Advantages and Disadvantages of Contract Warehousing

Advantages and Disadvantages of Contract Warehousing

The decision to outsource all or part of your company’s warehouse operations is a big one, particularly for small and medium sized businesses. Whether you have outgrown your own warehouse space or you’re expanding into new markets and need to operate out of a new location, contract warehousing may be the right solution. Your specific needs will determine which specialized services you may need, but there are some general advantages and disadvantages of contract warehousing to consider over running all warehouse activities in-house, whether you’re a supplier, manufacturer or retailer or whether you outsource some or all of your warehousing functions.

Disadvantages

Less Control

This is generally the main argument for businesses that opt to do it themselves. However, with changes in consumer expectations and growing complexities in the industry, contract warehousing often results in a better customer experience than a business can provide doing it alone. With contract warehousing, businesses can achieve greater control  by clearly defining needs and understanding the range of services available. Choosing the right provider can make all the difference.

Difficulty Finding a Good Match

Depending on your specific needs, the search and selection process can take some time and if not conducted properly, the result may not be as beneficial as it could be. There are many resources available online to assist you, including our list for small and mid-sized businesses that selects the top providers by region. View our list here.

Benefits

Lower Capital Investment

Small to mid-sized businesses may not have the resources on hand needed to acquire new facilities and equipment. Cost and availability of labor both to operate and manage additional warehouse space is another important consideration. The process of establishing a new warehouse operation is also time consuming and resources may be better applied elsewhere that leads to growth. Contract warehousing requires less financial investment upfront and less commitment overall. Suppliers, manufacturers and retailers can benefit from facilities that are already set-up for their specific needs, such as temperature-controlled storage or approved food-grade facilities and respond to growth quickly and efficiently.

Eliminates Risk

With less of a commitment needed overall, contract warehousing allows any sized business to avoid taking on risks associated with the long-term investment of developing a larger warehouse operation. Contractors are warehousing specialists and typically have multiple clients so they can assume the responsibilities of running the warehouse and offer more flexibility to each client.

Scalability

Contract warehousing allows you to use only what you need. This flexibility is especially important if your needs change over time, such as seasonal changes. It also allows smaller businesses to benefit from equipment or procedures that would be too costly to implement on their own.

Better Efficiencies of Operations

Contract warehousing can lower your operating and distribution costs significantly. Warehousing is only one part of your entire business operation, but for contractors, that is all they do so they are able to streamline their processes, lower operational costs and pass on the savings to you.

Conclusion

Contract warehousing is a valuable option for handling your company’s growth. For most small and medium sized businesses, the advantages of contract warehousing far outweigh the disadvantages. For companies doing business in Hawaii, the benefits of contract warehousing are particularly favorable when choosing a provider on-island, such as Delivery Hawaii, because of the proximity of the warehouses to your customers. By storing inventory on the islands where your customers are, you can lower your transportation costs and reach your customers faster.

If you have customers in Hawaii, find out how much you can save.

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