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Unit 12: Warehouse Management

Owner-operated Warehouses Notes
An owner-operated warehouse is operated by the firm owning the product. The actual facility,
however, may be owned or leased. The decision to own or lease the facility is essentially a
financial decision. The major benefits of owner operated warehousing are that there is better
control and flexibility. Control, especially, facilitates the ability to integrate warehouse operations
with the rest of the firm’s internal logistics processes. Where there is need for flexibility, owner-
operated facilities provide the freedom to adjust operating policies and procedures to meet
unique requirements of the firm. In many cases, owner operated warehouse could be less costly
than private warehousing because the profit markup is eliminated. This benefit may be misleading
since private warehouses often are more efficient as they utilize their resources more effectively.

There could also be a number of other intangible benefits particularly with respect to market
presence. A private warehouse with a firm’s name on it may produce customer perceptions of
responsiveness and stability. This perception can provide a marketing advantage over other
enterprises.

Private Warehouses

Private warehouses charge clients a basic fee for handling and storage. The handling charge is
based on the number of cases or weight handled. For storage, the charge is assessed on the
number of cases or weight in storage during the month. When economies of scale are not
possible in a private facility, public warehousing is a low-cost alternative.
A classification of private warehouses, on the basis of the range of specialized operations
performed, is as follows:

(1) General merchandise,
(2) Refrigerated,
(3) Special commodity, and
(4) Bonded warehouse.

Each warehouse type differs in its material handling and storage technology as a result of the
product and environmental characteristics.
General merchandise warehouses: This is a warehouse that is used to store goods that are readily
handled, are packaged, and do not require a controlled environment, such as paper, small
appliances, and household supplies.

Traditional general warehousing companies receive and ship goods on behalf of their customers,
serving as middlemen in the transportation process and a vital part of the logistics business. The
carrier is chosen either by the customer or by the warehouse operator who then acts as the
customer’s agent.
General warehouses use EDI and other electronic devices such as bar coding and radio frequency
monitoring to enhance the productivity and efficiency of warehouse operations and simplified
inventory tracking. As customer expectations have become more stringent and competition in
the general warehouse industry has increased, more warehouses are investing in technology to
remain contenders in the market.
Private warehouses owned by 3PL operators are extensively used in logistical systems. Almost
any combination of services is offered by such operators, either for a short term or over a long
duration.

Refrigerated warehouses (either frozen or chilled): These are specialist warehouses designed to
handle and maintain products that are perishable such as food, medical items, and chemical

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