Searching for warehouse space can be a frustrating and time-consuming experience. As the e-commerce industry continues to grow, companies are facing a space shortage that can lead to a host of logistical challenges. Other than the inherent hassle attached to finding substantial warehousing, it’s also exhausting to negotiate with contractors, architects, and even the local city government. All of these underlying factors can pile up, alongside an undeniable slow in new construction development due to lead times, labor costs and interest rates.

McKinsey recently reported, “there will be a shortage of around 190 million square feet of warehouse space within the next five years, which could lead to an increase in rental prices and put further pressure on 3PLs” So, the question for industry leaders and innovators is: What can be done to combat the ever present complications that arise when seeking sufficient capacity for their products?

Multi-customer warehousing, also known as shared contract warehousing, involves the storage and management of inventory for multiple companies in a single facility. It offers a clear solution to the issue at hand by allowing complimentary warehouse operations to share a single warehouse space, maximizing efficiency for each organization involved by leveraging shared labor, space and equipment. In this article, we will take a closer look at the top advantages to this approach to warehousing and how it can benefit the entire industry.

3 Shared Warehousing Benefits

1. Cost

The cost savings from sharing warehouse space is probably the most attractive value if you are a supply chain executive or procurement professional. It used to be difficult to quantify an exact number or percentage that customers save from deciding to operate in a multi-client fulfillment center.  Now, when we consider the visibility 3PLs, shippers and manufacturers can achieve through more sophisticated WMS and ERP systems, procurement and supply chain professionals are now in the driver’s seat to provide more value to their organization.

Faster, better business decisions are the overall result.  As a result,  the logistics industry, supply chain leaders, and even scientific studies are quantifying the successes that have come out of the shared space model. Of course, it doesn’t benefit everyone in the supply chain, but mid-level B2B shippers and manufacturers see a huge value in leveraging shared/flexible warehouse arrangements during peak seasonality or efforts to cover concrete during slower times.

Depending on the type of contract structure (e.g. transactional, fixed/variable, cost plus etc.), the 3PL service provider can potentially limit the customer’s costs to only reflect the amount of space they’re utilizing week to week; in some cases day-to-day. This improves cost savings by a notable margin, especially considering the client won’t need to pay for any additional space in the warehouse.

2. Labor

It comes as no surprise labor in the logistics industry has been less than ideal in recent years. Setting up a warehouse and ensuring it’s running like a well oiled machine is best achieved through productive employees who know how to work efficiently and effectively. This brings us to our next point: shared warehousing = shared labor.

Maximizing the warehouse workforce leads to increased productivity and coherence, but it takes extra effort to effectively communicate business objectives for customers across the warehouse team.  Success is also driven by employee satisfaction and retention. Workers who are cross trained across a variety of tasks, recognized for good work and included in customer collaborations are much happier.  Happy employees are more productive and make better choices on the company’s behalf.

Typically it works well to identify complementary customers and material handling equipment that allow free flow of labor across the warehouse creating a flexible warehouse environment. In some cases, for example, during peak seasons and fluctuations in the market, businesses may not have to add manpower to get shipments out on time if other, already trained employees on site can step in.

3. Equipment

With multiple companies inhabiting the same space, businesses can pool their equipment. By sharing their assets with one another, companies can reduce their capital expenditure or monthly lease expense on equipment purchases and modernizations. This is especially great for small businesses that may not possess the upfront financial capital ($100k +) to spend their funds on expensive machinery.

One particular benefit that stands out in this practice is that many organizations will gain access to a wider range of equipment. Companies that require specialized lift attachments could potentially leverage a multi-customer warehouse to share the  equipment effectively across like-kind or complimentary customers in the same space. Other conveniences include reduced maintenance costs, reduced carbon footprint, improved sustainability, and refined equipment utilization – just to name a few.

Multi-Customer Warehousing Solutions: the Future of Supply Chain

As the demand for on-time delivery and supply chain visibility increases, 3PLs want to step up their game and provide the most fruitful assistance they can offer for their customers. While a distinct shortage of warehouse space and construction deceleration closes in on us, the best thing to do is look for unique solutions that require a bit of collaboration (a.k.a. PROBLEM SOLVING).

Though many fear a lack of control and insight into operations as they trust a third party to help them find space, there is no truth to this concern. A good 3PL is an advocate and advisor working hand-in-hand with shippers and manufacturers providing crystal clear communication to ensure the customer understands challenges; the path to overcoming said challenges. By thinking “outside the dedicated box,” the customers may find that multi-client warehousing is the partnership they’re looking for.

Author Bio: Joe Oliaro is the Chief Real Estate Officer and Vice President of Sales for Wagner Logistics, a leading 3PL provider that has specialized in contract warehousing, transportation and fulfillment services for over 75 years. Joe brings a unique perspective to Wagner’s leadership team as he oversees their top-notch sales team and real estate activity across Wagner’s coast-to-coast portfolio. Day-to-day, he coordinates with professionals in the organization to create solutions for new and existing customers. For more information, visit https://wagnerlogistics.com/