Contract Warehousing Companies: Comprehensive Guide and What To Know

Buske Logistics provides a variety of contracted warehousing and logistics services across our network of 30+ warehouses. Contract warehousing, also known as dedicated warehousing, involves a service agreement between a company and a warehousing provider where space and services are customized for a client for a fixed period of time based on a contract.

This arrangement contrasts with public and private warehousing by offering a middle ground that provides contracted scope of services to be performed by a third-party-logistics company over a period of time. An example of a contract warehousing provider is one between us, Buske, and our client, PepsiCo. We have contracted services with PepsiCo to perform a scope of warehousing services over fixed period of time. the market to find a for a customized and long term warehousing solution.

This blog post details the best contract warehousing companies, what contract warehousing is, and what to know.

Who Are The Top Contract Warehousing Providers?

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Types of Contract Warehousing Agreements: Fixed vs. Fixed-Variable vs. Variable Agreements

How contract warehousing pricing is structured can be segmented into fixed, fixed-variable, and variable agreements. The main difference is how they are structured in their pricing.

Fixed Contract Warehousing

Fully fixed contracts are common with operations that have consistence and predictable volumes. A fixed contract is where a company contracts a scope of services and a set amount of space in a warehouse for a fixed fee on a monthly or annual basis. An example is a company wants to ensure they have 50,000 square feet of space dedicated to them at all times and know their volumes will be a set amount without much fluctuation.

A fixed contract ensures predictable costs and services for the duration of the agreement, making budgeting easier and reducing risk. These are less common given the unpredictability in volumes that most companies face.

Fixed-Variable Contract Warehousing

Fixed-variable contracts are more typical in outsource 3PL operations. A company wants guaranteed space, such as 15,000 square feet, which is the fixed component. The variable component of a fixed-variable arrangement is typically structured as a per pallet, per case, or per item fee. Volumes fluctuate so it's variable in nature.

Variable Contract Warehousing

Fully variable contract warehousing arrangement offers flexibility in pricing and services for companies with highly volatile space and shipment demands. Typically, the variable storage charge is charged at a premium because the 3PL needs to cover the cost of rent, which the shipper may not have enough stored to do that at a given time.

An example of a variable contract warehousing is pricing on a per pallet position and each time a pallet, case, or unit goes out the door. This arrangement is also seen in public warehousing agreements.

Three Types of Warehousing Arrangements for Manufacturers and Providers

There are 3 main types of warehousing agreements between a provider and a customer.

Contract Warehousing

This arrangement provides the benefits of private warehousing but without the capital expenditure. It is tailored to the specific needs of a company for a contracted period, usually spanning several years. A ‘Warehousing and Logistics Services Agreement’ is one example of what it is called.

The benefit with contract warehousing is that space needs are always guaranteed to the manufacturer based on the scope of the work.

One example is Purina starting up a new distribution center. They know they will need 190,000 square feet of space for a period of time. Rather than renting warehouse space on a month-to-month basis, they can go out and get contract for warehousing on a long-term basis.

Public Warehousing

Public warehousing offers space and services to multiple clients on a short-term basis. It’s flexible and ideal for businesses with fluctuating warehousing needs.

A great example is of a beverage manufacturer that needs an extra 10K square feet in the spring to build enough inventory for summer demand. This happens a lot with our clients such PepsiCo, which will go out and find extra warehousing for Gatorade.

Private Warehousing

Owned and operated by large companies, private warehouses provide complete control over logistics operations. However, they come with high operational costs and capital investment.

Private warehousing typically occurs when the cost-benefit analysis has occurred by the manufacturer and the result is that it’s better to keep everything in house.

An example is that some aerospace and defense companies, like BAE Systems, will have a private warehousing arrangement given they have long-term contracts with the government and can plan their warehouse space needs accordingly. Another reason could be the work being done is classified between the two parties.

Advantages of Contract Warehousing

There are many advantages to contract warehousing for the manufacturers and brands that decide to use contract warehousing company.

• Customization and Flexibility: Contract warehousing solutions are highly customizable, catering to specific business needs such as handling, storage requirements, and additional services like packaging and transportation. An example is  General Mills opening a new distribution center. They will typically look for a 3PL, such as Buske Logistics, to run the operation on a contractual basis.
• Cost Efficiency: By avoiding the capital outlay required for private warehouses and leveraging the expertise of dedicated logistics providers, companies can reduce overall logistics costs. Additionally, the fixed nature of contract warehousing allows for better budget control and cost predictability.
• Core competencies: Warehousing is a beast in of itself. Many manufacturers find that they are good at manufacturing, but that’s it. In this case, they will outsource it because it would be more costly without the level of service if they were to do it themselves.
• Reduce upfront costs: An estimate to build a warehouse can cost between $55-$70 per square foot. If a company is looking to build a 1,000,000 square foot facility, it can cost in upwards of $60,000,000. That money for the brands or manufacturer could be better used for R&D and other initiatives that will help grow top line revenue.

Disadvantages of Contract Warehousing

While there are advantages of contract warehousing, there are some disadvantages as well of this arrangement.

• Long-Term Commitment Concerns: Contract warehousing agreements typically require a long-term commitment, which can be a disadvantage if a business’s needs change drastically due to market shifts or unexpected events like COVID-19 creating a shortage of warehousing space. An example is if demand dries up for their produce and they are left with 100,000 square feet of space that’s not being utilized.
• Potential Lack of Control: While contract warehousing offers many customization options, the ultimate control over operations resides with the warehousing provider, which might not always align with a company’s operational philosophy or speed.

Pros and Cons: Contract vs. Public vs. Private Warehousing

What are the pros and cons of contract, public, and private warehousing?

• Contract Warehousing: Best for businesses looking for a balance between flexibility and cost without the burden of managing a facility.
• Public Warehousing: Ideal for businesses with variable demand and a need for short-term commitments.
• Private Warehousing: Suitable for large companies that require full control over their logistics operations and can afford the significant investment.

Frequently Asked Questions

What is contract warehousing?

Contract warehousing is a long-term agreement where a company outsources its storage and distribution needs to a third-party logistics (3PL) provider. Buske Logistics offers contract warehousing solutions tailored to large businesses that need stability and scalability.

What are the main benefits of contract warehousing?

The benefits include predictable costs, dedicated space, customized services, and improved supply chain efficiency. Buske Logistics helps businesses reduce overhead while gaining reliable, long-term warehousing support.

How does contract warehousing differ from traditional warehousing?

Traditional warehousing often works on a short-term or shared model, while contract warehousing provides dedicated facilities under a long-term agreement. This makes contract warehousing more cost-effective for companies with consistent storage needs.

Who should consider contract warehousing?

Companies with steady demand, high-volume products, or specialized storage requirements benefit most from contract warehousing. Buske Logistics partners with businesses across industries, including food, beverage, retail, and automotive.

What are the alternatives to contract warehousing?

Alternatives include public warehousing, shared 3PL facilities, or managing an in-house warehouse. Buske Logistics helps clients evaluate these options to find the most efficient and cost-effective solution.

Contract Warehousing Providers

If you are contemplating the shift to contract warehousing, public warehousing, or need more information on how it can benefit your business, reach out to Buske Logistics. With our expertise and range of customizable logistics solutions, we can help you optimize your warehousing strategy to meet your specific needs.