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Warehouse Options

For acquiring warehouse space, the following three options are available:

1. Private warehouse

2. Public warehouse

3. Contract warehouse

Consideration for exercising these options depends on various factorssuch as product characteristic, demand fluctuations, investment, cost ofoperation, degree of control, sales economics etc.

Private warehouse:

Private ownership of storage facility refers to having the entire facilityunder the financial and administrative control of the firm, i.e. the firmowning the product operates the warehouses. The facilities may either deowned by the firm or taken on lease, for a period of three to five years.

The decision as to which strategy best fits an individual firm is essentiallyfinancial. Often it is not possible to find a warehouse for lease that fits theexact requirement of a firm. For example, a warehouse requires

substantial material-handling activities. Existing or leased facilities maynot be adequately designed. As a general rule, an efficient warehouseshould be planed around a material-handling system is order to encouragemaximum efficiency of product flow.

Private ware house are an attractive proposition under certaincircumstances, such as:

1) Product specific material handling and strongly facilities are require,which are not available with other options.

2) Volumes handled are high, ensuring full capacity utilization andbenefits of scales economics.

3) A high degree of control over the operations is required.

Benefits of privates warehousing:

1) Control: Private warehouses provide more control science theenterprise has absolute decision-making authority over all activitiesand priorities in the facilities. The ability to integrate warehouseoperations with the rest of the firms internal logistics process.

2) Flexibility: Private warehouses generally offer more flexibilityscience operating policies and procedures can be adjusted to meet

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unique needs. Firms with very specialized customers or products areoften motivated to develop their own warehouse facilities.

3) Cheaper: Private warehousing is usually considered less costly thanpublic warehousing because private facility costs do not have a

profit mark-up. As a result, both the fixed and variable costcomponents should be less.

4) Intangible benefits: Finally, private warehousing has someintangible benefits, particularly with respect to market presence. Aprivate warehouse with a firms name on it may produce customerperceptions of responsiveness and stability. This perceptionsometime provides a firm with a marketing advantage over otherenterprises.

Extra advantages:

1) Advantageous for a company with very high turnover of inventoryand mass production.

2) Greater management control over the operation of warehouse.

3) Technologically sensitive activities for e.g. final assembling ofproduct can be undertaken in the warehouse, as there is nointerference of any external agency.

Suitability of warehouse:

The ownership of a private warehouse is suitable in following area:

1) Mass production Company.

2) Generally stable demand and supply conditions throughout theyear.

3) Achieving cost efficiency through maximum utilisation of warehousefacilities.