While marketing empty warehouse space to other user companies may be an increasingly attractive option to a growing number of non-warehousing specialists, it is essential that the most appropriate industry terms and conditions are in place before venturing in to the third party storage business, says the All Ireland Warehousing Association’s Roger Williams
Across the third party logistics sector executives are being squeezed to reduce operational costs as companies seek to weather the downturn and fill pallet positions that have become empty due to a fall in demand for the products that once occupied them.
Many 3PLs have sought to fill storage space freed up by lower volumes by making sites that were once dedicated to one client shared user facilities.
And it is not only the warehousing specialists that are offering shared storage. Many own account operators – retailers and manufacturers that run their own warehouses and distribution centres – are looking to recover fixed storage space costs by letting out parts of their stores too.
For any company with storage capacity to spare offering space to a third party can provide a valuable extra revenue stream and allow staff to be utilized cost effectively.
However, while filling empty racking with another firm’s products has obvious financial and operational attractions, it is essential that any own account operator looking to let part of its warehouse has clearly defined industry terms in conditions in place before it starts to store goods on behalf of anyone else.
Standard industry terms and conditions are principally a mechanism to regularise the commercial relationship between the supplier of a product or service and the supplier’s customer. For a service provider, using standard terms is a cost-effective way of protecting your position, especially when dealing with numerous customers.
However, standard terms can only perform their function if they are effectively incorporated into the contract between the parties. Warehouse space providers need to ensure that the customer (and the owner of the goods, if not the same person) understands and agrees that the contractual relationship will be on the space provider’s terms. Seeking to rely on terms only to find that they have never become part of the contract is an easy situation to find oneself in, especially when handling goods that are owned by someone other than your customer.
It is always best to have your standard terms and conditions incorporated in writing, as proving that they have been agreed orally is not always straightforward.
It is important that own account warehouse operators who are looking to offer a third party storage service have some form of storage contract in place as goods held in a warehouse face a wide range of potential causes of damage.
Once in the warehouse, careless handling – whether manual or by forklift truck, damp, fire, pest or even the proximity of other goods which have the ability to contaminate products stored nearby, are all potential causes of product damage. The value of goods stored may be high and, unless the storing company has dealt with the issue of value in a storage contract, he may be liable for the full value of the goods in the event of a disaster. It is, therefore, important that within all Contracts the responsibilities of the customer and the logistics service provider are made clear.
The newly formed All Ireland Warehousing Association’s (AIWA’s) Conditions of Contract are highly recommended as the basis for the standard terms and conditions for any company involved in third party storage and handling. AIWA Conditions of Contract cover a broad range of services such as freight forwarding, haulage and, of course, warehousing. By using AIWA’s Conditions the Association’s members do not have to prepare three different contracts to encompass these distinct areas of their business – one document is sufficient.
This is particularly important in instances where it is not clear if damage to goods is caused by the storage firm or, perhaps, the haulier – say, a dropped pallet in the yard.
For companies seeking warehouse space, shared user sites can offer valuable extra storage when it is needed to cope with seasonal peaks, overflow, new product launches, acquisition or expansion, while start-up enterprises looking for flexible warehousing options also often find shared user sites attractive.
So, while marketing empty warehouse space to other user companies may be viewed as an option to a growing number of non-warehousing specialists, it is essential that the most appropriate industry terms and conditions are in place before venturing in to the third party storage business.
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