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Business Guides to Warehouses

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Owning or renting a warehouse space is essential for many companies, but choosing which space to use can be one of the most important decisions a business can make. Business owners should research every aspect of their warehouse purchase, including ease of use, location, cost, and potential income, before making a decision. When one thinks of a warehouse, storage is most likely the first word that comes to mind. However, there could be uses for this asset that are less obvious. Warehouses can be very profitable business investments if chosen wisely, but there are also some disadvantages that should be considered.

Benefits

There are many ways in which warehouses benefit their owners. With the right technology, keeping a warehouse organized and efficient is simple. Renting out unused storage space to small businesses can defray the costs of ownership. Warehouses are not solely restricted to storage purposes, either. They lend themselves to conversion—into retail space, office space, or as a base of operations for goods production. This versatility, as well as the tax benefits that may come from owning a commercial property, makes investing in warehouse space a profitable investment choice.

Storage

Keeping in-store storage space free for fast-selling items is a crucial aspect of avoiding sale losses. Moving less popular items to a warehouse and keeping in-demand items more readily available in stock at the store is an excellent method for this.

Ease of Use

The proper picking system can make your warehouse more efficient and increase profitability. The Voice Pick ’n Pack, developed by Datria Systems, Inc., is a new development in warehouse picking and packaging. It allows a warehouse manager to voice-activate material handling devices that automatically pick an order and send it to an automated packaging system. The Voice Pick ’n Pack System has been implemented by more than 1,000 companies around the world.

 

Versatility

The open layout of many warehouses makes conversion easy. You can divide your warehouse into storage, office and retail space, and adjust these spaces as your needs change.

Subleasing

Smaller businesses that may not be able to afford the cost of a full warehouse will look for warehouse owners willing to sublet unused storage rooms. Again, the versatility of warehouses expands the market of possible renters—those looking to create unique entertainment venues may seek out owners.

Financial Profit

Owning a warehouse mitigates the risk of sales losses and generates income through rent. As warehouses are considered commercial real estate, they are an investment subject to possible tax benefits at both the local and federal levels. Leases on warehouses are often longer than most commercial properties and therefore pay out dividends in the long-term and can be used as collateral.

Pitfalls

Along with the many benefits of warehouse space, there are also several potential pitfalls that should be considered.

Lack of Space

When using public warehousing for storage, you will not have any control over the amount of space available. During holidays and other peak times, it may be hard to find space to store your items. If your stock increases and you have reserved a limited amount of space, it can be a hassle to get the size changed, especially if it is not available at the time you need it. The inability to find adequate storage space can force you to stockpile items at your primary location. This can cause problems if you do not have extra storage space.

Climate

Temperature is often insufficiently monitored in warehouse storage locations. This is very important if the product being stored requires a cool temperature and the storage facility is in a hot climate. This can cause a huge loss for a company. Most warehouses require you to sign a contract that limits their liability. If you lose a product due to temperature problems, the storage facility will probably not be held responsible.

Location

The distance to the storage facility from your company can be a problem if the facility is far from your main office. Thus shipping products from and to the warehouse can be very inconvenient and troublesome.

You will then incur an additional cost for transportation, which in turn will be transferred to your customers. The cost of moving products from one location to another can get expensive and cause budgeting issues.

Communication

A lack of communication between the warehouse and your company can hurt your business. If the warehouse is not accessible during certain hours and you cannot access your stored items, it can cause strain and cost you and your customers both time and money. If it is difficult to get in touch with someone concerning your items, your productivity and goals will also be affected.

Pricing

Warehouse Space

The costs of warehouse space will vary depending on where your business is located and how much space you need. You can save money by buying space, rather than renting. As of 2011, warehouse space was selling for an average of $5.50 per square foot. For a warehouse of 25,000 square feet, you should expect to pay approximately $137,500.

Employees

You will need employees to receive, scan, and ship out the product. According to the U.S. Department of Labor, the average hourly wage for a warehouse employee was $12.35 in 2006. However, a company can save money by hiring contractors, rather than full-time employees. Each day in the first quarter of 2007, there were an average of 2.8 million workers in temporary and contract warehouse positions, according to The American Staffing Association.

Additional Costs

Packaging supplies, scanners, RFID tags, and security cameras represent additional expenses to consider. The price for these items varies significantly depending on where and when you purchase them. 

Conclusion

As with any firm business decision, how to handle your warehousing needs should be given careful thought and planning. Consider each of these benefits and pitfalls before making such a large purchase. Serious thought should go into the potential investment of profits and resultant tax breaks a warehouse could provide. Equally as important, is making sure to minimize the potential disadvantages by properly analyzing space needs, location and costs.

Choosing the right warehouse space can boost efficiency and profitability, helping a business to reach its goals. On the other hand, choosing the wrong warehouse space can do irreparable harm to your bottom line.