Multi-Client Warehousing: The Difference between Dedicated & Shared Warehousing
Every business works in a unique way; some benefit from contract warehousing, while others seek multi-client (shared) warehousing solutions to fulfill their requirements. Multi-client warehousing allows you to share the space with other customers and offers a flexible, affordable method to store your products. Here’s what you need to know about multi-client warehousing and distribution services, and how it differs from dedicated warehousing.
The Difference between Dedicated and Shared Warehousing
A dedicated warehouse, or a contract warehouse, deals with the management of a warehouse facility occupied by a single tenant. You may own or rent the space, but you will have to pay for all labour, operations, technology implementations, equipment, and value-added services. A shared warehouse is the opposite. Also known as a multi-client or public warehouse, it is where multiple businesses can operate under a single distribution centre. All the tenants can enjoy shared labour, capital equipment expenditures, material handling equipment, and more.
In the first option, you manage all the costs of running your warehouse and deal with the expenses yourself. It usually requires a multi-year commitment that includes labour structure, equipment expenditures, a warehouse management system, and all operational processes. The building lease can be tied to the client or the third-party logistics provider, but a contract agreement must be made.
In the second scenario, you can enjoy the flexibility of shorter contract terms. The third-party logistics provider will own the facility and equip it with everything that you need. The costs are spread out evenly across all the companies that use the facility, and many of these costs become variable and fluctuate with the volume and activity levels of your business depending on the time of year.
Advantages of Multi-Client Warehousing
Compared to dedicated warehousing, shared warehousing offers shorter, more flexible contracts. This makes it more useful for startup companies, as well as those with a smaller client base, seasonal products, or products where demand fluctuates. In any of these situations, shared warehousing is the better option. Shared warehousing allows you access to space that can be reduced or increased to match your personal business demands. Multi-client warehousing provides a solution to rapidly changing distribution needs, without the commitment to a long-term contract. It is also a great option for businesses that require several smaller locations, offering multiple distribution points instead of one large warehouse.
Improved Service and Efficiency
By allowing a third-party warehousing company to help you, you gain improved service and efficiency from logistic experts, access to analytics tools, and tighter control over your inventory. By teaming up, you can maximize space management and reduce costs, allowing you to give better service to your customers. Third-party logistics providers also have adequate staff that are professional, experienced, and knowledgeable to take the worries of storage management off your shoulders.
Cost is one of the biggest challenges for growing businesses. Multi-client warehousing provides a solution by allowing you to share your space with other businesses. By sharing labour and spreading our operational costs among all the customers, you can achieve significant savings. You will only be paying for space that you use, which means there are no large, expensive warehouses being paid for that are standing half empty. Shared warehousing eliminates the need for you to hire your own staff to take care of your warehousing responsibilities such as packing, storing, and distribution. If you require specialized tools, equipment, or additional services, you can share these costs evenly amongst the other customers.
Disadvantages of Multi-Client Warehousing
One of the primary drawbacks of multiple fulfillment locations are the fixed costs. Sharing warehouse space with other companies means that you may have to pay for double the inventory space and handling costs. Although the amount is shared with the different clients, you may be paying for more than you actually need.
Space availability and competition is another disadvantage of multi-client warehousing. You may have your eyes set on a specific distribution centre but may not be able to get the access you want because other companies have sought after it as well.
Another concern is system incompatibility. This may lead to problems with communication between you and the third-party logistics provider, as well as the other clients using the distribution centre.
Partner with Lean Supply Solutions for Multi-Client Warehousing Solutions
Despite some drawbacks, the benefits of shared warehousing for small or seasonal businesses outweigh them. The flexibility and a low level of commitment is exactly what a small or seasonal business requires. Your business could change on a dime, which means that you need to be able to access scalable services and the best level of service to keep your customers coming back. With the right third-party logistics provider, you can reap the benefits of multi-client warehousing services.
Lean Supply Solutions will integrate your supply chain for you, providing the services you need. We will assemble and manage the resources, capabilities, and technologies of your organization with the assistance of external service providers so that you have expertise to manage your resources. Our services include contract logistics, e-commerce fulfillment services, inventory planning and management, supply chain management and optimization, pick-and-pack services, freight and warehousing, reverse logistics management, and more.
When you’re ready to reap the benefits of multi-client warehousing, Lean Supply Solutions is ready to help you. To learn more about warehousing and distribution in Toronto with our 3PL logistics services, or to ask any questions, contact us today.