When considering warehousing various products, it’s important to know the difference between Public warehouses and Contract warehouses. These days, the majority of warehouses are both public and contract. Those terms basically refer to the particular details of the agreement between you and the warehouse.
The operation of a Public warehouse is designed around a “pallet-in-pallet-out” system. One would pay a fee for a pallet of product to be handled and stored. The invoice amount would depend on the number of pallets you use and the length of time it was stored.
There is no commitment to storage space. Therefore, the agreement begins when the pallet is unloaded at the warehouse and ends when it leaves. If a large number of pallets are stored and there is a continuous inventory rotation, keeping track of each pallet and invoice would be very time-consuming.
In that case, it may be wise to agree to pay the handling (the in and out) when the pallets are unloaded. Then, use a monthly average of pallets in the warehouse throughout the month for a monthly invoice. So, if you average 250 pallets in June and 400 pallets in July, your June invoice would be much lower than July.
A Contract warehouse implies a more significant contractual agreement and typically a much longer-term contract. Where a Public warehouse contract is customarily a month-to-month agreement, a Contract warehouse may be a multi-year commitment. In addition to the longer yearly terms, instead of invoicing for each pallet or individual product coming in, you and the customer would agree to lease a certain amount of square feet for the contract’s length.
If the agreement was 50,000 square feet, the customer would pay a certain dollar amount per square foot regardless of how much square footage is actually used. If the product only covers 25,000 square feet, the charges would still be for 50,000. Why would any customer want to agree to that?
Because included in that fee are any special shipping, handling, and storing requirements, the customer may need to keep their business running smoothly. Palletizing, packaging, special securement regulations are examples of what a customer may need to be done. Because of the “umbrella agreement” covering multiple years and an extensive amount of space, a Contract warehouse would do what it takes to satisfy all of the customer’s needs.
Here at Sibley Warehouse, we can accommodate both Public warehousing and Contract warehousing. We are happy to adapt our operations to fit your specific requirements. Contact us for a quote today!