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What Is a Contract Warehouse and How Is It Beneficial?

Monday, December 22nd, 2014

There are a variety of warehousing options available to businesses of all sizes. Some companies choose to build and maintain their own spaces while others opt for a leased space. One of the most popular options is a contract warehouse space. Some benefits include lower costs, lower capital investment, guaranteed periods of service and reliability.

Contract Warehousing Defined

A contract warehouse handles the shipping, receiving and storage of goods on a contract basis. This type of warehouse usually requires a client to commit to services for a particular period of time. The length of time varies, often stated in years rather than months. The fee structure also varies based on transactions; it may be a fixed cost, cost-plus or a combination of both.

Lower Costs & Capital Investments

A company requires a large amount of capital to buy proper warehousing space. There are costs associated with renovating a building, purchasing equipment and staffing the facility. With contract warehousing, the facility is already in place and divided into zones for a variety of goods. This can include temperature-controlled storage, dry storage and general storage. The logistics company providing the space handles the employees, equipment and maintenance expenses. They are also responsible for most incidental expenses, which further reduces costs.

Locked-in Service Period

When you choose a contract warehouse space, you know that you will have access to it for a specified period of time. Whether you intend to use the space for a year or ten years, a contract protects your company from unexpected expenses. The contract will specify the annual or monthly cost, along with possible changes over the contract period. Additionally, there will be language that details the process for extending the contract period.

Reliability

Contract warehouses provide extra services related to packaging and distribution. These are useful services a business can use if expanding or experiencing sharp increases in demand. With a contract warehouse, a business can trust the logistics providers to keep goods flowing to and from storage on time. Developing long-term relationships with reliable partners is important to a business’ longevity. To create this requires both entities working together in an atmosphere of trust.

No matter how large or small your company is, choosing the right warehouse space to house your goods is of great importance. Make the smart choice. Limit your expenses. Define a specific service period. Provide increased customer service through high levels of reliability. Contract warehouses are a common choice, choosing CWI is a no brainer.

Commercial Warehousing