How To Choose A Warehouse Service Provider

Having some experience in managing warehouses and using third party warehouses, we thought it would be helpful to provide some guidelines to users considering how to choose a warehouse service provider.

The first consideration would obviously be the location of the warehouse. Cargo for transshipment would ideally be stored inside or near the port so that local import duties and customs procedures will not be an issue.

Similarly, most export cargo if not stored in the factory is often stored near the port. In Malaysia, land near the ports is cheaper and therefore storage costs are often lower. Most bulk warehouses are located near the port for this reason. Popular areas near to Port Klang include Port Klang, West Port and Teluk Gong.

However, for Fast Moving Consumer Goods as well as imported cargo, warehouses nearer to the city are often more popular.

In Kuala Lumpur, the popular areas for such warehouses have traditionally been the Shah Alam area which is about midway between Port Klang and the city. Newer areas which are also becoming popular include Bukit Jelutong, Sungei Buloh and Kota Damansara.

The storer's management will have to balance the cost of shipping and storing the cargo nearer to the city with convenience. Often, the storer will want to have quick access to their cargo either to show customers or to perform stock takes conveniently.

The Warehouse Itself
The quality of the warehouse will probably be the next consideration.

Warehouses run the gamut from four steel walls with a roof to modern, elevated and fully racked warehouses with state of the art fire fighting and alarm/anti theft facilities not to mention stock tracking computer systems built in. While obviously a new warehouse will be very impressive and an old decrepit building will be a turn-off, the cost will be a major consideration. All the bells and whistles will inevitably be expensive. Do you really need it? It probably depends on the value of the cargo being stored and the velocity of the stock turnover. What's your budget? Most companies these days are operating on decreasing margins and wish to save cost at every opportunity.

Furthermore, storage costs are recurring. We've lost count of the number of times a customer has said the storage will be 'short term' and the storage has stretched to years!

Another factor to consider is whether the warehouse will be able to accommodate your company's future expansion. To shift your cargo to a larger warehouse can potentially be an extremely expensive and time consuming exercise.

If you should go for a warehouse visit, we would look first at the staff. How's morale? Do they look happy and enthusiastic? Secondly, how's the housekeeping? A clean and tidy warehouse shows the management cares and is likely to look after your goods properly. Thirdly, how's the layout of the warehouse? Is cargo easily accessible? You would be surprised at how inefficiently designed some warehouses are. Also, is there ample room for lorry/container movement to facilitate quick cargo turnarounds? Finally, we suggest you take a look at the number of forklift teams available. Too few and you may be waiting for your cargo to load during busy periods.

Intangible Factors
In Malaysia, these are just as important as (1) and (2) above.

Among the factors to consider are: which company are you transacting with? What is its paid-up capital? Are the warehouse and its contents insured? Is the insurance coverage sufficient? Be aware of the limits of liability under the company's conditions of business. In the event of a loss, what are the procedures required to pursue a claim? What are the documents which have to be submitted? How quickly will compensation be released?

Another factor you may not be aware of is that in Malaysia, it is important to note that buildings come with a Certificate of Fitness (CF). This relates mainly to the fitness of the building for occupation after it is built and is issued by the local authority. In the first place, there are warehouses (and indeed many buildings) which are operating without a valid CF. Sometimes, the structure may not be in compliance in some way, for example, the set-backs may be less than that allowed by the regulations. However, the building may still be 'safe' for occupation. In other cases, the building may be downright unsafe for occupation - for example the structure may not be sufficiently strong to handle the loads imposed. Certainly, whether the warehouse has a valid CF is worth checking if you care about your cargo. More so if you work for a reputable company with Risk Management procedures to comply with. Certainly, most multi-national companies and large public listed companies will insist on a valid CF for the warehouse in which their goods are stored.

Conversely, if the warehouse does NOT have a valid CF, it does not mean that its insurance is invalidated. The structure and its contents can still be covered by insurance but the lack of the CF has to be declared to the insurer and the premium adjusted accordingly. If the lack of CF is not declared promptly, coverage may be invalidated or reduced in the event of a claim. Therefore, it can be said that the lack of a CF will increase the risk of storing the cargo at the warehouse accordingly.

Buildings are also required to have a Fire Department (or Bomba) Certificate. The Bomba Certificate is renewable periodically - usually every two years. It is a major expense for warehouse operators to comply with the Fire Department's requirements. For proper storage, some combination of roof sprinklers, smoke detectors, ventilation, hosereels and hydrants have to be adequately provided. If racks are present, in-rack sprinklers may be required. Furthermore, it is a substantial expense to continuously test and maintain this equipment. Full compliance with Bomba's requirements can be difficult. For example, ideally, aisles should be cleared every evening which is sometimes difficult to comply with especially during peak periods. As a result, it is not surprising that this is an area that many warehouse operators and owners try to save on.

Again, if the Bomba Certificate is not available, the cargo can still most likely be insured, however the lack thereof should be declared to the insurance company beforehand to ensure that it doesn't use this as an excuse to disclaim liability in the event of a fire. This may vary from insurance company to insurance company.

Above are just some of the factors to consider when choosing a warehouse. Cargo is invariably uniquely valuable to the company storing the cargo. Damaged or lost cargo may result in service failure or even losses to your company. Therefore, it would be wise to properly audit an external warehouse service provider if one is required.


Top Forwarding Sdn Bhd
(Co. No. 172849-P)
No 18-1, Lorong Batu Nilam 3D
Bandar Bukit Tinggi
41200 Klang
Selangor Darul Ehsan

Tel: 03-3322 1392; 03-3322 1295
Fax: 03-3318 3257