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Build own warehouse and rent warehouse is 2 solutions for storage. They both have advantage and disadvantage. Customers could decide base on the total logistic cost and turn over rate, to save logistic cost in all.
The cost of rent warehouse only including flexible cost, the total cost will increase along with quantity required. The cost of build own warehouse is fixed. Third party warehouse must have profit in the rent, thus the increase rate of flexible cost of own warehouse is less than third party warehouse. When the total cargo turn over rate reach a certain amount, the 2 lines have a intersection which means the total cost is the same. This means when the cargo turn over rate is low, third party warehouse is better. When the cargo turning rate is going up, own warehouse can amortize fixed cost into large quantity of inventory, thus it will be more cost effective under this situation.
Owner of company should consider below factor when choose solution of warehouse:
1. Total turn over rate of cargo.
Self warehouse has higher fixed cost, thus require large quantity of inventory and high turn over rate.
2. Stability of requirement
This is a important factor to make decision. If demand fluctuate dramatically and the turn over rate fluctuate accordingly, it’s not cost effective to build warehouse.
3. Market density.
High density of market and supplier is good for building warehouse. As LCL shipment is more expensive than FCL. Otherwise it’s better hire third party warehouse.
4. Value of property
These years land cost in China is surging dramatically year by year. If enterprise build own warehouse, they can share the value of land added value.
As a professional racking and shelving supplier, T Racking supply a lot of pallet racking to customers all over the world. Any relative question feel free to inform us.