Warehouse Types & How to Choose Which Is Right for You

What are the different types of warehouses? 11 warehouse types, their benefits, and how they may work with your business operation.

Those who deliver goods need to have warehouses. But warehouse spaces have many advantages beyond just storage. Choosing the appropriate warehouse type is important for the effectiveness of large or small businesses alike. Adding a warehouse management strategy that fits your business needs is essential.

Table of Contents

Different Types of Warehouses

A storage building is a building (sometimes large, sometime small) where products temporarily gather before either selling or exporting. When a company determines they need a warehouse or additional warehouses, the company has to search through various warehouse types. This is because not all warehouses are the same. Let us examine 11 typical warehouse types: from cold storage centers to private warehouse units.

A birds eye view of a large distribution center

Distribution Centers

Warehouses can have a large storage capacity but the basic definition does not go much further than that. Distribution centers (sometimes called logistics centers) are a type of warehouse capable of transporting a large volume of goods in a very short time. In a distribution center, inventory turns very rapidly. This is often done by pallet but many large distribution centers also run vast pick pack and ship operations. This quick turn inventory process requires a highly optimized workflow.

For companies that move a lot of inventory, a distribution center may be a good option. It enables a much lower level of total cushion stock with a type of “just in time” inventory. Most distribution centers also operate a logistics service or locate close to transportation centers.

Public Warehouse

Public storage facilities are often (but not always) a state owned and controlled type of warehouse. Although, public warehouses can be either state or privately owned. These facilities are open to private sector enterprises and government sectors. A public warehouse may lease for business or private use per the owner’s requirements. Public storerooms offer particularly attractive solutions to a small business with limited inventory, as others may be less costly and need storage for a short period of time. Public warehouses are commonly available to new or growing enterprises such as eCommerce companies and startup companies because of the relatively low cost.

The downside to public warehouses are their typically “barebones” environment and minimal technical infrastructure. If you need a proper warehouse management system or automated systems you may want to exclude public warehouses from your considered types of warehouses.

Government Warehouse

A government warehouse is always owned by the state and is a type of public warehouse. Often this type of public warehouse has more security. Therefore, it is an ideal option for delivering certain products or goods that require additional security.

Although the security enhancement in the facility is an attractive option, government warehouses generally require extensive application processes for storage of product in such facilities. Another drawback of government warehouses is when businesses have failed to pay rents because the government can quickly dispose of inventory for the return of that money.

Private Warehouse

More common among the types of warehouses is private warehouses, commonly called proprietary stores or proprietary warehousing. Unlike a public warehouse, private warehouses are controlled in a company division or private companies. If a private sector companies want to build a private warehouse it must invest in infrastructure. Private warehouses are an option for wholesalers, distributors, and producers. At AMS, we invest in our own privately owned warehouses.

Although a private store is a cheaper choice than public stores, it allows a business owner more complete control over its inventory management process. For example, a small business may need order fulfillment or a fulfillment process for small shipments. Services such as these are possible to include with the flexibility of private warehousing. This is because private warehouses are often highly customizable such as in contract warehousing.

There are quite a few services offered by private warehouse companies. Here are some of them:

A government warehouse with archives of files on shelving

Bonded Warehouse

Usually bonded warehouses store imported goods before the collection of taxes. Customs clearance is often complex and secured (bonded) warehouses are an efficient way to secure merchandise for the duration of the transaction. In return, government organizations offer businesses a bond for renting the premises to prevent losses in the market after products were ordered.

Advantages of securing a bonded warehouse appeal to importers interested in storing normally restricted items. This is because a bonded warehouse limits cash exposure risk from customs duties to the sale of those goods.

On-demand Warehouse

With online commerce booming, warehousing is becoming increasingly popular. On-demand warehouses (also referred to as online storage or an ecommerce warehouse) are warehouse services that supply businesses with surplus storage. The firm using the warehouse may not require additional space, but a demand warehouse provides a valuable alternative for businesses who might need a short term storage solution for seasonal storage needs.

Oftentimes, online marketplaces may have a large number of SKUs but a low overall inventory count. Ecommerce warehousing is an ideal solution for when a merchant like this needs to mix their inventory. On-demand warehouses work well for both well established ecommerce businesses and ecommerce startups.

Cold Storage Warehouse

A cold warehouse (different than climate controlled warehouses) is a warehouse for storing perishable goods or temperature sensitive items. Cold storage warehousing can comprise the whole house or a specific part of the warehouse to accommodate this product. Regulations protect cold warehouses to ensure that the stock remains in good condition and no loss occurs during shipping. The Cold Storage Warehouse is similar from the inside but has very different inner parts to ensure that the storage of the goods (such as perishable foods or other perishable items) remain in good condition.

Of course, cold storage warehouses require larger of capital investments than other warehouses such as on demand storage or other privately owned warehouses that store goods. Consider that even the transportation for inbound and outbound shipping of these goods will require refrigeration. These costs aren’t saved even after the initial capital cost either, as the storage space costs more to run than other warehouse types.

Climate Controlled Warehouse

Not to be confused with the aforementioned cold storage warehouse, climate controlled warehouses simply control the climate (whether cool or low humidity) of storage space. Some products may have specific temperature settings that affect a food or electronics component such as electronics or appliances. This means that continuous climate monitoring will be necessary in order to prevent loss or damage.

Smart Warehouse

When considering the future (broadly speaking) of warehouse systems, think of smart warehousing. A smart warehouse is completely automated from inventory tracking through pick pack and ship. These automations use advanced technology such as artificial intelligence. Because they run on automated systems, they require little physical labor to operate.

Smart warehouses are a considerable option for business operations that deal with a large volume of relatively similar tasks. This is because any time a task happens the same way every time, it is a candidate for automation. While you can expect to save money on the operational cost of automated warehouses, the initial capital expense is much greater.

A robot sorting goods into various bins
Source: 6river.com

Cooperative Warehouse

Cooperative warehouses (also known as a shared warehouse) are warehouses in which multiple organizations and companies share the warehouse. These companies work in a good cooperative atmosphere, so accessing the cooperative warehouse will reduce costs. Cooperative warehouses are very common among farms or wineries where the goods are stored at one place.

Both companies using cooperative warehouses are able to decrease inventory management spending and increase profits for co-ops members over time. This is because the companies storing goods share the operational resources. The downside, however, is that the services for this warehouse space is less customizable. If you have specific requirements such as you find in fulfillment centers, shared warehousing may not be right for you.

Consolidated Warehouse

Consolidated warehouses are warehouses combining small shipment orders from several suppliers at once to form a bigger and hence economical, shipment for the specific region. These smaller shipments may group together for companies without much inventory like new companies and start-ups. This warehouse type only carries limitations as shipments have to have a specific purpose.

Most often, consolidated warehouses becomes efficient because of relatively pinpointed geographical location. Therefore, if your supply chain or your customers are spread out, consolidated warehouses may encumber your business.

Other Warehouse Types

We have not examined all types of warehouses in supply chain management in this list. Examples of other different types of warehouses could be short term warehouses, or cross-dock warehouses. Although there is some debate as to whether distribution centers are a type of warehouse, all of these boil down to a simple service: storage space.

In essence, “storage” is all a warehouse is, regardless of the specific type. Warehouses are simply buildings in which materials store until they disperse further into the supply chain.

How to Decide on the Right Warehouse Type for You

Size, features, technology, and geographical location vary considerably, and depending on your target market some of these qualities may matter more than others. Some warehouses offer services such as processing and shipping orders in less than a day. Others better fit long term strategic goals and allow for storage of hazardous goods or raw materials. It may be helpful to consider our thoughts on common warehouse mistakes and lean warehouse principles in your decision making process.

In order to decide which types of warehouses are right for you, first you need to consider what your specific business needs are. Gather your team including warehouse management, take a look at your supply chain, and then decide which of the above different types of warehouses fit your specific business operations.

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