The Impact of Formalization on Warehousing Firms

Many of today's most successful companies have decided to focus on their core business and purchase other functional needs from outside vendors. Time and resource constraints make utilization of public or contract warehousing providers an attractive option. Because of their specialized expertise, external warehousing firms are often able to deliver services in a more cost‐effective and efficient manner. The researchers examined differential capabilities among warehousing service providers based upon the degree of formalized internal processes developed. Formalization was shown to impact: 1) the average number of services provided; 2) the average number of computer applications used in providing services to customers; and 3) the average number of installed technologies within the respondent firms. More highly formalized firms are positioned to be able to “offer more”.