What Is Contract Warehousing?

Contract warehousing is an arrangement in which a partner warehouse agrees to receive, store and ship goods for a client. The contract dictates the terms of service and length of the agreement. The time-frame can vary from months to years and the fee structure can be fixed cost, costs-plus or a combination of the two. Contract warehousing agreements can provide for various other services including handling, packaging, shipping and inventory management.

Contract warehousing companies help businesses store goods in a central location so that products can get to their destination more efficiently. A centralized warehouse facility reduces both the cost of transporting goods after order processing and the delivery time-frame. Contract warehousing is a preferred alternative for many organizations because it lowers overall costs and capital investment. Since contract warehousing can provide access to a multitude of strategic warehouse locations, it’s no wonder that the practice has become a popular solution for businesses.

Contract Warehousing vs. Public Warehousing

Operating a private warehouse requires a level of daily involvement and inventory management that may not be attractive to you. This includes general upkeep and the logistics associated with keeping track of your items in storage. Contract warehousing and public warehousing provide a more hands-off approach. But what is the difference and which strategy is best for you?

A public warehouse is a space that can be rented for a given time period. Often used as a short-term resource, public warehousing may be the right choice for seasonal or less-involved storage needs. Public warehouses usually operate in a pallet in/pallet out mode, and billing occurs monthly by square footage used.

In public warehouses, space is available on a first come, first served basis. As a result, a warehouse might not have the space your company needs when you need it. In addition, there typically aren’t options for value-added services like pick and pack fulfillment, kitting, packaging and logistics with this type of arrangement.

In contrast, using a contract warehouse guarantees you will have access to a specified amount of storage space each month. That means you are more in control of your space and don’t have to worry about availability.

Contract warehouses are also able to accommodate client needs such as pallet reworking, pick and pack order fulfillment and quality control checks. Contract warehouses work well for companies with medium- to long-term storage needs or those looking for a larger portfolio of warehousing services.

Benefits of Contract Warehousing

Using a contract warehouse means that you don’t have to worry about managing day-to-day operations of inventory management. For many companies, that’s a big selling point. By leaving daily warehousing operations to the experts, businesses are able to flourish by sticking to their core competencies.

Here are some of the main advantages of contract warehousing:

Lower capital investment

Buying, building or expanding a warehousing space requires a considerable amount of capital. With contract warehousing, the facility is already built and businesses bypass capital costs by partnering with commercial warehouses to utilize the space they already have.

Lower costs and fees

In addition to reducing capital requirements, contract warehousing companies offer specialized services and procedures plus expert manpower that increases warehouse efficiency. This translates to improved customer satisfaction and cost savings. Entering into a contract warehousing agreement also helps you avoid fees associated with running a warehouse yourself. These fees include facility renovation costs, utilities, maintenance and various others.

Value-added services

For companies with very specific warehousing needs, the option to capitalize on value-added warehousing services can make this type of arrangement especially valuable. Contract warehouses can not only store your products, they can also take care of pick and pack order fulfillment, quality control checks, product handling, packaging, kitting, shipping and inventory management.

Advanced inventory management

A commercial warehousing operation can offer state-of-the-art inventory management compared to in-house or public warehousing options. Because a commercial warehouse’s experts manage your inventory, you don’t have to go through the learning curve associated with getting your own new employees up to speed.

Greater reliability

Businesses can trust a contract warehouse with a good reputation to keep goods flowing to and from storage on-time. This reliability can be crucial to customer satisfaction and the long-term success of your business.

Using Contracting Warehousing to Your Advantage

Businesses can gain a competitive edge over their competition by taking advantage of contract warehouses. By allowing warehousing and logistics experts to sort, store and transport your inventory, you leverage an expert resource instead of spending time and money on trying to get it right yourself. So, you can rest assured knowing that a team of specialists is taking care of your inventory while your team focuses on hitting your business growth objectives.

NewStream Enterprises, LLC is well known in the industry and we offer expert contract warehousing services in Springfield, Missouri, and Joliet, Illinois — centralized locations that provides coast-to-coast reach.

Wondering if contract warehousing is the right solution for you? Contact us and one of our friendly team members can talk with you about your objectives and answer any questions you have.