The right warehouse can make or break your business model and position your company better than your competitors. A warehouse is a standard building for the average person, but there are many options for small, medium, or large businesses. If you manage a warehouse or are thinking of acquiring one, you should know the possibilities it offers.
Today we’re digging into the top eight warehouse types, their benefits, and drawbacks. This should help you decide which one is best for your goals as an owner.
Private warehouses are owned by distributors, manufacturers, or wholesalers. Some of the more established online and retail marketplaces will also oversee their private warehouses.
Compared to public warehouses, private warehouses are more costly. However, private warehouses are an effective solution for small and medium-sized eCommerce businesses.
- Fewer errors because it is managed by a small group of people
- Can be rented instead of purchased
- Can be designed to fit the needs of a specific company
- Performance improvements
- Viable option when public warehouses are unavailable
- Return rates are low
- Less flexibility with operations
- Expensive to build from the ground up
Public warehouses are owned by third-party companies or sometimes government entities and then offered to companies in the private sector. The owners rent these buildings for both personal and business use. Private business owners can utilize public warehouses to store their goods for a short or long amount of time at an affordable rate.
Public warehouses are not the most technologically advanced options, but they are generally the most budget-friendly solutions. This affordability makes it an excellent choice for small to medium-sized businesses and startups in the eCommerce space.
- Location is usually well-placed and strategic
- Enables companies to scale and reach ideal customers
- If the company stops using the warehouse, there is no liability
- Tax advantages
- Less flexibility
- Space may not be available all the time
- Minimal specialization or coordination when it comes to service
- Could be expensive when space is limited
A smart warehouse is a technologically advanced warehouse where the fulfillment process, storage, and management are driven by automation and artificial intelligence.
Management will also have access to innovative software. The largest corporations in the world, like Alibaba and Amazon, utilize smart warehouses. Investing in smart warehouses allows companies to create a quick and error-free order fulfillment process.
- Lower labor costs, due to automation
- Fewer labor constraints and liabilities
- Boosted productivity, efficiency, and accuracy
- Space is maximized
- The initial investment is extremely high
- Tough to maintain
- Requires a high amount of technical skills
- Not a good solution for operations with a lot of variables
A bonded warehouse is a place that can house imported goods before businesses will need to pay customs duties on them. Government authorities provide bonds to companies when they rent or lease the space with them. That way, the business will not make a profit loss when it releases its products.
Companies will also go the bonded warehouse route because they will not need to expend any duties until their goods are launched. Bonded warehouses enable companies to store items that are restricted until the necessary documentation is complete.
- Perfect solution for importers
- Items are stored duty-free until they are released to customers
- Safe and secure storage space for goods
- Tax advantages for goods stored
- Excellent solution for long-term storage of goods
- Located securely
- Only allows for taxable goods
- All products need to be released or moved (with the duty paid) after two years
- The process to clear is long and cumbersome
- There is a required license enforced by the customs authority
Cooperative warehouses are owned and operated by cooperative organizations like a winery or farmer co-op. All co-op members can house goods at these locations, including the people outside of the co-op. However, co-op members are the ones who gain incentives through the form of reduced rates.
- Cost-effective option
- Monetary advantages for members of the cooperative
- Allows cooperatives to scale and expand market reach
- Not as much operational control
Government warehouses are operated and owned by the government. These entities usually control larger seaport storage facilities.
Government warehouses usually come with budget-friendly rates. However, these warehouses will enforce these rates strictly. If a company cannot pay rent promptly, the government has the power to recoup the rent by disposing of that business’ goods.
- Good choice for larger operations
- Cost-effective rates
- Tight payment guidelines
- Government has the right to recoup unpaid rent through the disposition of goods
Consolidated warehouses are another warehouse option that receive smaller shipments from various groups and suppliers. The warehouse then groups these goods into bigger shipments before sending them out to buyers. The warehouse shipping procedures will make sure that the consolidated goods are sent to a similar geographical region.
Consolidated warehouses are a viable option for small- to medium-sized businesses for a couple of reasons. First, they are economical when it comes to fulfillment. Secondly, the inventory volume and capital investment requirement are minimal. eCommerce companies of all sizes can utilize this option without a lot of barriers.
- Less operating costs
- Inbound costs are less because you can store larger quantities
- Higher customer service levels because of better resource allocation
- Higher cost for rushed delivery
- Local manager issues
Distribution centers are storage spaces that are usually designed strategically with specifications to adhere to. The storage is utilized for a temporary time, and goods will be moved around quickly for supply chain purposes.
Massive inventory quantities will normally come through and get distributed to retailers and resellers very quickly, sometimes within a day. Distribution centers are a budget-friendly rent option, and the price will depend on the types of products that will be stored.
- Customer convenience for shopping
- Cost and time savings because of specialization
- Retailers can purchase products in smaller quantities
- Financial support for resellers and retailers
- Loss of revenue because the manufacturer offers the final product at cost
- Lack of communication to the customer
There are many warehouse types for your business to maximize, and each option has its advantages. Businesses will select one according to their supply chain, business needs, budget, target market, and others. When you acquire or redesign a storage space, make sure to consider its features and optimize it accordingly.