Warehousing decisions are extremely important to all businesses. The decision to set up a company-owned warehouse is a crucial one which will impact the future of your business. With so many fixed asset investments involved, it will not only affect the coffers of your company, but it will also chart the way your company chooses to do business.
Companies need to consider multiple factors before setting up a warehouse of their own. Some of the things you could take into account include:
- Ability to get loans
You can set up a storage facility only if you have the financial resources needed to purchase all the fixed assets. Loans are subject to approval from banks and VCs and if these parties are not in consensus with your decision to set up a warehouse, getting a loan can be challenging.
- Growth and expansion plans
If a company-owned warehouse is in your future, then it makes sense to consider acquiring the facility now. If you intend to set up multiple manufacturing or trading facilities offshore, then having a warehouse of your own will help.
- Operational efficiency
Owning a storage facility will definitely help increase the efficiency of your operations. Assembly of parts, packaging, sorting of goods and other activities become easier. You will also have complete access to and control of the warehouse. However, if growth and expansion are not a part of your plan, then investing in a warehouse will be an unnecessary expense. With the proper systems in place, operational efficiency is achievable even in rented facilities.
- Real estate as an investment
Real estate is a wonderful option for investment because of its tendency to appreciate over time. If you are considering setting up more branches of your company in the future, then owning land will be beneficial. Even if you don’t want to use it at a later date, you can always have the structure knocked-down and reuse the land.
- Terms of leasing
Owning a warehouse is feasible only when the terms of leasing are not. There are many third-party logistic companies, government-owned bodies, and private warehouses who offer storage facility to companies at various commercial terms. If these terms are unacceptable to you or if you are unable to uphold the terms of the leasing agreement, you need to consider owning a warehouse.
- Nature of goods
Some products require certain conditions of storage. If the storage facility you are renting does not offer these facilities or if they are charging exorbitant prices for the same, owning your own facility will help with long-term savings.
New construction v/s existing premises
Assuming you have decided to own a warehouse, the next choice you need to make is whether you want to purchase an existing structure or have a new building constructed. This again depends on your financial strength, nature of the product, future plans and more. Evaluating your current standing and your plans for growth will help you take an informed decision.