The private warehouse is a storage facility that is owned by big companies or a single manufacturing unit. It can also be operated as a separate division for the company. They serve as distribution centers for finished goods.
A warehouse should have enough space for storing and packing goods. It should also be located in an area where it can easily be accessed for the goods to take in and to be taken out.
Pros of Private Warehouse
- Reduction of errors
Since the warehouse is managed by internal managers there is a possibility to have minimal errors that may have been caused the warehouse to be owned by a large group of people like in case of some free or public warehouses.
You can see our article about the pros and cons of public warehouses
- Can be rented instead of being purchased
As it is a private warehouse it can be owned by single manufacturing units hence they can decide to rent the warehouse and pay rent instead of buying which may a little bit expensive for the manufacturing company.
- It can be made to have a specific requirement of the company
The private warehouse can have specific requirements of the company because the company has the opportunity to set the requirements according to the goods manufactured in the company.
- Good when there are no public warehouse within the area
When there is no public company around the area then the private warehouse will be suitable because they will cut on the cost of going far away for warehouse services and paying for the service as well and also the cost of transferring the goods to the warehouse.
- Improved performance
The performance may be improved due to the management’s requirements. This will be possible because there will be better monitoring systems on the handling and storage of goods in the warehouse.som
Cons of Private Warehousing
- Tax issues
The private warehouse may need to pay tax to the government as opposed to a public warehouse where the service cost also includes the tax charges.
- Challenges in operating
The private warehouse may experience a challenge in operational flexibility. This will make it impossible for the warehouse to change from storing one good to another hence when the company has no goods to be stored there the warehouse stays empty hence not utilizing it.
- Low return rates
When the warehouse is owned privately there will be low returns from the warehouse as people will not be coming to store their goods there and paying for the service hence low return rates.
- Costly to construct a warehouse
It is very difficult to construct a warehouse as there are a lot of materials needed which are costly to acquire and also construction space is needed hence not easy to construct a private warehouse.
- Fluctuation demand patterns
When there is a high demand the company may have a lot to be stored in the warehouse hence it can lead to damage to the products and if the demand is low the warehouse may be underutilized hence not easy to operate a warehouse.
A private warehouse is good when the company has a steady market for the goods because the company will never be underutilized or lack where to store goods when the demand too high.