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Warehousing Options: Choosing the Right One for a Company
There are three main options for warehousing: public, contract and private. Here are the highlights of the basic differences among them:
- Public Warehousing: Space is leased month-to-month for a fixed fee per square foot. The advantage of public warehousing is that there are no long-term commitments. The disadvantage is that this option is often the most expensive per square foot
- Contract Warehousing: Space is leased for a fixed term, usually six months or longer. The cost per square foot is generally better than for public warehousing, and the space often comes with features such as racking, forklifts, dedicated docks and 24-hour security
- Private Warehousing: Space is owned and managed by the business. The main advantage to owning the space is the potential for total control of all aspects of the operation, including leasing out unused space. The biggest downside to private warehousing is the capital needed to acquire the space and the cash flow to manage it
How to Choose the Best Warehousing Option
Beyond the basic differences described above, there are a host of other factors to consider:
- Purpose: Will the warehouse be a cost or a profit center?
- Duration: How long will goods be housed? Will goods enter once and remain for an extended period (storage), or will there be many shipments received and sent from the warehouse? Is this need temporary or permanent?
- Location: Does the warehouse need to be close to a transportation corridor such as a rail line or a port? Or does it make more sense to have a warehouse located near a primary customer or the company office? As fuel costs continue to rise, the location of warehousing is not just a matter of convenience, but is strategic to the profitability of the enterprise
- Access: How often will the warehouse receive shipments? How often will the goods stored be accessed? Who needs access to the building and when?
- Services: Does the business require specialized services such as ultraclean storage, cold storage, a communications system, the ability to generate documentation, and so on?
- Costs: The cost per square foot is only one factor in the calculation of the overall cost of warehousing. All the factors listed above contribute to that calculation as does consideration of taxes (no taxes on public storage, but a possible tax benefit for private warehousing)
Warehousing is an extremely competitive business. Unsold space is irrecoverable, lost revenue to warehousing companies. Its a great time to find a bargain.