Contract Warehousing

PUBLIC WAREHOUSING: The contract is drawn up based on the number of months you expect to use the facility. As such, you will be required to pay on a month by month basis. For instance, if you have 500 pallets worth of goods in March, at the end of the month you will pay for 500 pallets worth of space but if in April, you have 300 pallets worth of goods due to a sudden sale, you will only need to pay for 300 pallets worth of space at the end of April. This is one example and may differ due to the agreed terms in the contract.

CONTRACT WAREHOUSING: The contract is usually drawn up based on the number of years you are using the facility. Why the large difference? This is mainly due to a trade-off for a larger number of services/ more specialised services available which will be further explained below.

PUBLIC WAREHOUSING: Historically, public warehouses often operate based on the movement of pallets. As such, some of the common fees incurred are pallet-in and pallet-out fees, storage of the pallets and certain administrative costs for documents or account management. However, the costs charged per pallet may differ based on factors such as difficulty in moving, how fragile the good is, the number of pallets that can be stacked, risk of theft, value of the good and other hazards that may be associated with the good. Furthermore, public warehouses can also support the storage of other goods such as drums of metal, rolls of paper and the like.

CONTRACT WAREHOUSING: As for contract warehousing, their operations are similar to that of public warehousing. However, there are a few additional pricing models available due to longer time periods.

• Activity-Based

For this aspect, it is similar to the way public warehouses are priced, based on the number of pallets stored and moving in and out of the area. In addition, contract warehousing usually charge based on a fixed area leased out. Depending on the terms in the contract, this may include a variable area charge that may be incurred if a surplus of goods need to be stored for a few months within your contract.

• Cost Plus

Due to the higher unpredictability of the type of goods stored, contract warehousing may adopt different pricing structure known as the “cost plus” which refers to the storage provider tracking the actual cost of storing and moving your goods and then marking it up by an agreed percentage. This is equivalent to having a private warehouse within the warehouse premises as space, workers and equipment will be dedicated to that area. This helps to ensure that the warehouse provider profits from the service as it eliminates estimating the costs needed to store goods of varying nature.

• Mix of Both

A third option can be a mixture of the above two methods or adopting alternative price methods. This is often not surprising as the nature of goods being stored can vary greatly from one customer to another. As such, as long as the warehouse provider and customer agrees, the warehousing solutions will be provided.

PUBLIC WAREHOUSING: In general, the types of services provided by public warehouses generally include, pick and pack warehousing, order consolidation and may include custom packaging or even light manufacturing services such as light assembling. Any additional services such as temperature controlled storage spaces or the like are usually dependent on the availability of the necessary equipment within the facility and may incur additional costs upon usage.

CONTRACT WAREHOUSING: As for contract warehousing, due to the longer time period, they are more willing to procure the equipment necessary to store your good as they are able to spread out their costs over the longer duration. Hence, a simple rule of thumb is that they are willing to store almost anything, as long as space permits and any additional costs in procuring the necessary equipment are paid for by the customer. Hence, they are usually able to accommodate a wider array of goods.