What a 3PL Warehouse contract needs to include
Well, continuing from my previous blog on Warehouse Costs and Margins, let's now touch upon the components that needs to be included in the contract between the 3PL Warehouse service provider and the Client who will be using the services of the warehouse.
The contract includes, at a broader level, the terms and conditions on usage, rate and billing contract, payment terms, warehouses contracted, billing period, space utilised, the client's customers and warehousing activities agreed upon.
In the billing contract, both storage based and activity based pricing are agreed upon. All activities that will be charged to the client will be listed with their individual rates. The method of charging will also be indicated, viz, weekly, monthly, quarterly or yearly. For storage based billing, the type of method will be agreed, whether fixed rental fee, pack UOM based or storage UOM based. This is decided based upon kind of items being stored, the kind of packaging, duration of storage and various UOMs in which the items may be stored. Fixed rental could be decided mostly when the similar kind of items having the same weight and dimenions, occupy almost a fixed space each month or for a period. In case there is a wide variation in the packaging in terms of size and weight, the Pack UOM based pricing is preferred. However, if the item is stored directly in its UOM, rather than its packaging type, then Storage UOM is taken up.
Billing period can either be daily, weekly, fortnight, monthly, bi monthly, quarterly, half yearly or annual. However, activity billing and storage billing cycles are maintained separately. Also separate invoices for storage and activity can be created, based on the client's request.
The client should also include a list of his customers (who are basically suppliers) in the contract that will utilize the services of the 3PL warehouse. He will also have the option of having dedicated storage loactions reserved for each of his customers, which will roll up to reservations at the client's level. There can be an extra reservation fee that can be levied on top of the storage charges.However, the client can also opt for random storage of goods, wherein he would not have dedicated positions for each of his customers.