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What Is a Contract Warehouse?

What is a contract warehouse

What Is a Contract Warehouse?

A contract warehouse is a third-party logistics (3PL) storage facility that stores goods on behalf of a client. The client and the warehouse enter into a contract, which can range from months to years. The agreement may have a fixed fee structure or operate on a cost-plus model. Contract warehouses can also perform many other services, such as handling, packing, labeling, fulfillment and similar activities. Let’s talk more about this potential solution for your long-term storage needs and how to find warehouse contracts that will work in your favor.

 

Contract Warehousing Defined

Many companies need to store their goods or supplies for various reasons, and contract warehousing is one of the many storage options they can choose from. Companies that don’t want to build, buy or rent their own warehouse space can contract out to a company specializing in warehousing. This company will handle the storage, shipping and receiving of merchandise on behalf of their client. They can also add value by taking on more logistical tasks such as inventory management.

Differences Between Contract Warehousing and Other Options

One of the main differences between contract warehousing and other popular options like shared warehousing is that a contract warehouse is dedicated to a sole client. All the warehouse’s resources and the entire facility go toward one company’s goods. The tenant commits to occupying that fixed space and relies on the contract warehouse to manage it. Because of this factor, contract warehouses usually require their clients to commit to a specific contract length, often months or years.

There are two other variations on the contract warehousing model. The first is when the contract warehouse company owns the physical facility and allows the tenant company to operate it with their own employees and equipment. In the other alternative, the client owns or leases the warehouse facility and hires a contract warehouse to staff it and handle all operations. Contract warehouses may also parcel out a larger facility for several contract clients. In this arrangement, the contract will dedicate a certain amount of square footage and resources to each client.

Contract Warehousing

 

Contract Warehousing vs. Public or Private Warehousing

When your business needs more storage capacity, you have three options to expand your warehousing. They include:

  • Private warehousing: When a company uses private warehousing, it owns or leases the warehouse building and is 100% responsible for managing inventory and warehouse operations. This approach is highly involved and requires a hefty investment. Typically, it takes 30 years to see a return on investment when a company builds a private warehouse.
  • Public warehousing: Under public or shared warehousing, the client does not contract for a dedicated amount of space or resources. Instead, they share the warehouse with other clients. They pay a monthly bill based on the number of pallets that come in and out so they can occupy more or less warehouse space depending on their inventory needs. While the client only pays for the space they use, the warehouse operates on a first-come, first-served basis. A public warehouse may not always have the space you need if your inventory fluctuates often. Usually, these warehouses work best for short-term storage needs, such as seasonal inventory.
  • Contract warehousing: Since contract warehousing dedicates a certain amount of space on a long-term basis, it’s the best option for companies with a consistent inventory volume. Contracts usually last years so they work well for medium- and long-term storage needs.

 

Benefits of Contract Warehousing

For many customers, contract warehousing is the perfect balance between the total freedom and control of owning a private warehouse and the low cost and low involvement of using a shared warehouse. Some of the advantages of contract warehouse agreements include:

Lower Capital Investment

Consider that in New York City, it cost an average of $117 per square foot to construct a new warehouse or logistics center in 2020. The average newly built warehouse is just shy of 185,000 square feet, so constructing a new warehouse is typically a multimillion-dollar investment. While real estate costs are a little lower here in North Carolina, warehouse investments are too costly for most businesses to justify. Setting up an existing building for warehousing also requires investments in warehousing equipment like forklifts.

When you choose to contract your warehouse space, the warehouse space is readily available without the high cost of construction, renovations or equipment. When you hire a warehouse, you can use it for a shorter time frame to meet your current needs. When your contract is up, you can choose to contract for more space if needed without another significant upfront investment.

Lower Costs and Fees

Contract warehouse companies are experts at what they do. Often, they can develop strategies to make your storage, logistics and fulfillment more efficient, resulting in cost savings. For example, at Crown LSP Group, we can perform transportation and logistics services alongside value-added warehousing services. By keeping all these operations under one roof, where an expert logistics team can manage everything closely, you’ll save money and time.

Meanwhile, when leasing or owning a warehouse, the property usually comes with many fees and expenses. Utilities, building maintenance and property taxes can all add unpredictable costs to your monthly bills. When you choose a contract warehouse, all the costs you’ll incur will appear upfront in your written warehousing agreements. You can enjoy predictable overhead and share costs like utilities and maintenance with other contracted clients.

Value-Added Services

One excellent benefit of a contract warehouse over a public warehouse is that they can provide a dedicated workforce. While a public warehouse is mostly concerned with keeping its storage at full capacity, a contract warehouse knows it can rely on predictable storage needs and assign more resources to individual clients. For example, some companies need temperature-controlled storage facilities, which require expert monitoring from dedicated staff members. When you have a contracted staff committed to managing your goods, they can also offer other valuable services such as:

  • Cross-docking: Cross-docking improves supply chain efficiency by reducing the time products spend in storage. It helps you get products to your customers faster. For example, at Crown LSP Group, we can build personalized cross-docking solutions for your shipments. We’ll receive deliveries at our warehouse, organize them or break them down into smaller shipments right away, and send them out on the next available outbound trucks. That way, shipments spend less time in storage, which reduces handling, storage costs and inventory management needs.
  • Pick-and-pack: Pick-and-pack is a complex order fulfillment strategy where warehouse workers will pull items for many customer orders at once and then pack them all for shipment. This method lets you prepare e-commerce orders and get them ready to ship quickly, so you can guarantee faster delivery times. A contract warehouse like Crown LSP Group can develop an effective pick-and-pack solution for your warehoused products.
  • Rework: If you ship in products from a manufacturer in another country, it costs a lot of time and money to send back damaged items that need to be reworked. A third-party contract warehouse like Crown LSP Group can handle minor rework issues, such as reprinting labels or instruction manuals, replacing broken or missing components or repackaging items. This improves supply chain efficiency by taking care of product quality concerns right from your stateside warehouse.
  • Palletization: A contract warehouse can also organize incoming shipments onto pallets or break down and rearrange products on existing pallets. Depending on your needs, Crown LSP Group can store your products on pallets for long-term storage or prepare them for their next destination.
  • Advanced inventory management: E-commerce businesses and manufacturers that frequently ship goods in and out of their warehouses need to track what’s in stock and what they need to reorder. Contract warehouses can record valuable inventory data like real-time available quantities, current locations, serial numbers and manufacturing dates to streamline inventory management operations. Crown LSP Group adds value to inventory management with advanced support like helping you set a sustainable safety stock level for your products. Many companies find they need more safety stock to get ahead of potential supplier delays, and we can advise you on an amount that makes sense for you.
  • Greater reliability: Many businesses choose to work with a contract warehouse so they can continue focusing on their core strengths. You can leverage the expertise of a company like Crown LSP Group, which can develop personalized solutions for your business. This partnership eliminates the growing pains of learning how to operate a warehouse internally. A contract warehouse dedicates a set amount of warehouse space and personnel to your business, so you can rely on having the storage space you need at all times.

 

Resolved your warehousing concerns with Crown LSP Group

 

Resolve Your Warehousing Concerns With Crown LSP Group

Crown LSP Group is flexible, reliable and committed to finding the solutions that work best for you. We recognize that while most businesses benefit from using a 3PL contract warehouse, every company uses these services a little differently. As your expert warehousing partner, we’ll act as an extension of your staff and personalize our solutions to serve your operation best. Learn more about contracting warehouse space through Crown LSP Group, and reach out online to request a quote.

 

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Warehousing During COVID-19

warehousing during COVID-19

Warehousing During COVID-19

The COVID-19 pandemic has brought many changes to our daily lives. As a result, businesses have had to rethink how they perform their operational tasks while serving their customers’ needs safely.

Warehouses are no different. With the need to adhere to guidelines from the Centers for Disease Control and Prevention (CDC), everything from creating workplace safety plans to maintaining supply chains has been altered during the COVID-19 pandemic. These safety measures allow customers to continue receiving the services they require while everyone does their part to limit transmission.

How Does COVID-19 Affect Supply Chains?

Because of the challenges posed by COVID-19, consumers are more eager than ever to choose delivery services that drop off packages at the door. Because most customers understand the sacrifice front-line workers are making — including delivery drivers — most are more than willing to pay the added delivery fees.

Due to the increased requests for product delivery, stores are noticing their traditional logistics networks can no longer meet their expanding customer demands. Subsequently, these stores are turning to third-party logistics (3PL) providers, like Crown LSP Group, for solutions.

Third-party logistics providers have implemented a wide variety of warehouse management systems (WMS). These systems improve picking processes and ensure workers can maintain social distancing requirements and other safety measures prescribed by the CDC.

palletized racking system in warehouse

6 Recent Warehousing Trends Due to COVID-19 That Are Here to Stay

Due to the increased demand for logistics and warehousing services during COVID-19, companies recognize the need for creative solutions to handle their additional orders while still keeping everyone safe.

Technological advancements in warehouse management systems mean less worker involvement in warehousing operations is required. Business owners see the value in 3PL providers as a safer alternative to paper-based, pre-pandemic logistic services.

How has COVID-19 impacted warehousing, and which areas of the supply chain have seen the changes? Here are some ways 3PL providers have adapted to warehousing in a pandemic to meet the demands of an increasingly logistics-dependent marketplace:

1. More Inventory on Hand

When fulfilling customer requests, nothing is more important than having the needed materials and supplies available on hand and ready at a moment’s notice. The problem with storing materials on-site is that they take up valuable real estate that could be better used for more productive means, like manufacturing or assembly.

Numerous 3PL providers introduce a convenient solution to this problem by allowing customers to rent floor space in their facilities. The combination of added storage space with the ease of on-demand shipping makes this service extremely beneficial to warehouses facing capacity constraints.

These 3PL providers have also invested in advanced warehouse management systems. The providers help speed up sorting and shipping and offer improved security monitoring, advanced fire protection systems and temperature- and humidity-controlled spaces. For example, at Crown LSP Group, we use 3PL Central Cloud-Base WMS, allowing us to provide 24-hour video security monitoring for enhanced warehouse safety.

2. Rise of Automated Warehouse Technology

Warehouse automation has seen massive improvements in recent years — mostly in warehouse management systems, which synergize multiple pieces of equipment through software control.

Warehouse automation systems use material handling equipment (MHE) such as conveyors and robotics. While automation provides a significant improvement over manual tools, its true potential is fulfilled by a fully connected automated warehouse management system. Warehouse management systems sync numerous sensors to control and position equipment. The warehouse management systems at Crown LSP Group sync together various sensors to control and position machinery and catalog stored goods to keep them organized and easily accessible.

With robots capable of handling materials and products safely and efficiently — and software systems ensuring items arrive on time and at their correct location — it’s easy to see how the rise of warehouse automation has been such an industry game-changer. Without these technologies, the onset of COVID-19 would have made safety and efficiency protocols that much more difficult for warehouses.

3. Customized Strategies

customized strategies in warehousing

Third-party logistics providers like Crown recognize every business requires a unique solution to ensure its operational needs are met. From custom warehousing solutions to immediate processing and shipping of materials and products, we can tailor our warehouses and delivery systems to meet any business’s specific requirements.

Storage space is a pain point for most small to medium-sized businesses. This issue is why 3PL providers offer a wide range of storage spaces and flexible contract lengths to address seasonal trends. Storage arrangements range from rack storage to floor space to bin storage, depending on the goods being warehoused.

Advanced 3PL providers seamlessly integrate warehouse management system (WMS) software with their flexible delivery services to ensure your materials and products are available to be shipped to any location, worldwide. This provides a level of convenience and reliability that will certainly remain in warehousing post-COVID.

4. Increased Warehouse Capacity

When selecting the best location to operate your business, you have many considerations. From employee desirability to customer interaction, location can play a critical role in any business’s success.

Because commercial rental costs are at an all-time high, it makes sense to choose a location that appeals to your employees and is within a reasonable range for customer walk-ins. This consideration means the trade-off between location and floor space is often a tough decision to make. However, it’s made much simpler with a third-party logistics provider’s help.

Businesses using 3PL support don’t have to worry about leasing or purchasing properties. Partnering with a 3PL like Crown takes this headache off the manufacturer. If their products can be shipped quickly and reliably from a third-party location, they no longer need to keep goods on-site.

Crown LSP Group has multiple locations strategically located throughout North Carolina and Virginia. We can ship orders to three-quarters of the U.S. population within 12 hours, making us the top 3PL provider on the East Coast.

5. Greater Reliance on 3PLs

COVID-19 has demonstrated that customers and businesses are more eager than ever to have their deliveries dropped off safely at their front door instead of picking them up in person. This phenomenon has created a boom in delivery requests worldwide and has substantially strained the usual delivery methods most businesses use.

To solve this problem, more companies are seeking 3PL providers to warehouse their materials and products and ship them when required. The conveniences offered by 3PL enterprises extend far beyond storing and delivering items.

With benefits ranging from increased floor space to added security and damage protection to highly efficient storage and shipping solutions, third-party logistics providers are becoming more prevalent as partnering businesses. Business owners will continue using 3PL providers for distribution and warehousing even after COVID-19 because of the convenience and cost savings.

6. Increase in Temperature-Regulated Storage

Many businesses use materials requiring special storage conditions to ensure they remain intact and undamaged. Similarly, once products or parts are assembled, they must be kept in conditions that prevent quality degradation.

Crown LSP Group’s warehouses come with temperature and humidity control, ensuring your sensitive products or materials remain in their ideal condition for an extended time. Additionally, our facilities are fully outfitted with fire protection systems to ensure your contents are always safe and ready for you.

Many materials such as metals or paper products suffer degradation when exposed to higher humidity levels. Sometimes even a slight increase in humidity can cause metal to corrode or paper products to soften. If these items are left unattended long enough, they can be totally destroyed from exposure.

Environmental control systems, such as those offered by 3PL providers, are essential for companies that require sensitive materials to remain in their original condition for manufacturing or sales.

Plan for Success With Crown LSP Group

The benefits of third-party logistics and warehouse providers have become more significant since the COVID-19 pandemic’s onset. The solutions they implement to store and ship materials, products and supplies safely and efficiently make them valuable, time-saving additions to any business.

With supply chains being weighed down by the increase in customer demands, it‘s important to choose a 3PL provider that can offer unique warehousing solutions to fit your storage and logistics needs.

Crown LSP Group is strategically situated in Rocky Mount, North Carolina, with the capacity to ship to three-quarters of the U.S. population within 12 hours. For a convenient and reliable solution for your East Coast logistics and warehousing needs, contact Crown LSP Group today and request a free quote.

warehouse worker with box

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Guide to Warehouse Safety

guide to warehouse safety

A Guide to Warehouse Safety

Warehouse safety is an essential cornerstone of warehouse management at Crown LSP Group. With e-commerce rapidly increasing in popularity, warehouse services are in demand more than ever. To ensure your workforce is safe and productive, you must have experienced safety staff and create effective safety procedures.

Why Is Warehouse Safety Important?

With online purchasing seeing a record increase, merchants are turning to third-party logistics companies like Crown LSP Group and their warehouse facilities to store, package and ship their goods.

To accommodate the demand, warehouses are hiring more employees than ever to perform a wide variety of tasks. Providing a safe work environment for a growing staff is vital in retaining workers and creating a culture that looks after everyone. Injuries ranging from personal injury to falls and crushing accidents put a significant strain on both the safety culture and employee-employer relationship.

Making efforts to create warehouse safety plans and ensure all employees are aware of the potential dangers is an excellent first step toward maintaining workers’ health and safety. You can avoid incidents by following warehouse safety guidelines from the Occupational Safety and Health Administration (OSHA) and integrating safety checklists for various warehouse safety issues.

Top Warehouse Safety Challenges

Warehouses can be dangerous places if the proper safety actions haven’t been addressed. Inadequate training, failure to heed hazard warnings and improper manual lifting are among the most common safety issues that lead to injury and even death every year.

Awareness of safety issues and dangers around a warehouse is the best way to proactively tackle workplace accidents. The better safety coordinators can identify dangerous situations, create a plan and communicate the plan to the workers, the safer everyone will be. This means the right people must be selected for the warehouse safety management team, and they must be able to instruct others in the dangers of warehouses and proper safety procedures.

When it comes to power equipment operation, operators must be sufficiently trained and licensed, even if a third party needs to be hired to perform the task. Forklift accidents make up a large portion of warehouse incidents that result in serious injuries and death, and therefore, training and licensing should be taken very seriously.

Modern warehouses require workers to perform many repetitive movements quickly throughout a shift, including standing, twisting, crouching and reaching for objects. If not performed correctly, these movements can lead to repetitive strain injuries, including muscle, tendon and ligament damage. To prevent these injuries, warehouse safety coordinators must teach workers how to move correctly, take sufficient breaks and ask for help when necessary.

Hazard warnings indicating danger along with barricades to prevent workers and equipment from entering areas or going over ledges are critical in warehouse environments — ensuring all areas are adequately lit falls under this category.

forklift driver loading trailer

Warehouse Safety Standards

OSHA provides guidelines for their warehouse safety requirements in an easy-to-read pocket guide called The Warehousing Worker Safety Series. The guide breaks down the 10 most accident-prone areas most frequently cited for violations.

About 100 employees are killed and 95,000 injured every year while operating forklifts. Forklift roll-overs account for the majority of these accidents. OSHA stresses the importance of training forklift drivers adequately and evaluating them regularly. Additionally, drivers should routinely inspect and maintain their forklifts.

OSHA states that hazard communication constitutes a large percentage of warehouse safety managers’ responsibility. Covering holes and wall openings to ensure equipment and workers don’t fall through is essential. OSHA also recommends clearly labeling and organizing dangerous goods and chemicals and correctly displaying Material and Safety Data Sheets.

Employees should be supplied and equipped with the proper personal protective equipment (PPE) required for their tasks and should be routinely trained in the equipment’s proper operation. The most common PPE required in warehouses include:

  • Respiratory masks
  • Hard hats
  • High visibility safety vests
  • Gloves
  • Steel toe boots

most common ppe graphic

OSHA includes electrical system design and wiring, mechanical power transmission and portable fire extinguishers as areas for warehouse safety managers to pay particular attention to. It’s critical that licensed professionals, such as electrical and mechanical engineers, perform all electrical wiring and system design. The dangers posed by improper wiring can lead to severe injury or death of warehouse workers.

Having proper fire extinguisher locations and training employees on how to use them is especially important in warehouses storing flammable materials. Evacuation plans and procedures should also be well thought out, documented and taught to workers. Regular evacuation drills are a good idea to make sure everyone is following the plan.

Warehouse Safety Checklists

Safety checklists are a convenient way to ensure your facilities and employees perform their tasks safely. At Crown, our safety checklists cover general warehouse safety, forklift operation and manual lifting.

General Warehouse Safety Checklist

Because every warehouse has a different layout, stores different materials and requires different types of employees to operate, you need to tailor your general warehouse safety checklist to your specific needs. It should focus on safety issues that stand out as being the most dangerous or require the most focus to address. Items often on a general warehouse safety checklist include the following:

  • Warehouses should be well ventilated, and the temperature kept comfortable for all occupants.
  • Hazards should be clearly marked, and leading edges blocked off to prevent falls or roll-overs.
  • All equipment should be equipped with emergency stops or power-downs.
  • Employees should receive ergonomic training and coaching to maintain realistic work expectations and take sufficient breaks to prevent overwork.
  • Employees should be trained to operate fire extinguishers and be thoroughly familiar with emergency safety procedures and evacuation drills.

Forklift Operation Checklist

Forklift operation and storage, including loading, unloading and stacking checklists, can include the following items:

  • Forklift operators must be appropriately trained and licensed.
  • Forklift operators must always wear seatbelts, operate the forklift in approved, well-lit areas and not let anyone else ride on or in the forklift.
  • Forklifts should not be operated in any way other than their intended use. This includes ensuring the lift is not overloaded and not lifting loads too high.
  • Forklift operators must ensure other workers in the area are aware of their presence by using lights, horns and backup alarms as necessary.
  • Place heavier items on lower shelves and ensure they are straight and evenly stacked.
  • Store dangerous goods in designated areas.
  • Clearly indicate maximum stacking distance on shelving and adhere to height limitations.
  • Distribute loads on shelving to balance their load across the shelving unit.

Manual Lifting Checklist

Manual lifting causes a significant number of worker injuries every year. Workers should learn proper lifting techniques to complete these tasks safely and effectively. Some points on an ergonomics lifting checklist can include:

  • Use power equipment to lift materials whenever possible.
  • Teach workers proper lifting techniques and remain diligent in coaching them.
  • Use your legs to lift and keep your back in a neutral position.
  • Ask for assistance if a load is too heavy.
  • Ensure all areas of the warehouse are appropriately marked and well lit.
  • Enforce the wearing of proper personal protective equipment at all times.
  • Allow injured workers to take sufficient time to recover and return only when fully ready.

Warehouse safety checklists are an essential part of a site safety program and can help supervisors and managers quickly making sure their workers perform their tasks safely with all appropriate measures in place. Simply having a brief list of safety tips can aid supervisors in maintaining safety as they perform their daily tasks.

Improve Warehouse Operations With Crown LSP Group

Crown LSP Group provides warehousing and logistics services to meet the needs of any business. Whether your business needs additional storage space with temperature control and security systems or shipping at a moment’s notice, Crown LSP can provide a tailored solution to meet your needs. In addition, Crown LSP Group can assist you in your efforts to improve your warehouse operations.

Located in Rocky Mount, North Carolina, Crown LSP is strategically positioned to freight any shipment to three-quarters of the U.S. population within 12 hours. This means you can rely on Crown LSP to store your materials or products while you use your commercial floor space for more productive means. Contact Crown LSP Group today for more information or request a quote.

improve warehouse operations graphic

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