Storing Goods With a Third Party: Risks and Safeguards

Keeping goods in someone else's warehouse is often the sensible choice. It saves capital, adds flexibility and puts stock closer to customers. It also changes who controls your assets: the goods are yours, but the keys, the staff and the records belong to another company. The risks that follow are well known, and most of them can be reduced with simple arrangements made before the first pallet arrives.

The main risks

• Mixing. Your goods stand beside other owners' goods, and identical items from two owners get confused.
• Poor visibility. You see only what the operator reports, and you see it later than you would like.
• Handling errors. Wrong picks, misposted receipts and returns that are never recorded.
• Damage and loss. Water, fire, theft, pests, poor stacking and forklift accidents.
• Release problems. Goods released to the wrong person, or without your instruction.
• Exit problems. In a dispute, a change of ownership or the end of a contract, getting goods and records back can be slow.

Safeguards that cost little

1. Segregate and label by owner. Ask for your goods to stand in marked locations, with your name or code on pallets and location labels, and for an inbound condition report with photographs when they arrive.
2. Receive against a written list. Count at receipt, note any damage on the delivery note and have the operator countersign it. What is not recorded on the first day is hard to prove later.
3. Control releases. Accept written release orders from named persons only, and receive a copy for each dispatch.
4. Keep a shadow ledger. Maintain your own running balance from your own documents.
5. Count independently. Do it at agreed intervals and after any incident, with the right to attend or to send a representative.
6. Put liability and insurance in writing. Who is responsible for loss and damage, up to what limit, and who insures the goods are questions for your legal and insurance advisers. Do not assume the answers.
7. Plan the exit. The agreement should say how and how quickly goods and records are returned, and how stock will be counted at that point.

Not every safeguard is needed for every product. Match them to the value and the speed of turnover: a pallet of cheap, fast-moving goods needs lighter control than a pallet of expensive spare parts.

A shadow ledger in practice (conditional figures)

Your own documents show 3,000 cartons sent in and 2,200 released, so you expect 800 to remain. The operator reports 780. You ask the operator for the movement list for the 20 missing cartons. If they match a delivery note that was posted late, the difference closes. If they match nothing, you have a loss to discuss, and you have found it while the trail is still fresh. Without your own ledger you would not even have known there was a question.

Choose the operator with care

Before you commit, visit the warehouse or have someone visit it for you. Look at cleanliness, stacking, fire equipment, access control, how paperwork is handled at the dock, and how the staff answer simple questions about stock. Ask how long records are kept and who can change them. A visit takes little time and shows more than a brochure.

Ask also how the operator handles other clients' goods of the same type as yours. An operator who can explain, without hesitation, how two owners' identical items are kept apart has probably thought about the problem. One who cannot is telling you something as well.

Review the arrangement regularly

The terms that suited you at the start may not suit you after a year. Volumes change, products change, and staff at the operator change. Set a date, once or twice a year, to review the statements, the incident log, the count results and the contract, and to decide whether the arrangement still gives you the visibility you need.

In short

Third-party storage works well when ownership, visibility and exit are arranged in advance. WarehouseDepo supports owners at the points where they need independent eyes: the count at receipt, periodic counts during storage and the final count at exit.