1. There are three types of warehouses: private warehouses owned by firms, public warehouses that serve multiple clients, and contract warehouses that combine private and public characteristics through long-term contracts. 2. Key decisions in designing a warehouse include site selection, product flow-oriented design with a single floor, maximizing cube utilization, analyzing product mix, allowing for future expansion, selecting material handling systems, and layout that facilitates efficient product flow. 3. When determining warehouse size, projections of total volume, base and safety stocks, utilization rates, and allowing additional space for growth must be considered to avoid under-estimating requirements.

1. Supply Chain Management
Warehouse ownership
&
Warehouse decision
Arun Sudhakaran
Roshan Rajan

2. 2
Warehouse Ownership

3. Warehouse Ownership Arrangements
▪ Warehouses are typically classified based on ownership
1. Private Warehouse
2. Public Warehouse
3. Contract Warehouse
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4. 1. Private Warehouse
▪ Operated by the firm owning the product. ( Building may be leased or owned)
▪ The decision about ownership or leased is essentially financial.
▪ Sometimes it is not possible to get a warehouse for lease which fits the firm’s purpose,
so the only option is to design and construct a new warehouse.
▪ Major benefits are
a. Control
b. Flexibility
c. Cost
d. Range of intangibles
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5. a. Control
Offers substantial control since management has authority to prioritize activities.
Such control facilitate integration of warehouse operations with the balance of firm’s
logistics operations.
b. Flexibility
It offers more flexibility since operating policies, hours and procedures can be adjusted
to meet the specific customer and product requirements.
Firms with very specialized customer and products are motivated to own and operate
warehouses.
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1. Private Warehouse
Benefits

6. c. Cost
Less costly than public since it is not operated for a profit.
So both fixed cost and variable cost of a private warehouse may be lower than public.
d. Range of intangibles benefits
A private warehouse with the firm’s name may stimulate customer perceptions of
responsiveness and stability.
This provides a marketing image compared to the competitors.
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1. Private Warehouse
Benefits

7. 1. Private Warehouse
Disadvantage
▪ The Use of Private warehouse is declining because of an increasing managerial interest in
reducing capital invested in logistical assets.
▪ As public warehouse deals with multiple clients there is a scope of getting reduced cost as
there is an operational economies of scale which offset the perceived cost of benefit of
private warehouse.
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8. 2. Public Warehouse
▪ Are used extensively in logistical systems.
▪ It is classified based on operational specialization.
a. General Merchandise
b. Refrigerated
c. Special Commodity
d. Bonded
e. Households goods and furniture.
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9. 2. Public Warehouse
a. General Merchandise
▪ Handles packaged products such as electronics, paper, food, small appliances and household
supplies.
b. Refrigerated warehouse
▪ Offers frozen or chilled capacity designed to protect food, medical and chemical products
requiring special temperatures.
c. Special Commodity Warehouse
▪ Designed to handle bulk material or items requiring special handling such as tires or clothing.
d. Bonded warehouses
▪ Licensed by govt to store goods prior to payment of taxes or import/export duties
▪ Exert tight control over movements in and out of the facility since documents mus accompany
each move.
e.Households goods and furniture
▪ Specialize in handling and storing large bulky items such as appliances and furniture
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10. 2. Public Warehouse
▪ From a Financial perspective it may achieve lower operating cost than private.
▪ They do not require capital investment on the part of their customers
▪ Based on ROI judgment public warehouse can be an attractive alternate
▪ It offers flexibility on size and number of warehouse thus allow users to respond to
suppliers, customer and seasonal demands.
▪ Benefits of operational economies of scale since public warehouse can have multiple
clients.
▪ It may also leverage transportation cost by providing consolidation of multiple client
freight.
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11. 3.Contract Warehouse
▪ It combines the characteristics of private and public operations.
▪ Long term contractual relationship will result in lower total cost than a public warehouse.
▪ It can provide benefits of expertise,flexibility,scalability and economies of scale by sharing
management,labor,equipment and information resources across multiple clients.
▪ Contract warehouse offers a range of logistical services such as transportation
management, inventory control, order processing ,customer service and return
merchandise processing.
▪ Contract logistics firms are typically called as integrated service providers (ISPs) and are
capable for providing total logistical responsibility for an enterprise.
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12. 12
Warehouse Decisions

13. Warehouse decisions
▪ Basic use of a warehouse is storage and handling of material.
▪ But it require detail analysis of various factor before the size ,shape and type of
warehouse can be determined.
▪ They are
1. Site Selection
2. Design
3. Product Mix Analysis
4. Expansion
5. Materials Handling
6. Layout
7. Sizing
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14. Warehouse decisions
1. Site Selection
▪ Factors driving site selections are
▪ Service availability
▪ Cost
▪ A warehouse need not be located in an industrial area.
▪ Land cost is the most important factor.
▪ Beyond procurement cost, setup and operating expenses such as transport access, utility
hookups, taxes and insurance rates require evaluation.
▪ Site must also provide adequate room for expansion, necessary utilities must be available,
soil must be capable of supporting the structure. Proper water drainage etc.
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15. Warehouse decisions
2. Design
▪ 3 factors to warehouse design
a. Number of floors
b. A cube utilization plan
c. Product flow
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16. Warehouse decisions
2. Design
a. Ideal warehouse design is one floored
Eliminates vertical product movement
Use of vertical handling device such as elevators, conveyors require time,energy, and creates
bottleneck situation.
b. Design Must maximize Cube utilization
Warehouses are designed with 20- 30 foot clear ceilings although the handling equipment can
use heights over 100 feet.(limited by the safe lifting capabilities of handling device and fire
safety regulation)
c. Product flow
Should facilitate continuous straight product flow through the building
 Received at one end of the building. Stored as necessary in the middle and shipped from the
other end. 16

17. Warehouse decisions
3. Product Mix Analysis
Operation of warehouse depends on product mix.
So each product should be analyzed in terms of annual sales, demand,weight,cube and
packaging.
Total size, cube and weight of the average order to be processed through warehouse must be
determined.
This data provide information for determining warehouse space, design and layout, materials
handling equipment, operating procedures and controls.
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18. Warehouse decisions
4. Expansion
Future expansion should be considered during the initial planning phase.
It is common to establish a 5 – 10 year expansion plan.
Potential expansion plan can justify purchase of a site 3 - 5 times larger than the initial
requirements
Building design should accommodate future expansion.
Some walls may be constructed of semi permanent materials to allow quick removal to facilitate
expansions
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19. Warehouse decisions
5. Material Handling
It is the basic driver of warehouse design.
Material handling system must be selected early in the warehouse development
process.
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20. Warehouse decisions
6.Layout
Layout and storage areas of warehouse should be planned to facilitate product flow.
Key to efficient layout is a well developed slotting area ( where specific products are kept in
selected pallet locations)
Handling equipment must be integrated to finalize layout.( path and tempo of product flow
depends on it)
Selection or picking area should be placed such that it minimize the distance order pickers must
travel when assembling an order.
The selection area is supported by a storage area.
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21. Warehouse decisions
7. Sizing
Several techniques are available to estimate warehouse size.
Each method begins with a projection of total volume expected to move through the warehouse
during a given period.
The projection is used to estimate base and safety stocks for each product stocked in the
warehouse.
Failure to consider utilization will result in over building but most complaint of warehouse
managers is under estimation of warehouse size requirement.
A good thumb rule is to allow 10 % additional space to account for increased volumes, new
products and business opportunities. 21