How do I find out if one customer fills most of a 3PL’s warehouse space?
Ask for space used by customer, revenue by customer and billing by month for several years, then compare them with a walk through the building. If one name dominates, ask about its contract, its plans and how quickly the space could be refilled if it left.
Concentration is easy to hide in a general summary, so go to the detail. Ask for a report of pallet positions or square footage used by client, and another of revenue by client, across several years. The two can differ: a client may fill space but pay a low rate, or use little space but bring high-margin services. Both numbers matter. Ask for a plain list of clients, with their start dates.
Then check it against what you see. Walk the building and read the labels on the racking. Does one name appear everywhere? Are there large blocks of space set aside for one client? Compare what you see with the reports and ask about any difference.
If one customer is large, learn why it stays. Read its contract, ask when it ends and whether the customer has talked about moving or building its own facility. Ask who manages the relationship at each side. Think about how quickly you could refill the space and what that would cost. Also look at whether clients share the space, such as shelving or a cage. Check also whether the customer has dedicated equipment or staff that would be stranded if it left. A lawyer can read the contract’s wording on a change of ownership.
Key takeaways
- Get space and revenue reports by customer, then walk the building.
- Read the biggest customer’s contract end date and exit terms.
- Think about how quickly freed space could be refilled.
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Sources
This answer is checked against primary sources. Links were last confirmed on the dates shown.
- 01Business Development Bank of CanadaGovernmentHow to conduct due diligence when buying a business
- 02Business Development Bank of CanadaGovernmentWhat are the steps to buying a business?
- 03Business Development Bank of CanadaGovernmentAfter buying a business, what is the next step?
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