Public Warehouse

A public warehouse refers to a large enclosed area for storage and inventory purposes rented or leased to multiple small and medium-sized businesses. The setup ensures businesses can benefit from the low cost of storage and distribution. In addition, the warehouses ensure optimum space utilization and income for their owners.

Various entities, including government bodies, semi-government entities, and private third-party companies, own public warehouses. According to the storage space occupied, these entities provide warehousing services for a fee. However, public warehouses offer more than just storage space for their customers; they also provide additional services such as picking, packaging, and returns management services.

• Public warehouse meaning can be defined as those storage facilities owned and operated by government bodies or third parties.
• Third-party logistics providers own and operate public warehouses, rented or leased to multiple businesses based on their space needs. They offer more than storage, including picking, packing, labeling, and distribution.
• They are essential in international trade, providing secure and efficient storage for goods in transit.
• Public warehouses are adapting to customer needs and implementing new technologies and sustainability initiatives. 

Public warehouse companies build large but enclosed structures with an initial investment. Then, they equip the warehouse with basic storage and handling materials like ladders, pallets, cupboards, conveyor belts, forklift trucks, weighing bridges and machines, scanners, etc. They also hire professionals and unskilled laborers with sufficient experience.

They then offer the space to small businesses that store their products in the warehouse and pay a fee accordingly. The warehouse owners and businesses enter into a service-level agreement (SLA). The fee is at par with the market prices offered by other warehouses and is based on the space occupied by the products in square footage. Sometimes, an additional fee is charged for handling, packaging, and such services.

Large-scale automation, mechanization, and digitization are relatively new characteristics of public warehouses. This has made inventory management much easier and faster, reducing lead times. In addition, automation has reduced the need for physical labor for carrying, loading, and unloading purposes. It also updates the company as and when the products move in or out in real-time (QR and barcode).

Following are the different types of public warehouses:

1. General merchandise warehouse – These are the ordinary warehouses where the goods that do not require special conditions are placed. For example, garments, books, furniture, etc. They are the most common type of warehouses, as they require less investment than others.
2. Cold storage warehouses – Certain goods such as medicines, perishable items, plants, and even chemicals might require more extensive cold storage facilities than simple reefer containers. 
3. Special commodity warehouses – These warehouses require different humidity and temperature conditions to store chemicals and other hazardous materials. These warehouses are rather less common due to the high investment required.
4. Bonded warehouses – These are the customs warehouses where imported goods can be stored until sold. The warehousing fee is collected from the sales proceeds.
5. On-demand warehouse – Storage facilities in these warehouses can be obtained on-demand immediately, maybe due to a sudden spike in supply-demand or other reasons.

TikTok, the popular social media platform, is expanding its business operations by opening its network of fulfillment centers across the United States. These fulfillment centers will function as public warehouses, providing logistics, warehousing, and delivery services to businesses that use the TikTok platform to sell products. The company aims to offer fast and efficient delivery to customers while streamlining the fulfillment process for sellers.

This move positions TikTok to compete with major e-commerce giants like Amazon and Walmart by providing an end-to-end shopping experience. With these public warehouses opening, TikTok is boldly moving to enter the e-commerce market and transform how sellers and buyers interact on its platform.

Here are the advantages and disadvantages of using a public warehouse.

#1 – Advantages

• These warehouses are a great benefit for small and medium businesses that cannot afford to undertake such large-scale investments. Thus, they can select the warehouse and rent space based on the distribution area and quantity. This helps in easier market expansion.
• Often, warehouses have specialized storage structures – reefer containers for cold storage, silos for bulk material, conveyor belts for movement, etc. These are major investments apart from constructing an open structure. Therefore, businesses can take advantage of this too.
• Since the fee is based on space occupied, they only need to pay for that portion in square footage. But in private warehouses, there might be some extra unutilized space. Hence, the cost and the risk factor fall in using public ones.
• Also, these warehouses provide other services such as picking for distribution, packaging, labeling, loading-unloading, etc.
• These warehouses can be a great benefit during peak seasons.
• Finally, public warehouse companies can earn a source of income if they can invest in setting up a storage structure in an industrial or strategically important location.

#2 – Disadvantages

• The degree of control for individual businesses to perform operations on their goods would be far less than they would have had if they had owned their warehouse. Flexibility is another important factor in this regard.
• Multiple businesses holding different types of goods under a single shed can be dangerous, especially if hazardous goods are handled improperly. The same goes for large equipment, which may collide with or destroy other goods.
• Comprehensive SLAs (service-level agreements) should be drafted; otherwise, a business might risk losing space when it desperately needs it.
• Finally, specialized services might not be available at all the warehouses across a country or state. This might put the business at a disadvantage.

Let's understand how private warehouses are different from public ones. 

• Private warehouses are owned and operated by a certain company for its purposes. The products of that particular are stored, loaded, unloaded, picked and packed, and distributed from its warehouse. If the warehouse is public, the operations are managed by the owners, but the products belong to different companies.
• Private warehouses are usually a part of the company's logistics or distribution department. Thus it can be an important cost center in itself. On the other hand, companies using public warehouses might not have them as a separate cost center, but they are a part of the expenditure.
• Generally, large companies that have sufficient funds to build, equip, and operate storage units have private warehouses. The investment is high, and the operating expenses are incurred too. On the other hand, small and medium-sized businesses rent or lease required storage areas from public warehouses. Thus, the latter has to incur less investment but at the cost of little control.

This has been a guide to what is Public Warehouse. We explain its examples, advantages & disadvantages, types, and comparison with private warehouses. You can learn more about accounting from the following articles –

• Warehouse Bond
• Dynamic Pricing
• Ex Works