similar to your current most profitable or ideal clients.
4. Create More Sales Leads for the 3PL Warehouse
So you have available resources and/or space to do more work and store more freight now, but where do you find your future clients at? Do you wish prospects needing your services were reaching out to you directly requesting prices, or is this already how your 3PL gets its customers? There are many ways to get inbound and outbound sales leads for your 3PL warehousing business, but not everyone knows these options exist.
How can I generate outbound sales leads? Ie my company initiates contact (usually cold outreach) with a potential prospect.
- Buy contact or data lists from reputable providers
- Create your own lead lists by searching the internet or other directories such as the local Chamber of Commerce
How can I generate inbound sales leads? Ie potential prospects reach out to my company directly for a quote.
- Sign up to work with 3rd party business brokers, like Corporate Distribution Services. These brokers have vast networks and often do their own marketing. The broker gets leads in your area and sends them to you for review. You have no obligations to work with the prospect, and the broker has no involvement after you close the lead.
- List your 3PL warehouse with a warehouse network like Olimp, Crossdock Buddy, and Transload Now. These companies are building a warehouse network across the US for short-term warehousing projects. They get leads in your area and send them to you.
- Run Google Ads to generate qualified warehousing leads in your area. Google allows you to run ads targeting people in specific geographic locations that search for specific keywords. Since Google lets you target both the search term and the location of the user, the leads from Google Ads are very qualified and affordable. Note it normally takes 60-90 days for the ads to produce regular results.
- Run social media ads. Though we do not find this advertising method as effective as Google Ads, running ads on Social Media may produce results for some 3PLs. LinkedIn Ads are likely the best social media ad option to target 3PL warehouse prospects since LinkedIn users are on the platform in the context of work. Advertising on other social media platforms can be done, but it is less likely to convert to paying 3PL customers.
5. Charge More For Your Warehousing Services
Since your 3PL has now evaluated the use of its resources and is generating more Sales leads than ever before, the warehouse must decide what customers they will work with from all the leads that are coming in. There is no way the warehouse could work with every prospect that contacts your team, so being selective in who to work with is important. A critical factor to consider is how profitable the client is for the 3PL. While 3PL warehouse pricing must be affordable to the client, there are many clients that can afford to and are willing to pay more for great reliable service.
Most 3PL warehouses do not change their warehousing rates very often and many never change the prices at all. The rates have likely been the same for years or decades. Since there are many clients willing to pay more for the same level of great service as other customers, the only way to get these clients is by raising your current pricing. Then naturally, only the customers that are willing and able to pay for superior service will move forward with your team. If you do not raise your warehouse rates, then you never give anyone the opportunity to pay more for the great service that your team delivers.
Your team must deliver great reliable service that aligns with the customer expectations in order to charge higher pricing. Customers will not and should not pay higher prices for lesser quality.
6. Add New Service(s) to Your 3PL Warehouse
Adding new service offerings to a 3PL warehouse is very common in the industry. New services may allow a 3PL to increase profits more than could be achieved by only warehousing.
Most 3PL warehouses consider adding one or more of the following services.
- Trucking and delivery (no assets) – running ltl, truckloads, or partials of freight for clients using other people’s equipment and drivers
- Trucking and delivery (with their own trucks/assets) – running partials or truckloads of freight with equipment and people that they own or lease
- Drayage (with or without assets) – trucking ocean containers from port to warehouse
- Cross-docking and Transloading Services – short-term holding of palletized freight for short-term and one-off clients
- Kitting and bundling – short-term and one-off projects that require grouping and/or packing several items into a single sellable unit
Conclusion
There is no one-size-fits-all solution to increasing the revenue and profit in a 3PL warehouse, but there are several options to consider. The stakeholders of the warehouse should evaluate each of the identified points and determine what items are actionable for their 3PL.
A 3PL should consider one or more of the following means of increasing business revenues.
- Better use existing resources
- Do more warehousing jobs
- Store more freight
- Create more sales leads
- Charge more for warehousing services
- Add new services to the 3PL offerings