What should I check in a packaging company’s warehousing of customer-owned inventory?
Check three things: whose goods they are, how they are counted and tracked, and what happens if they are damaged or lost. Stock on the floor that belongs to customers should never be mixed into the plant’s own inventory or the sale price.
Begin with the count. Ask for a list of customer-owned stock, then walk the warehouse and compare. Ask how receipts and releases are logged, and how often someone reconciles the records against the shelves. Differences between the two are a signal about how carefully the shop is run.
Next, ask how the plant is paid for storing it. Some shops charge storage fees; others treat it as a free service to keep the customer. If it is free, find out how much floor space it uses and whether that space could earn more. Also ask whether customers have ever asked for stock they could not find. Then look at risk. Ask what insurance covers goods held for others, and who is responsible if there is a fire or a flood. Read any written storage agreements, and ask your lawyer to explain how they would pass to you. Finally, confirm that none of the customer stock appears in the financing documents or the figures the seller gave you. Keep notes on anything that looks informal, such as stock held on a handshake or goods nobody has asked about in a long time. Raise each one with the seller early, and agree in writing how it will be handled at closing.
Key takeaways
- Keep customer-owned stock separate from the plant’s own inventory in every figure.
- Compare logs against the shelves and ask how often they are reconciled.
- Ask what insurance covers goods held for others and who bears the loss.
Related reading
12 pages on the same subject, grouped by topic.
Buying
- Expert answerHow do I check a packaging maker’s minimum order terms with its customers?
- Expert answerHow do I find out which packaging customers could switch suppliers easily?
- Expert answerHow do I check a subscription box’s inventory of leftover products?
- Expert answerHow do I find out how a subscription box handles failed customer payments?
- Expert answerHow do I check a flooring company’s reliance on big-box store referrals?
Selling
Due diligence
- Expert answerWhat should I ask about a packaging supplier’s minimum order and custom die inventory?
- Expert answerWhat should I ask about a functional fitness box’s barbell and rig inventory?
- Expert answerHow do I find out how many subscription box customers are on gift plans?
- Expert answerHow do I check a fleet shop’s parts inventory ownership versus client-owned?
Sources
This answer is checked against primary sources. Links were last confirmed on the dates shown.
- 01Business Development Bank of CanadaGovernmentWhat are the steps to buying a business?
- 02Business Development Bank of CanadaGovernmentHow to conduct due diligence when buying a business
Deavo is an advertising and listings platform, not a brokerage, law firm or valuation firm. This page is general information, not legal, tax, accounting or valuation advice, and rules differ by province. Confirm anything you rely on with a qualified professional before you act on it.