When looking for third-party warehousing solutions, your options will come in one of two types: contract or public warehousing. On the surface, the two can appear interchangeable and it can be hard to tell what public warehousing is when compared to contract options. Each is run by a third-party operation that offers storage space, better shipping rates, seasonable scalability, value added services, and so on. But there are several public warehousing disadvantages you ought to be aware of.
But before we get to the pros and cons of a public warehouse, let’s highlight the differences between public and contract warehousing.
The main differences arise when looking at where each warehouse type places the most focus and how this shapes its relationship with clients. Public warehouses are ostensibly meant for short-term rentals even though they can and are used by companies as a long-term logistics and fulfillment solution. Contract warehouses are designed for long-term use of both space and services. It is from this core difference that the main disadvantages of public warehousing become apparent.
All that said, let’s take a look at some of the public warehousing disadvantages.
Both contract and public warehouse companies allow clients to rent space from a shared environment. The amount of space can be scaled up or down as needs dictate. This can, however, create situations where you may need extra space but none is available since it is all being used by other clients. The risk of this is highest during peak seasons—exactly when you can least afford to run into the problem.
As with the communication issue, contract warehousing avoids this problem due to the contract process itself. You can lay out how much space you wish to use during each part of the year in order to preserve the ability to scale your operations and ensure adequate room. Alternatively, you can arrange to contract the entire warehouse and use all the space you like. This particular option is not usually available with public warehouses since the short-term focus of their business model makes such prospects too risky.
The short-term focus of public warehousing means that many included features, such as inventory management systems, are standardized and provided without major adjustment to each client. Depending on your business, this may not be a problem.
One of the cons of public warehousing, however, is that should you already be using an incompatible system, or if your business has inventory needs or practices the assigned IMS doesn’t account for, you will be out of luck. Sure, you’ll be able to bring your preferred system along with you, but there’s no guarantee it will be able to communicate properly with the systems used by warehouse staff.
With contract warehousing, elements like communication infrastructure are gone over and established beforehand. The systems you use, and how they will be able to communicate with the warehouse, will be laid out during the contracting process. Since contract warehouses operate on longer-term relationships, there is more incentive to accommodate and support individual needs rather than take a blanket approach.
No Specialized Services
Some e-commerce providers (maybe even your business) require specialized services that are designed to meet the unique demands of your specific business process, products, location, etc.
And if you do indeed require these types of specialized services, you likely won’t be able to access them at a public warehouse. This can be a rather large public warehousing disadvantage as, if you need these services, you’ll have to search them out from a third-party provider on top of the cost you’re already paying for the warehouse. In other words, this usually means a substantial extra expense for your business.
What’s more, even if you don’t need these specialized services but they can enhance and optimize your workflow, any money saved on a public warehouse may be offset or even dwarfed by how much you could save with these specialized services that are much easier to orchestrate in a private warehouse with an experienced third-party logistics support provider.
While a public warehouse may seem like a cheaper option in some circumstances, that initial cost may actually be deceiving.
As mentioned above, specialized services, for example, can add additional costs. But that’s not the only way that your warehouse cost can grow beyond what’s first advertised.
If the public warehouse is far from your business, the transport costs can begin to pile up in a hurry.
In addition, a private warehouse can reduce cost per unit of storage when handling large volumes of a product or products. A private warehouse can also often help with scaling, as there are fluctuations in space availability in public warehouses, whereas in a warehouse setup by a third-party logistics provider, you’ll be able to accurately predict how much space you have and when you’ll need to add additional room long before it can become a problem, allowing you to be proactive and circumvent growth-related headaches.
Maximize Your Warehouse and Keep Costs Low with APS’s Warehousing Service
Managing and storing inventory is critically important to your e-commerce fulfillment business—and a critically important element of inventory management is warehousing. With the right warehouse setup, you can substantially reduce costs, boost margins, and develop an overall more efficient delivery pipeline.
And in order to achieve all those benefits, you’re better off working with a top third-party logistics provider like APS Fulfillment, Inc.
We offer full-service e-commerce fulfillment out of Miami that includes state-of-the-art warehouse management software (WMS) and we make inventory management and goods tracking easy. We’ll also support your business and automate the warehousing, prepping, shipping, picking, and packing of your orders!
Get in touch with us and one of our consultants will tailor a fulfillment plan designed to grow your business. Book a consultation by calling (954) 582-7450 or email [email protected].