Firms generally use a combination of public, private and contract facilities. A private or contract facility is used to accommodate basic annual requirements, while a public facility is used to take care of peak period. In other situations, central warehouses serve as private facilities, and field warehouses serve as public facilities.
Full warehouse utilisation annually is a remote probability. As per the planning rule, warehouses designed for full capacity utilisation will be utilized fully by 75-85% of the time. And 15-25% of the time, the space to meet peak requirements remains unutilized. In such cases, building private facilities is proven more efficient to cover 75% requirement, and using public facilities to meet peak demand.
Another form of combined public warehousing emanates from market needs. Basis distribution volume, an organization can identify private warehousing as perfect at particular locations. At other market situations, public facilities are most low cost option. In case of a logistical system design, the prime objective is to find which combination of warehousing strategy is most economical in meeting customer service objectives.
An all-inclusive warehouse strategy focuses on (1) number of warehouses to be employed, and (2) type of warehouses to be used to cater to market requirements. For most of the firms, it should be combination that can be differentiated by product and customer. In specificity, some customer groups can be better served from a private warehouse, whereas, a public warehouse can be used for other groups. Some of the qualitative factors that need to be considered include:
Presence synergies are the marketing advantages of having stock inventory situated close by in a facility, with a clear affiliation with the organization.
Industry synergies are the operating advantages of co-locating with other organizations within the same industry.
Operating flexibility is referred to as the ability to make adjustments in internal policies and procedures to accommodate product and customer requirements.
Location flexibility is referred to as the ability to make quick adjustments on warehouse location and number as per permanent or seasonal demand changes.
Scale economies are referred to as the ability to made reduction in material handling and storage by use of advanced technologies.
