Private warehousing equals greater control

The advantages are: • Degree of control – the owner has direct control of inventory with associated cost control; • With more control, there is greater flexibility of designing and operating the warehouse to suit the needs of its customers and the characteristics of the products; • Less costly in the long-term – where the operating cost can be 15%-to- 25% lower if the company achieves sufficient throughput or utilisation; • Better use of human resources; • Tax benefits – with depreciation allowances on buildings and equipment reducing tax payable; Its disadvantages to the user are: • Lack of flexibility; • High opportunity cost (high risk); • High start-up cost: Firms have to generate enough capital to build or buy a warehouse. A warehouse is often a long, risky investment. Moreover, there is cost of hiring and training of employees, and the purchase of material handling equipment. The high cost involved may force the company to seriously consider public warehousing as a better option. FTW1218SD [Sources: Douglas M. Lambert, Fundamentals of Logistics Management, McGraw/Hill Publication (1998); Ernst F. Bolten, Managing Time and Space in the modern warehouse, New York (1997); Jenkins, Creed H., Complete guide to modern warehouse management, Prentice Hall (1990); Ken Ackerman, Warehousing profitably, Ackerman’s publication (1994); Ken Ackerman, Practical Handbook of Warehousing, London: Chapman & Hall (1997).]