Contract warehousing vs public warehousing: what’s the difference?

If you’re making the move from storing products yourself to partnering with a 3PL provider, it’s easy to get tripped up on the different options available to you. In this article, we’ll compare and contrast the two most common types of 3PL warehousing: contract warehousing vs public warehousing.

Warehousing definitions

Contract warehousing

With contract warehousing  – also known as dedicated warehousing – you pay a 3PL to fully dedicate one (or more) of its warehouses to your operation. Alternately, you can lease the facility(s) yourself and run it yourself.  Or, you can lease the facility yourself and hire a 3PL provider to run it for you. Your 3PL can provide the staff, equipment and systems needed – saving you significant amounts of time and money and acquiring these yourself.

Public warehousing

With public warehousing – also known as shared warehousing or flex warehousing – your warehouse space and services can expand and contract to match your sales volumes.

You share this warehouse with your 3PL’s other ‘tenants,’ each of you scaling your space and services up and down as your needs change.

Compared to dedicated or contract warehousing, the terms of flex warehouse agreements may be shorter term – allowing your spend to flex right along with your warehousing needs.

Hybrid Warehousing Models

There can also be overlap between the contract and public warehousing models. With this overlap, a shared warehouse can have a section(s) devoted to a dedicated operation.

To illustrate, let’s say that a 3PL provider has a 200,000-square-foot warehouse. Much of that space is reserved for shared operations. But your company may want to lock in 50,000 square feet of that space for you’re a dedicated operation.

Many 3PLs will be amenable to such an arrangement. It benefits the 3PL because it locks in a commitment to a set amount of space and services.

And there is still yet another option. Located in Eastern North Carolina, Kanban Logistics has a shovel-ready pad in place for a new, as-large-or-larger facility that can be built to suit your precise needs.

A rarity in today’s industrial market, this site allows you to involve Kanban in your day-to-day logistics operations or go it alone.

For example, you can:

• Build a combined factory/distribution center, with Kanban operating the DC
• Lease and have Kanban act as your 3PL provider, or
• Build and operate the full facility yourself

Is contract or public warehousing right for you?

In general, if your sales volumes fluctuate or you don’t yet have a long enough track record to accurately predict your volumes, the public warehousing option is going to be best for you. It’s less of a commitment and gives you tremendous flexibility in adjusting space and resources to fit your needs.

For example, if your volumes are lower than expected but you’re locked into a set amount of space and services with a contract warehousing agreement, you may end up paying for space and services that you’re not using. If you have a public warehousing agreement, however, you can simply shrink your operations to match those volumes.

On the other hand, if you have consistent, predictable sales volumes, a longer-term contract warehousing commitment may make the most sense.

Contract warehousing is attractive to companies that like the predictability of a set contracted rate for their operations instead of the fluctuating rates associated with shared warehousing. Additionally, companies with operations large enough to warrant their own facilities may prefer to contract with a 3PL that owns a building because there’s less risk involved (it’s relatively easy to change 3PLs, much more difficult to sell a warehouse that you own).

Lean on Kanban Logistics for your East Coast warehousing solution

With over 1.5 million square feet of prime warehouse space in Eastern North Carolina, along with the shovel-ready pad mentioned above, Kanban has the space and resources needed to supercharge your storage and distribution operations. We offer both contract and public warehousing options from our distribution center campuses and can customize operations to meet your needs.

If you’d like to learn more about 3PL warehousing, check out our handy guide: 3PL Warehousing 101. And, if you’d like to talk to a warehousing provider that can get you on the right track, contact Kanban Logistics today.