Running head: COMBINE PRIVATE AND PUBLIC WAREHOUSES 1 Combine Private and Public Warehouses 11 Combing Warehouses Group A Assignment TLMT312, American Public University Professor Rodolfo Santamaria 08 June 2014 Introduction A company may choose to combine public and private warehousing through a contract process. In San Antonio, Texas there are a series of public warehouses that are actually owned by the city and they are located in Port San Antonio. Many of the businesses contract the warehouses for a specified period of time. Often this is based on a contract that the company has to manage materials for another company or as a temporary expansion option for a growing company. In this situation a company may or may not have its own transportation assets. In a contracted warehouse situation a company may or may not, depending on the contract, be responsible for maintaining the facility. The arrangement exists for the duration of the contract and any other responsibilities agreed upon by the two parties will be delineated in the contract. Public warehousing is a very good option for a company that does not have the money to hire full time staff to manage its product or manage its transportation costs. The cost of operating and maintaining the facility falls on the company that owns the building but only manages the inventory. A private warehouse it typically owned by a company with sufficient monetary assets to afford to hire a staff, maintain insurance, maintain a fleet of vehicles and takes to care of any facility maintenance that may be necessary. This keeps the whole supply chain within the bounds of one company. Combining public and private warehousing may be an attractive and economical option for any company. A company will choose to combine public warehousing with private warehousing when, financially, it makes sense for the company to lease a facility instead of build or purchase and staff it with their own personnel. Business Example There are several instances when private and public warehousing teaming up together makes good business sense. International Finance Corporation (2012) describes a public-private partnership (PPP) in agricultural storage in various locations around the world. The need for modernized storage facilities in developing countries and upgraded logistical systems is imperative for growth of the industry. The governments in the Middle East, Sub-Saharan Africa, South, and East Asia have recognized the short falls of public warehousing and are opening up the agriculture business to more privatization of warehousing and logistics. The introduction of privatization has allowed the governments to improve operational efficiencies, reduce waste/damage, and introduce the latest technology and international best practices, and finally allow better quality control. This allows for more growth and investment in the industry that previously was not being allowed when the storage facilities were owned primarily by ...

1. Running head: COMBINE PRIVATE AND PUBLIC
WAREHOUSES
1
Combine Private and Public Warehouses
11
Combing Warehouses
Group A Assignment
TLMT312, American Public University
Professor Rodolfo Santamaria
08 June 2014
Introduction
A company may choose to combine public and private
warehousing through a contract process. In San Antonio, Texas
there are a series of public warehouses that are actually owned
by the city and they are located in Port San Antonio. Many of
the businesses contract the warehouses for a specified period of
time. Often this is based on a contract that the company has to
manage materials for another company or as a temporary
expansion option for a growing company. In this situation a
company may or may not have its own transportation assets. In
a contracted warehouse situation a company may or may not,
depending on the contract, be responsible for maintaining the
facility. The arrangement exists for the duration of the contract
and any other responsibilities agreed upon by the two parties
will be delineated in the contract. Public warehousing is a very
good option for a company that does not have the money to hire
full time staff to manage its product or manage its
transportation costs. The cost of operating and maintaining the
facility falls on the company that owns the building but only
manages the inventory. A private warehouse it typically owned
by a company with sufficient monetary assets to afford to hire a
staff, maintain insurance, maintain a fleet of vehicles and takes

2. to care of any facility maintenance that may be necessary. This
keeps the whole supply chain within the bounds of one
company. Combining public and private warehousing may be an
attractive and economical option for any company.
A company will choose to combine public warehousing with
private warehousing when, financially, it makes sense for the
company to lease a facility instead of build or purchase and
staff it with their own personnel.
Business Example
There are several instances when private and public
warehousing teaming up together makes good business sense.
International Finance Corporation (2012) describes a public-
private partnership (PPP) in agricultural storage in various
locations around the world. The need for modernized storage
facilities in developing countries and upgraded logistical
systems is imperative for growth of the industry. The
governments in the Middle East, Sub-Saharan Africa, South,
and East Asia have recognized the short falls of public
warehousing and are opening up the agriculture business to
more privatization of warehousing and logistics. The
introduction of privatization has allowed the governments to
improve operational efficiencies, reduce waste/damage, and
introduce the latest technology and international best practices,
and finally allow better quality control. This allows for more
growth and investment in the industry that previously was not
being allowed when the storage facilities were owned primarily
by the government. (Public-Private Partnerships in Agricultural
Storage, pp.5-12).
Transportation Management
The benefit of combining private transportation in a logistical
system for warehousing is a task the transportation manager
must plan for based on the daily operations of their company.
It could make the overall process of warehousing cost effective,
in terms of price, scheduling and transportation flexibility. By
offering the vendor these solutions of transporting their

3. products throughout the logistical system of warehousing is
what separates the private transportation from the public
transportation.
The private transportation company tailors its service to meet
the needs of their customers. The public transportation company
does not have this flexibility due to the nature of their business
model and operations being set to provide for a wider
demographic.
The public transportation company has at its disposal, the
intermodal transportation for multi stop locations, and can
provide standard rates for this operation. It is sometimes not
needed on a smaller scale operation in warehousing.
The private transportation company can offer this option as
well, but are better suited and cost effective for transporting
from point A to B with better efficiency. Their automated
network for processing to a selected demographic allows them
to compete more effectively too. So for warehousing the
private transportation company serves the vendor best.
The private transportation company has their own fleet of
vehicles, operators and mangers that work to provide the intra
warehouse transportation needed. They can even be embedded
within the warehouse company.
Overall, it depends upon the customer need, and the service the
vendor would like to provide, will determine whether private or
public transportation is best.
Inventory Control
Inventory control is an important component of supply chain
management. In today’s fast paced marketplace, maintaining
excess inventory is not conducive to remaining competitive.

4. Efficiency is important for survival and maintaining excess
inventory utilizes important resources to purchase and maintain.
“There are four major components of inventory carrying cost:
capital cost, storage space cost, inventory service cost, and
inventory risk cost. Capital cost is the amount of money that is
tied up on inventory that could be invested or spent somewhere
else. Storage space cost is the cost to move excess inventory,
rent, heating, lighting, and handling costs. Inventory service
costs is the amount of insurance and taxes that are spent on
inventory. Inventory risk costs include the costs associated with
obsolescence, damage, pilferage, expired goods, and other risks
to stored products. “(Coyle, 2009, Page 332-333).
Utilizing information technology and just in time processing
assist in maintaining appropriate levels of inventory that
satisfy consumer demand and do not waste valuable resources
with excess inventory. “At the Nabisco Division of Kraft,
branch warehouses are located adjacent to bakeries. Inventories
for all products are located at these warehouses to facilitate full
shipments to customers.”(Bowersox, Closs, and Cooper, 2012,
Page 297). This ensures the right products in the right
quantities are strategically located for distribution and reduces
the inventory cost for items that are in transit. “Inventory
carrying costs are on average about 34 percent of the total
logistics costs for organizations. Transportation costs comprise
about 61.4 percent of all logistics costs.” (Coyle, 2009, Page
323).
Order Processing
One key ingredient to a contract warehouse agreement is the
order processing department. Kraft is known for their contract
warehousing facilities which gains logistical benefits from the
private as well as the public systems. With a contract
warehousing agreement, Kraft would be entering a longer
contract then they would with a public contract, but this
contract would be cheaper and allow for more control. What

5. this means to the order processing department is that the
processing of all orders can be potentially controlled more by
the company, unlike the normal stipulations under a public
warehouse. Aparna Iyer stated that a, “public warehouse
results in the lessee having to relinquish control” (2009).
Furthermore, with Kraft being in a contract warehouse deal with
AmeriCold, in regards to their order processing department,
“the longer Kraft utilizes AmeriCold’s services, the better the
contract warehousing firm’s capability to understand business
needs and provide customized services” (Bowesox, Closs &
Cooper, 2012). This can easily benefit both the order
processing department, as well as the return merchandise
processing. AmeriCold will be able to recognize recurring
errors or problems with the various processes, and be able to
address them in a better way than a public warehousing deal
would be able to.
Customer Service
According to the VendorSeek website (2013), there are three
types of warehousing: public, contract and private. Each offers
businesses various advantages such as no long-term
commitments (public) and reasonable per square foot storage
costs (contract). However, each also has limitations, such as
potentially high startup and operating/maintenance costs
(private). Foremost, a business should consider their
customers’ needs. Will the customer’s product be more at risk
in a public warehouse versus a private warehouse? What are the
total costs for each option? Can this cost be absorbed into the
product price, or will it need to be satisfied internally? Private
warehousing offers many customer benefits because its
operation can be tailored to fit the customer’s needs. On the
other hand, public warehouses can benefit multiple customers if
it offers multi-load transportation. The VendorSeek website
(2013) asks the following questions:

6. Do they need to store the products near the customer in order to
reduce the time from order placement to delivery? Does the
customer need the product shipped via a specific carrier (air,
land, or sea)? If so, then the warehouse would need to be at or
nearby one of these carriers’ hubs.
Hudock (1998) wrote that “customer service is the true value of
warehousing, and people will pay for [product] availability.”
With the introduction of information technology into the supply
chain system, the need for large, inventory-filled warehouses is
being replaced with smaller or consolidated warehouse
operating facilities that are able to fill a customer’s order in a
more efficient amount of time and cost.
Return Merchandise Processing
Returned Merchandised Processing involves the process
whereby a product is returned so as to receive a repair, refund,
or replacement during the warranty period for the product. In
such a situation, the purchaser of the product should first
contact the product’s manufacturer or retailer or distributor to
obtain authorization to return a product. Typically, the logistics
department are responsible for warehousing that also involves
directing returned product back to their constituent
manufacturers.
Consolidated returned merchandise processing should start
through a definite credit policy that includes ground rules that
are coded in a customized copyrighted software solution. The
proprietary software should be able to provide an infrastructure
that is necessary to manage order information, return receipts,
replacement fulfilment and credit/billing services (Daugherty,
Richey, Genchev, & Chen, 2005).
The process in turn is supposed to capture information about the
returned item at the component level that will be able to control
a manufacture’s exposure to incomplete and invalid returns. For

7. a good reason. Incomplete and invalid returns can at times be
very costly to importers and manufacturers.
Manufacturers can reduce the overall costs of supply chain by
approximately 25% and backlogs from the return processing
from 40 to 80 days to 8 days through distribution process in a
given location as well as through reverse logistics.
Refurbishment and reprocessing can as well be added to the
return merchandise processing process and include disassembly,
restoration, reassembly, diagnosis, and rebuilding activities
with requirements for accurate inventory control, product
sorting, and warehousing for goods in progress, rebuilt finished
product and components (Mukhopadhyay & Setaputra, 2006). In
order to meet specific needs, these processes require customized
processes.
Ultimately though a solid IT infrastructure and well defined
procedures and policies as well as a flexible workforce and an
accurate inventory control, the processing of returned
merchandise should not pose any problems or difficulties to the
company’s logistics.
Conclusion
References
Bowersox, D., Closs, D., Cooper, B., (2012). Supply chain
logistics management. (4th ed., pp. 30-31). New York, NY:
McGraw-Hill. Retrieved from
http://online.vitalsource.com/books/9781308001029
Coyle, J. J. (2009). Supply chain management: a logistics
perspective (8e [ed.] Ed.). Mason, OH: South-Western Cengage
Learning. Print
Daugherty, P. J., Richey, R. G., Genchev, S. E., & Chen, H.
(2005). Reverse logistics: superior performance through focused
resource commitments to information technology.

8. Transportation Research Part E: Logistics and Transportation
Review, 41(2), 77-92.
Edward Jr, S. J., Stevens, M. J., Milch, J. A., Sidari, P. J.,
Combs, T., & Kern, D. J. (2004). Merchandise return system
with value added returns processing (dispositioning).
Washington, DC: U.S. Patent and Trademark Office.
Hudock, B. (1998). Secret weapon: Warehouse strategies help
improve customer service. Materials Management and
Distribution, 43(10), 58. Retrieved from
http://search.proquest.com/docview/227982270?accountid=8289
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Iyer, A. (2009, July 23). Advantages and disadvantages of
contract warehousing. Retrieved June 3, 2014 from
http://www.buzzle.com/articles/contract-warehousing.html
International Finance Corporation (2012), Public-Private
Partnerships in Agricultural
Storage, PPP Workshop Bhubaneswar, Retrieved from
http://www.ppiaf.org/sites/ppiaf.org/files/documents/NEERAJ-
Agribusiness-Storage-PPP.pdf
Mukhopadhyay, S. K., & Setaputra, R. (2006). The role of 4PL
as the reverse logistics integrator: optimal pricing and return
policies. International Journal of Physical Distribution &
Logistics Management, 36(9), 716-729.
VendorSeek website (2013). Retrieved from
http://www.vendorseek.com