Despite what you might think of when you hear the name, most warehouses aren’t dusty places with ceiling-high shelves full of forgotten boxes: far from it; many are actually bustling hubs that link together to form the backbone of the supply chain, often just keeping enough inventory to meet sharp consumer demand. But not all warehouses are the same. There are many different types of warehouses that are used in the private and public sector.
What’s the Difference Between Public, Private, and Government Warehouses?
Warehouses serve different sectors of the population, so it’s important to note the differences between them.
Public Warehouse
A public warehouse is owned and operated by a company that leases the space to other companies, either directly to renters (who enter the warehouse space and provide their own labor) or as part of outsourced storage and fulfillment services (where the warehouse owner provides the labor and operations on behalf of the renter).
Most warehouses of this type operate using a pallet in/pallet out model where fees are assessed based on monthly or yearly storage volume, calculated by the number of pallets or the square footage used. Pallets are typically stored in large racks or directly on the warehouse floor.
These warehouses are ideal for small businesses and seasonal products, as well as companies who don’t want to operationalize logistics.
Private Warehouse
A private warehouse is one that is owned directly by the company selling products to a consumer or another business. Also referred to as proprietary warehousing, they require large capital investment in facilities, equipment, and labor. Private warehouses are typically used by big retailers to store their extra inventory in bulk, rotating goods seasonally to maximize their ability to capitalize on demand.
Government Warehouse
Government warehouses make up a large percentage of the total warehousing industry in the United States. In a 2014 report the government accounted for around 15% of the total warehousing industry, with about 90 million sq. ft. of warehouse space. These warehouses are used mainly to store supplies for local governments, schools, and hospitals. However, in times where they have free space, the government may also rent out space to private companies.
Warehouses vs Distribution Centers
Warehousing is a broad term that describes the storage of physical inventory. But this doesn’t necessarily mean the inventory sits around for a long time. While a traditional warehouse may hold goods in bulk for a long time without much movement in or out of the building, a distribution center is a specific type of warehouse that holds customer products for shorter periods of time and has greater velocity of products flowing throughout.
Distribution centers are found closer to the end consumer to help minimize delivery times as well as fewer damaged or spoiled products. You will also see that distribution centers offer other value added services, such as cross docking, pick & pack, and kitting.They often serve large retail or grocery chain stores, where orders come in from wholesale suppliers which are then redistributed to individual stores. These centers often have technology systems in place to facilitate expedient, quality-assured operations.
Different Types of Warehouses
3PL Warehouse or Fulfillment Center
A third party logistics (3PL) warehouse or fulfillment center consists of many different services bundled at one location. These services include warehousing, order fulfillment, shipping/receiving, inventory management, retail distribution, exchanges, and returns. Some 3PL providers even provide additional services such as:
- Kitting & Assembly
- Pick & Pack
- FTL/LTL Shipping
- Reverse Logistics
Pros:
- 3PLs handle all the logistics for your products
- Works well for both business-to-business and business-to-consumer (B2C) goods
- Advanced software capabilities for better reporting
Cons:
- Costs can quickly add up with all the value-added services available
- Relying solely on the partner to handle and ship your products safely
How Do 3PL Warehouses Differ From Distribution Warehouses?
While a 3PL warehouse might seem similar to a distribution center, there are several differences.
- 3PLs provide fulfillment services for many different clients. Distribution centers usually process goods for just one company.
- Fulfillment warehouses are part of the eCommerce industry. Distribution centers most often serve brick-and-mortar retail stores.
- Third-party logistics warehouses occupy a different spot in the supply chain from distribution centers. A 3PL will receive goods from a supplier or wholesaler, process online orders, and ship products directly to the end consumer. A distribution center will receive products from suppliers and ship them to stores, thus remaining within the wholesale space. Distribution centers never deal with individual consumers.
By working with a full-service 3PL, you can access benefits like scalable warehousing solutions, shorter delivery times, and even lower shipping costs.
Distribution Centers
As mentioned previously, distribution centers serve as an intermediary for retailers and their manufacturers. Instead of products being held for long periods of time, distribution centers just temporarily store the goods before they are shipped to the retailer for sale.
Pros:
- Often closer to retailers allowing for faster delivery times
- Lower cost than a fulfillment center
- Better quality control systems due to more automation
Cons:
- Fewer value-added services
- Not ideal for most businesses
Climate Controlled & Cold Storage
Climate controlled and cold storage warehouses store products that have strict temperature and/or moisture range requirements. By using equipment like specialized heating, ventilation, and air conditioning (HVAC), insulation, and thermostats, climate controlled warehouse providers can ensure consistent temperature and moisture levels. The most common use cases of climate controlled storage are:
- Food items (produce, meat, etc.)
- Furniture
- Artwork
A rise in e-commerce grocery sales in the past few years has caused the cold storage market to grow rapidly. It’s been reported that as of Q2 2022 there is 3.3 million sq. ft. of speculative cold storage development underway in the U.S., a big increase compared to the 300,000 sq. ft. of cold storage reportedly in development just a few years ago.
Pros:
- Preserves goods greatly
- Able to store a wide range of goods
Cons:
- Not as common compared to normal warehouses
- Higher costs than dry storage
Bonded/Customs Warehouse
A bonded warehouse, or customs warehouse, is used to store imported goods. They are used to store goods that are being imported or exported, and are found close to borders in nearby airports or seaports.
Goods arriving to a bonded warehouse follow strict procedures bound by local customs laws:
- Goods are imported to the bonded warehouse: The goods are received at the warehouse, where liability is passed to the warehouse proprietor under a warehouse bond. All taxes, duties, and customs charges are deferred until the items leave the warehouse.
- Storage, transformation, and fulfillment: While goods are stored in the bonded warehouse they can be sorted, repacked, and even undergo manipulation under the supervision of customs authority. Many bonded warehouses also serve as fulfillment centers, allowing orders to be sent directly to customers from the warehouse.
- Payment of duties & fees: Before goods are released for consumption (sent out to customers), all custom duties and fees must be paid. However, these fees aren’t required to be paid if the goods don’t get withdrawn for consumption. This is much different than a non-bonded warehouse where these fees are required to be taken care of immediately.
Pros:
- Fees are delayed until product is sold
- International goods can be stored closer to local customer base
- Lower costs due to bonded warehouses being closer to ports
Cons:
- Arranging permits, licenses, and other permissions can be complex and expensive
Contract Warehouses
Contract warehousing is a type of public warehouse much like fulfillment centers. However, when using a contract warehouse, you are guaranteed your storage space. This is in contrast to a normal public warehouse that works on a first-come, first-serve model. Most contract warehouses also provide value-added fulfillment services like pallet rework and pick-and-pack order fulfillment.
Pros:
- Provides guaranteed storage space when your business needs it
- Provides management services
- Some provide value added fulfillment services
Cons:
- Difficult to find compared to public warehousing
- Little control over product handling
Smart Warehouse
Smart warehouses, or automated warehouses, leverage automation technology and equipment to replace human labor in warehouse operations. This term is also used loosely for any warehouse that isn’t fully automated but still leverages these technologies.
Smart warehouses use technologies such as:
Collaborative Robots
Collaborative robots or “cobots” are becoming more efficient in a modern warehouse setting. The market for cobots is expected to grow at a compound annual growth rate (CAGR) of 41.5% from 2022-2028. These robots are used alongside the human warehouse staff and can handle repetitive tasks like picking or kitting.
Automated Guided Vehicles (AGVs)
These AGVs are material handling systems that travel autonomously throughout a warehouse. These vehicles can perform tasks that are normally handled by other warehouse equipment like carrying large loads of pallets or materials throughout a warehouse.
Automated Storage & Retrieval Systems (AS/RS)
ASRSs are very popular fulfillment systems that span all industries. These allow for quick and efficient operations in tasks like order picking, assembly, and storage. These systems provide a plethora of benefits including increased safety for staff, lessened potential for human error, and even improved inventory management systems when integrated with a warehouse management system.
Warehouse Management Systems (WMS)
A WMS is software that helps companies keep track of the movement of goods and materials in a warehouse center in real time. It is essential for the management and control of daily warehouse operations, from the moment goods are received and stored to the moment they depart the warehouse. The WMS collects valuable data that can help managers optimize warehouse operations, helping them monitor inventory and catch issues before they become more serious problems.
Pros:
- High efficiency with little supervision needed
- Wide range of automation technology for any need
Cons:
- Expensive to fully automate warehouses
- Will require specialized technicians to run and repair equipment
Leveraging Nautical’s Centrally Located Full-Service 3PL Warehouse
Nautical provides full-service 3PL solutions for all partners. With our 456,000 sq ft fulfillment warehouse in Kansas City, we can provide comprehensive inventory management systems, quick and efficient order fulfillment, and many other value-added services like product packaging and sampling. We have proven experience working with large scale companies such as Walmart, Kroger, and BJs. These previous projects have allowed us to perfect our procedures, ensuring precision in all operations.
