Warehouse Ownership Classification in the Interlining Industry

Ellena Arroyo

Facing with the fierce competition in the global market, each manufacturer is putting every effort to develop its own competitive edge. This is especially true in the interlining industry. One of the aspects for an interlining supplier to achieve competitive edge is to lowering costs while increasing efficiency. Whilst lowering the storage cost is a means for an interlining supplier to focus on. Before making a strategic planning to lower the storage cost, an interlining supplier is necessary to understand the basic concept of warehouse ownership classification.

Warehouses in the manufacturing industries are generally classified by the ownership. Under this idea, warehouses can be classified as private warehouses, public warehouses and contract warehouses.

1. Private Warehouse
A private warehouse, as a type of warehouse ownership classification, is operated by the firms or organization that owning the products stored in the facility. These firms or organizations may be factories, trading companies or wholesalers. The building of the warehouse can be owned or leased. The critical point for a firm to decide whether to own or lease the facility is the financial concern. Sometimes it is not possible to find a proper warehouse to lease. Take an interlining supplier for example; the storage racks or other physical nature in a leased building may not be suitable for the storage for interlining products like woven interlining, non-woven interlining and fusible interlining. Under this circumstance, design and arrangement need to be taken place for construction. On the other hand, at a particular connection for logistic purposes, a firm may have difficulties in finding a warehouse for ownership.

The major benefits of a private warehouse are flexibilities, control, cost and some intangible attributes. A private warehouse is more flexible than a public one, as the operating policies and process can be adjusted to meet the special needs of a customer or the product itself. Also, a suitable course of action can be taken to meet specific requirements for logistic purposes.

Private warehouse offer stable control since the firm has the sole authority on warehouse management to optimize activities. For example, the control on warehouse operations for an interlining product like woven interlining, non-woven interlining and fusible interlining can integrate with the logistic operations of an interlining supplier.

Usually a private warehouse is considered less costly. One of the reasons is that a private warehouse is built within the manufacturing base of a supplier; therefore, the fixed and variable components may be lower than a public warehouse. Furthermore, a private warehouse is not profitable to the owner of the facility.

A private warehouse may also have intangible benefits. For instance, a warehouse with the name of an interlining supplier for woven interlining, non-woven interlining and fusible interlining may provide marketing advantages. The customers may have the perceptions of stability and reliability towards the supplier.

2. Public Warehouse
In contrast with a private warehouse, a public warehouse as another type of warehouse ownership classification is operated independently by a business to offer wide range of for-hire services related to warehousing. Such warehouses are extensively used in the logistic systems to reduce the supply chain costs. A public warehouse can be hired for a short or long-term, based on the policies of the facility and the needs of the customers.

In a financial view, lower cost on warehousing may achieve by hiring a public warehouse than owning a private warehouse. The share resources and economic scale in a public facility may result in lower operational cost. Another benefit of public warehousing is that customers like interlining supplier for woven interlining, non-woven interlining and fusible interlining do not need to spend a huge investment on the facilities. Furthermore, a public warehouse allows the users to change the number and sizes of warehouses easily to meet special demands.

Users in a same public warehouse may share scale economies by the leverage of combined requirements from users. Such leverage ranges fixed cost from to operating cost. Transportation cost may also be leveraged in a public warehouse. For example, a public facility can arrange combined customer delivery consolidation, to deliver the woven interlining products of the first interlining supplier with the non-woven interlining products of the second interlining supplier to the same destinations.

Because of its flexibility, scalability, services and variable cost, public warehouses are popular by many firms. In general, a public warehouse as a type of warehouse ownership classification can design and perform special services to meet customers’ operational requirements.

3. Contract Warehouse
A contract warehouse, as a third type of warehouse ownership classification, has the attributes of both private and public warehouses. A contract warehouse can also be understood as a customized extension of a public warehouse, which is a long-term business arrangement to provide specific and customized logistic services to the customers. It is also thought that a contract warehouse is a form of business process outsourcing in a logistic perspective. In this relationship, the client and the service supplier share risks concerning the warehousing operations.

In general, many companies tend to utilize a combination of private, public and contract warehouses. Basic knowledge of the warehouse ownership classification will serve as a managerial guide on how to develop a warehouse deployment strategy. Such warehouse planning focuses on two aspects, namely, 1) the number of warehouses required and 2) the warehouse ownership used in specific markets. The focus on these two aspects will create warehouse segmentation for specific markets, which can provide more tailored and focused logistic capabilities to customers.

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