June 3, 2024

Ultimate Guide to Warehousing, Contract Logistics and Distribution

Warehousing has undergone a strong transformation in recent years. COVID-19, market change, political tensions as well as consumer buying habits are only a few of the factors driving change. A shipper’s ability to stay proactive is dependent on strategic partnerships and a robust understanding of the whole contract logistics space. Furthermore, warehousing demand since the COVID-19 pandemic has started to shrink, but now, new congestion challenges and blanked sailings are again creating a perfect storm for inventory management. To enhance your overall logistics strategy and improve operational efficiency in the face of relentless disruption, this guide will explore:

• The confusion between warehousing, distribution and contract logistics, as well as where overlap occurs and why.
• The state of warehousing in the coming years.
• The difficulties in managing warehouse use and network partners. 
• Tips and best practices to maximizing your use of warehouses. 
• Strategies for conducting an RFP for a new warehouse partner. 

Basics to Know About Warehousing, Distribution and Contract Logistics

Warehousing is a very broad term that encompasses all storage and staging processes in logistics. Warehousing can also be part of your distribution center strategy, and your distribution centers are warehouses as well. Most often sitting at the true middle mile of logistics, contract logistics covers all the moving parts of warehousing, distribution, and transportation throughout this vital middle mile. 

The State of Warehousing in 2024 and Beyond

In March 2024, the Producer Price Index (PPI) set a new record at 150.954, marking a significant milestone in the economic landscape. This figure is not just a statistic; it represents the shifting dynamics within the warehousing and distribution sector, underscoring the challenges and opportunities that lie ahead. As we delve into the current state of warehousing logistics, it's crucial to understand the forces at play and how businesses can navigate this ever-changing landscape.

During the COVID-19 pandemic, the quest for additional warehousing and distribution space turned into a Herculean task. Overstocked inventories led to a plummeting national US vacancy rate, reaching a low of 3.4% by the end of 2022. This scenario was further complicated in 2023 by the "Great Destocking", where inflation-adjusted US inventories saw a near 20% decline through September. This shift, detailed in an analysis by S&P Global, highlights the complexities of managing warehouse space in real-time while striving to meet customer demand efficiently. 

Recent movements, including the vote to unionize auto workers in Tennessee as an example, signal a shift in the regulatory landscape affecting warehousing and distribution. These changes underscore the importance of staying abreast of new regulations that could influence how companies manage their storage space, handle order fulfillment, and meet customer expectations within the United States.

In the current market, partnering with Third-Party Logistics (3PL) providers has become indispensable for companies looking for warehousing solutions and contract logistics solutions. These partnerships offer a way to navigate the scarcity of warehouse space, leveraging the expertise of 3PLs to find and manage storage space efficiently. Further, collaborating with 3PLs helps businesses focus on their core operations, trusting their partners to handle the complexities of storing goods and distribution.

Top Challenges of Supply Chain Warehousing

Warehousing and logistics is at heart of successful operations, driving efficiency and innovation across all industries. As businesses strive to meet the dynamic demands of the market, the challenges of supply chain warehousing become increasingly complex, necessitating a strategic approach to overcome them. However, it’s challenging to maintain a competitive advantage as businesses look for ever-more inventive ways of managing their distribution network. 

1. Continuing Disruption Across All Industries. Technological advancements, shifting consumer demands, and global economic fluctuations are reshaping the landscape at an unprecedented pace. 
2. Inventory Rebalancing. Effective inventory management systems are essential in providing the real-time data needed for accurate forecasting and inventory control. Implementing advanced tools and techniques enhances order fulfillment processes, ultimately leading to improved customer satisfaction and reduced holding costs.
3. Managing Duties and Import/Export Costs. Navigating the complexities of duties and import/export costs is a significant aspect of supply chain management. These costs can have a substantial impact on a company's bottom line, making it imperative to develop strategies for minimizing them. 
4. Tracking Inventory Across Multiple Sites. For organizations operating multiple distribution centers or warehouses, managing inventory across different locations presents a unique set of challenges. 
5. Trailer and Yard Storage Problems. Effective management of trailer and yard storage is critical for optimizing warehouse space and ensuring the smooth flow of goods in and out of the facility. 
6. Managing Pick-up and Drop-Off Standards. Standardizing pick-up and drop-off procedures is vital for maintaining efficiency in warehouse logistics. Inconsistent practices can lead to delays, increased dwell time, and ultimately, higher costs.
7. Tracking Dwell Time and Detention. Excessive delays at the warehouse not only impact the efficiency of the supply chain but also inflate operational costs. 

Best Practices in Strategic Warehousing and Distribution

Businesses face the constant challenge of meeting customer demands while managing operational costs. The key to navigating this complex landscape lies in a streamlined supply chain, enhanced by strategic warehouse logistics and cutting-edge technology.

Integrate Systems Via APIs to Know Real-Time Inventory and Shipment Status. The ability to access real-time data on inventory and shipments is invaluable. APIs (Application Programming Interfaces) serve as the bridge between disparate platforms and systems, enabling seamless information flow.
Identify Your True Supply Chain Needs and Network Positions. Understanding your supply chain requirements and optimizing your network position are foundational steps in achieving strategic warehouse management. Through data analytics and supply chain modeling, businesses can gain insights into their logistics operations, identifying areas for improvement and the potential of value added services.
Rebalance Inventory Based on Data-Driven Insights. By aligning inventory counts with customer demands, businesses can ensure their warehouse operations are not just running smoothly but are also optimized for cost savings and operational efficiency.

Remember to Consider Potential Tax Benefits of Warehousing Locations, Such as FTZ. Choosing the right warehousing locations can lead to significant duty and tax savings, thanks to the potential benefits of bonded warehousing and/or Foreign Trade Zones (FTZ). 

How to Choose a Warehousing Partner in Logistics

In today's fast-paced market, the efficiency of your logistics and distribution strategy can be the difference between success and stagnation. Selecting the right warehousing provider is not just a logistical decision but a strategic one that can significantly impact your business's ability to meet customer demands, manage inventory effectively, and reduce costs. Here are the top ways to choosing a warehousing partner:

1. Review Warehousing Providers’ Locations.  A location that offers proximity to key markets can drastically reduce delivery times and transportation costs, providing a competitive edge in customer satisfaction.
2. Consider Your Usual Distribution Needs and Ports of Entry. Considering your distribution channels in choosing warehouse locations enables more agile and responsive logistics solutions, crucial for meeting market demands and customer expectations.
3. Evaluate Each Provider’s Tech Stack. A complete warehouse tech stack, including a warehouse management system equipped with real-time inventory management and automation capabilities, can transform your supply chain management.
4. Assess a Provider’s Ability to Work With Transportation Providers. The integration between warehousing and transportation is a cornerstone of effective supply chain management. Evaluating a warehousing partner's network and ability to collaborate with third-party logistics companies is essential.
5. Consider the Reputation of Any Possible Partner. Researching and assessing a provider's standing in the market through customer testimonials and third-party reviews can provide valuable insights into their operational excellence and customer service quality.
6. Make a Short-List and Visit Preferred Locations. After narrowing down your options based on the criteria above, creating a shortlist of preferred warehousing providers and visiting their facilities is a crucial next step. Onsite visits allow you to assess the warehouse operations firsthand, including the condition of the storage space, the efficiency of the order fulfillment process, and the effectiveness of their warehouse management system.
7. Remember to Negotiate. Whether it's negotiating pricing, service levels, or scalability options, effective negotiation can lead to significant cost savings and more customized logistics solutions.

Get Control Over Warehousing Before the Next Disruption 

Warehousing and contract logistics are always going to be subject to disruption. The state of the industry is evolving, and the challenges are only mounting. The real trick lies in working together with contract logistics partners to get more from your network and take advantage of the bigger picture in logistics. 

Unlock More Value in Warehousing With Crane Worldwide Logistics. 

Crane Worldwide Logistics is much more than a transportation service provider, offering warehouses near all major transportation hubs in the US, including two locations in Columbus and Cincinnati, as well as strategic locations around the globe. Paired with local support teams and expert capabilities, shippers work together with Crane Worldwide Logistics to streamline their full global supply chains from origin through to final destination. Speak with a warehousing expert at Crane Worldwide Logistics to get started on your warehousing strategy for the rest of 2024 and beyond. Get in touch here