Warehousing is an integral part of many company operations. It allows them to store materials, supplies, and finished goods before final delivery to manufacturing sites, customers, and retailers.
While some may believe that a private warehouse is the best option, there are three main reasons that contract warehousing is a better option.
Companies that own and operate their own warehouse facilities are limited to the amount of space they have available to them. Therefore, any increases in the amount of space needed cannot be accommodated without a significant investment of time and capital. What’s more, a large warehouse that is underutilized becomes a financial burden, rather than an advantage.
Contract warehousing, on the other hand, can be adjusted depending upon the needs of the company. Increasing the space rented can accommodate an increase in product demand. Likewise, if the company is downsizing, a smaller area can be provided with ease.
Some companies cite a lack of control as their reason for avoiding contract warehousing. The belief is that keeping the warehousing activities in-house allows them to manage all aspects of the process and avoid problems.
This, however, is not the case. Inexperienced management, lack of employee training, inadequate equipment, and ineffective tracking contribute to a lack of control and increase the likelihood of failure. With a third-party warehousing company, businesses can achieve even greater control. Electronic inventory monitoring and daily reporting, provided by experienced, highly trained managers and employees help keep companies in the loop and assures there are no surprises down the road.
While many companies deem themselves successful when their profits rise, others are more concerned with the capital turnover, which is the ratio of assets to sales revenue. Reducing assets held by the company is one way to improve that ratio while increasing sales is the other. Companies focused on reducing assets benefit greatly from contract warehousing.
Since a contract warehouse is not an asset for the company, its value does not affect the capital turnover ratio. It also reduces the liabilities associated with owning a warehouse such as property taxes, maintenance, and repairs.
Adequate warehouse space assures that companies can continue to operate efficiently. It’s no secret that private warehousing is risky, difficult to control, and expensive. However, contract warehousing offers a great deal of flexibility, control, and financial security. The clear choice, then, for companies of all sizes is to partner with a reliable contract-warehousing provider.
Need help securing a contract warehouse for your business needs? Give the team at CWI Logistics a call today.