Most businesses need space to store inventory for sale. So storage is a basic necessity to make goods available for sale. When more space is required, most people start looking for a warehouse. Some of us get confused with terms like shared, private or common warehousing, when you really need storage space. Let’s get this straight, storage is not warehousing,
We get this all the time….
“I need space. I need a warehouse.”
Everytime we get this, we spend the next 10 minutes explaining to customers what they really need is storage. To illustrate this, we put together a typical conversation with potential customers. And it’s quite easy to see where the issue lies.
Whitebox: Hi, thanks for calling Whitebox. How can I help you?
Customer: What does Whitebox do?. What services do you offer?
Whitebox: We provide storage and fulfillment services for retail and distribution businesses
Customer: I need space. I need a warehouse.
Whitebox: Yes, we provide storage for your warehousing needs
Customer: Erm….No, I need a warehouse.
Whitebox: Yes, we operate a warehouse. You can store your goods with us.
Customer: No, I’m looking for a warehouse. I need space.
Whitebox: How much space do you need?
Customer: About 100 square meters.
Whitebox: Sir, most warehouses start from 1,000 square meters.
Customer: No, I need a smaller warehouse
Whitebox: Our storage starts from 100 cubic meters. And you only pay for what you use
Customer: Cubic meter? What is cubic meter?
So What is Storage ?
In short, storage is a unit of 3 dimensional space represented by volume in cubic meters. To calculate volume, convert the dimensions of your cargo to meters and multiply its length, width and height to find its volume in cubic meters.
Your storage needs fluctuate according to the amount of goods you have under storage. When you have less goods, you need less space, and when you have more goods, you need more space. The point is…you don’t need a fixed area of space when the volume of your goods are always changing.
Shouldn’t you be able to pay for only what you use ?
Most storage facilities charge fees based on your volume utilization in cubic meters whereas warehouses calculate fees based on the area you use in square meters, with minimum area commitments. Storage facilities offer cost flexibility based on your use whereas warehouses impose a fixed fee per month.
Depending on your business needs, one or the other may work better for you. But storage space without the right environment, equipment and management is nothing more than flat ground. That’s what you should avoid…warehouses that claim to offer storage but in effect simply offer flat ground space.
Storage facilities should be equipped with racks and shelves to enable easy movement of loose products by pieces or cartons, and not limited to cargo on pallets.
Types of Storage Equipment
Depending on the type, size and weight of your products, you may need different types of storage equipment.
Pallet Racks For bulky and heavy products
Medium Racks For loose or average size products
Light Shelves For light and small products
Bins For loose and very small products
Why do you need storage equipment? Well, stacking boxes on boxes means what’s at the bottom stays there. Products with many variances like style, colour or size can be impossible to find when everything is mixed onto a single pallet. Racks and shelves enable products to be stored with minimal stacking and proper organization for easy access.
Types of Storage Facilities (aka Warehouse)
The most common type of storage facilities are known as ‘shared’ or ‘common’ warehouses. These warehouses are operated by a logistics company who offers storage on demand, and forklift services to unload and load your cargo onto trucks and in and out of the warehouse. b
There are 2 types of ‘shared’ or ‘common’ warehouses – Traditional and Modern. The main difference is traditional warehouses offer flat ground for pallet storage, whereas modern warehouses have some form of racking, usually pallet racks for pallet storage. Both types of warehouses cater to businesses who move cargo by whole pallets only.
These warehouses are constructed with traditional design and basic materials where there is little ventilation, lighting and security. Due to these factors, the storage environment can be hot, humid and dusty. Such warehouses are located in remote locations outside the city, near major highways, therefore storage fees are lower.
Modern warehouses are purpose built facilities using good quality materials, located within an industrial zone. Industrial zones offer common access and perimeter security, wide asphalt roads for container trailers to navigate. Storage environment is cool and clean. But of course storage fees are much higher compared to traditional warehouses.
Both types of ‘shared’ or ‘common’ warehouses impose similar fee structures and require some form of minimum commitment.
Lift-on and Lift-off fees Per Pallet
Storage rental fees Per Square Meter Per Month
Minimum storage area starting from X – Y square meters
Minimum storage period from 3 months to 1 year
The third type of warehouse is less common. These are professional warehouses who offer not only storage, but also racks and shelves for different types of products. This caters to businesses who work with a range of products from big to small, and heavy to light.
Fulfillment warehouses offer additional services to manage your inventory, pick and pack your orders, process and ready your orders for shipping. Such fulfilment solutions are suitable for retail, distribution and e-commerce businesses.
What is Right for you ?
Ask yourself…do you need flexible space or a fixed area. Do your products move in bulk by pallets where all the same products packed onto a single pallet? Does your business experience low and high seasons where your inventory volume fluctuates according to your sales. These fundamental questions can help determine the right solution.
Scalable Cost (CBM) versus Fixed Cost (SQM)
Like all smart business owners, the most important consideration is price. Not so smart people who don’t do their maths will base their decision on price alone, and not the overall monthly cost. With cost calculated on a fixed square meter commitment, the monthly cost is….you guessed it, fixed. With scalable cost calculated on volume per cubic meter, you may pay more on some months, and less on those when you have little cargo. The average monthly cost over a year may be lower than fixed monthly cost.
Storage Environment & Equipment
Depending on the nature of your products, some like consumer products are susceptible to temperature and humidity while others like machinery are not. Products that are sensitive to the environment would require a clean, cool and dry warehouse. High value cargo would need a secured facility with internal and external security. These are important factors for consideration.
What about Inventory Management?
Your inventory is your money. Without proper inventory records, how do you manage your business cash flow? The velocity and movement pattern of your goods determines your needs for inventory management. Whether fast or slow moving, many small orders or a few large orders, you may or may not need real-time information of your inventory movement. Managing a few product lines versus hundreds of lines, adds to the complexity of your needs as well.
What’s right for you is determined by your preference for fixed or scalable cost, your storage environment and infrastructure needs, inventory movement pattern and most importantly, the level of professionalism you demand from your warehouse partner.