Facing fierce competition in the global market, each manufacturer is trying its best to develop its own competitive advantage. This is especially true in the interlining industry. One of the aspects for an interline provider to achieve a competitive advantage is to reduce costs and increase efficiency. Whereas reducing storage cost is a means for an interline provider to focus. Before undertaking strategic planning to reduce storage cost, it is necessary for an interlining provider to understand the basic concept of warehouse property classification.
Warehouses in manufacturing industries are generally classified by ownership. Under this idea, deposits can be classified into private deposits, public deposits and contract deposits.
1.Private Warehouse
A private warehouse, as a type of warehouse property classification, is operated by the companies or organizations that own the products stored in the facility. These companies or organizations can be factories, trading companies or wholesalers. The warehouse building can be owned or leased. The critical point for a business to decide whether to own or lease the facility is financial concern. Sometimes it is not possible to find a suitable warehouse to lease. Take an interline provider for example; storage shelves or other physical nature in a leased building may not be suitable for the storage of interlining products such as woven interlining, non-woven interlining, and fusible interlining. Under this circumstance, design and layout must be carried out for construction. On the other hand, in a particular connection for logistics purposes, a company may find it difficult to find a proprietary warehouse.
The main benefits of a private warehouse are flexibility, control, cost and some intangible attributes. A private warehouse is more flexible than a public one, as operational policies and processes can be adjusted to meet the special needs of a customer or the product itself. In addition, an appropriate course of action can be taken to meet specific requirements for logistics purposes.
The private warehouse offers stable control as the company has sole authority over warehouse management to optimize activities. For example, control of warehouse operations for an interlining product such as woven interlining, nonwoven interlining, and fusible interlining can be integrated with the logistics operations of an interlining supplier.
A private warehouse is generally considered less expensive. One reason is that a private warehouse is built within a supplier’s manufacturing base; therefore, the fixed and variable components may be less than a public deposit. Furthermore, a private warehouse is not profitable for the owner of the facility.
A private warehouse can also have intangible benefits. For example, a warehouse with the name of an interlining supplier for woven interlinings, non-woven interlinings, and fusible interlinings can provide business advantages. Customers may have perceptions of stability and trustworthiness towards the provider.
2. Public Warehouse
Unlike a private warehouse, a public warehouse, like another type of warehouse property classification, is independently operated by a company to offer a wide range of storage-related rental services. Such warehouses are widely used in logistics systems to reduce supply chain costs. A public warehouse can be rented on a short-term or long-term basis, depending on facility policies and customer needs.
From a financial point of view, a lower storage cost can be achieved by hiring a public warehouse than by owning a private warehouse. Shared resources and economic scale in a public facility can result in lower operating cost. Another benefit of public storage is that customers such as interlining supplier for woven interlinings, non-woven interlinings and fusible interlinings do not need to spend a large investment on facilities. In addition, a public warehouse allows users to easily change the number and size of warehouses to meet special demands.
Users in the same public store can share economies of scale by leveraging the combined requirements of users. Such leverage varies from fixed cost to operating cost. The cost of transportation can also be used in a public warehouse. For example, a public facility may arrange for combined customer delivery consolidation to deliver the first interlining supplier’s woven interlining products with the second interlining supplier’s nonwoven interlining products to the same destinations.
Due to their flexibility, scalability, services, and variable cost, public warehouses are popular with many businesses. In general, a public warehouse as a type of warehouse property classification may design and perform special services to meet the operational requirements of customers.
3. Warehouse by contract
A contract warehouse, as a third type of warehouse ownership classification, has the attributes of private and public warehouses. A contract warehouse can also be understood as a customized extension of a public warehouse, which is a long-term commercial agreement to provide specific and personalized logistics services to customers. A contract warehouse is also believed to be a form of business process outsourcing from a logistics perspective. In this relationship, the customer and the service provider share risks related to storage operations.
In general, many companies tend to use a combination of private, public, and contract warehouses. Basic knowledge of warehouse property classification will serve as a managerial guide on how to develop a warehouse implementation strategy. Such warehouse planning focuses on two aspects, namely 1) the number of warehouses required and 2) the warehouse property used in specific markets. Focusing on these two aspects will create warehouse segmentation for specific markets, which can deliver more personalized and focused logistics capabilities to customers.