What is Contract Warehousing?

Warehousing isn’t always as simple as it sounds. While someone who doesn’t know the industry will assume that all warehouses work in the same way, those in the know will be aware that it’s just not that simple. There are several warehousing options available to businesses that need to store goods offsite, but we’re going to be focusing on contract warehousing. What is it, why is it beneficial and what are the other warehousing options on offer that you can choose from? Let’s take a closer look:

What is contract warehousing?

Contract warehousing is when a business stores its inventory in a third-party warehouse or storage facility. The warehouse will have an owner and they will allow a business to store their stock onsite for a fee. The inventory will be housed on behalf of the client. As the name would suggest, the client and the warehouse owner will enter into a contract together. The contract can last anywhere from a week to years. Two different contracts could be drawn up: a fixed fee structure or a cost-plus model. 

Depending on the terms of the contract, the warehouse will be able to carry out a range of warehouse services on behalf of the client. This can include handling, packing, labelling, fulfilment and more. If you’re considering contract warehousing, make sure you discuss your exact needs and requirements with the warehouse owners, and then thoroughly read the contract before agreeing. 

What are the benefits of contract warehousing?

You might now be wondering what you can get out of choosing contract warehousing over other options. It’s a good question, and we have the answers for you. Here are just some of the ways contract warehousing can be beneficial to a range of businesses, from lower capital investment to enhanced reliability:

• Lower capital investment – building or expanding a warehouse comes with considerable cost. But when it comes to contract warehousing, the premises are already built. So you don’t need to invest as much capital in contract warehousing as under private arrangements, for example
• Decreased costs and fees – reducing capital requirements will free up some cash for other aspects of your business. From showing your employees that they’re valued, in the form of a pay rise, to upgrading your warehouse equipment, decreased costs and fees are always welcomed
• Increased value-added services – it gives your employees more time to focus on other tasks that their role requires. Often, it frees up time for workers to spend on value-added tasks rather than laborious jobs that can be automated with a warehouse management system (WMS)
• Advanced inventory management – State-of-the-art inventory management is the key to ensuring you have the right amount of stock at all times, as well as ensuring stock rotation for products that can expire, such as food and cosmetics
• Enhanced reliability overall – businesses are more likely to trust a warehouse that has a good, solid reputation concerning stock availability and impressive delivery times. It also boosts the trust your customers have in you

What are your other options?

While we now know what contract warehousing is, you might be wondering what other warehousing options are available for businesses who need somewhere to professionally store their inventory. We’ll be taking you through the other plans and options that are offered to businesses needing pallet storage and movement. 

Private warehousing

This does what it says on the tin, so to speak. Private warehousing is undertaken by wholesalers and manufacturers. The company will either own the warehouse or lease it. If you choose private warehousing, you will be completely responsible for inventory management and warehouse operations, including implementing your own warehouse equipment, employees, WMS and more.

Public warehousing

Also known as ‘shared warehousing’, this type of warehousing option means that the client doesn’t contract for space or resources. Instead, they will share their warehouse space with other businesses and companies that need a space to house their inventory. The bill is calculated based on the number of pallets that come in and out of the public warehouse. The fewer pallets that move, the less space that company is taking up. A such, their bill will be lower than a business that needs more space, for instance.

Contract warehousing

We have already touched on what contract warehousing is. But it does make up one of the many options available to businesses that would require such a facility. It’s also referred to as ‘dedicated warehousing’. It’s done when companies need much larger premises to store their inventory and stock. Contract warehousing isn’t suitable for smaller businesses. So it’s more advantageous for companies with a higher turnover of goods and profits.

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Multy Lift has over three decades of experience in the material handling industry. We have been providing customers throughout the UK with quality forklifts, reach trucks, order pickers, stackers, pallet trucks and more. We can also supply industrial cleaning equipment and chemicals, alongside warehousing racking and mezzanine flooring. In addition, for those on a budget, we can also supply used forklifts and a complete range of used warehouse equipment. For all of your material handling needs, look no further than Multy Lift. For more information, get in touch with a member of our friendly, knowledgeable team today – we can also provide forklift hire you can trust!