- A private or contract facility may be used to cover regular year round requirements.
- Public facilities are used to handle peak season.
- In many cases central warehouse may be private, while market or field warehouse are public warehouse.
- Where the warehouse space is fully utilized at least 75-80% of the time, private facility may be more efficient.
- A firm may find private warehousing to be more justified at certain locations on the basis of distribution volume, while in other cases public warehousing may be the least cost option.
- Some customer groups may be served better from a private warehouse, while a public warehouse may be appropriate for others.
- Where the customers can be served better by local presence of the products, private or contract facility may be useful.
- Public and contract warehousing increases the potential for industry synergy.
¨For example, firms in grocery business share public warehousing facilities with other suppliers serving the same industry.
¨The benefit is the reduced transportation cost due to joint use of same public warehouse allowing for frequent delivery of consolidated loads from multiple suppliers.
- Public and contract warehouses demonstrate more responsiveness as they offer location flexibility. For example, in-season demand for agricultural chemicals require warehouses to be located near markets to serve customers better. After growing season, local warehouse become unnecessary.
- Public and contract warehouses generally offer better economies of scale, as they are able to design operations and facilities to meet higher volumes of multiple clients.
- Contract warehousing facilities can provide complete logistical support such as transportation, order processing, inventory control, storage and other administrative assistance in an integrated manner.
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