SELECTING A THIRD PARTY WAREHOUSE

1. Is using a third party warehouse right for your business? To determine this, careful analysis is required. Companies outsource some or all of their warehousing for different reasons...
   • Reducing capital expenses
   • Entering and exiting markets (large & small)
   • Competing with competitor’s lead times
   • Reducing transportation costs
   • Staging products for production lines and “Just in Time” requirements
   • Providing local emergency stock for key customers
   • Handling returns, container management, etc


2. To select a suitable warehouse, document your needs and develop a detailed Scope of Work. The basic information in the Scope of Work will be used by the warehouse to provide an accurate quote. Include your basic transactional and product information such as:

   Product Information	# of SKUs, Package descriptions, Weights, Dimensions, Types and volumes of any hazardous goods
   Storage Information	Stack-ability, Typical inventory levels, Temperature ranges, or other special handling details
   Handling data	Receipt & order frequencies, Line items, Lot or batch recording, bar-coded products, FIFO, LIFO or expiry processing, Hazardous goods, Seasonality, Returns processing, Expected service intervals
   Shipping information	Desired freight arrangements, Customer pickup volumes
   Additional activity	Container returns, Waste disposal, Certificates of analysis, MSDS handling, ASN needs, Order desk service, Customer labeling, Processing transactions in other systems (i.e. SAP), EDI, etc



3. Send requests for quotations to the potential warehouses and then compare the quotes. According to the complexity of the project, you may wish to use a rating chart to compare each warehouse. Remember to weigh the specific items that are important to your business needs. There is no sense paying for or spending time on attributes that have no benefit.
   
   
4. For simplicity, assign points to the major attributes – as they apply to your needs. This way you are scoring each warehouse according to the factors that are most relevant to your business. As a suggestion...

   No	Warehouse Service or Attribute	Points
   1	Warehouse is able to provide needed services	30
   2	Technology requirements met	10
   3	Warehousing costs	20
   4	Geographic location(s) served	15
   5	Similar markets served (Hazardous, regulated, food, mining, forestry, industrial, retail, electronics, etc)	5
   6	Environmental, Safety & Quality policies	5
   7	Financial Stability	5
   8	Ease of communications	5
   9	Inventory Management and Control Systems	5
   10	Order Fulfillment and Documentation	5
   11	Growth and Surge capacities	1
   12	Flexibility and cultural fit with your business	5
   13	Managements’ Experience	2
   14	Reputation and Reference Check results	2
   15	Facility & Operational Audit results (Key performance indicators, security, housekeeping, organization, training, labour relations, after hour service, etc)	10
   16	Review of Contract clauses (termination timelines, etc)	5
   		130



5. The decision as to which warehouse you work with is an important one as it is very likely that you will be working with your selection for years to come.
   • Customers will view the warehouse as an extension of your own business.
   • Customer service and / or production teams will also be working closely with the warehouse on a regular basis.
   • A good warehouse can assist you in improving your services and lower your costs.


6. Review the quotes, perform site visits, call references, and complete your review. Proceed with additional discussions and enter into a well documented contract that addresses the
   • Scope of Work
   • Freight
   • Responsibilities
   • Liabilities
   • Term & Termination
   • Service Expectations
   • Fees for Service
   • Confidentiality