Top tips for Businesses procuring Warehousing Services

1. Risk and title:

As a customer, you want to ensure that risk passes to the supplier as soon as they take custody of your goods. However, title should not pass to the supplier at any point and the supplier should be expressly forbidden from exercising any lien over your goods. Your goods should be stored separately from any other goods in the warehouse so that they remain clearly identifiable, and you should be able to access and inspect your goods at all reasonable times.

2. Liability:

As with all types of contracts, liability provisions need to be considered on a case-by-case basis. Warehousing contracts usually split liability into 2 key sections – liability for loss of or damage to the goods themselves and then a separate (or overall) cap for any other contractual breaches or negligent performance. Liability for goods is often set by reference to an industry standard amount per tonne but, depending on the type of goods, this won’t necessarily be the right approach. And whilst warehouse providers may be willing to increase that base reference amount, they will almost certainly expect the customer to cover the associated increase in insurance premium. It then comes down to market practice, strength of bargaining position and a discussion with your broker as to who is best off insuring the risk.

3. TUPE:

Don’t forget to include detailed TUPE provisions (covering both service commencement and termination) – even if you think TUPE won’t apply. Too often at the start of a contract, customers either don’t think about exit or decide to ignore it in the interests of quick contract signature. But this approach leads to expensive problems in the future - at a time when the outgoing supplier may hold all the bargaining power.

4. Change control:

If you want to amend the operational side of your contracts without having to bring everything back to your board for full sign-off, make sure you have a dynamic change control process. Your process could involve different timeframes and levels of governance, depending on the value of the change. Always remember to include the right checks and balances to prevent your operational team straying too far from the overall strategic direction of your business.

5. Continuous improvement and gainshare:

A well thought-out gainshare mechanism will encourage operational improvements and technological efficiencies by offering clear reward for going ‘above and beyond’. Drafted carefully, it’s a great way of incentivising suppliers to adopt latest AI and robot technology as well as thinking about environmental impact and sustainability.