This is an accepted fact that shared warehouses are most cost efficient, still lot of companies opt for dedicated warehouses. Which factors influence the warehouse selection strategy. ? Does the cost unit economies change at higher volumes hence making dedicated warehouses a better choice??
Thanks for reaching out to us.
This is true that shared warehouses cover you from the risk of fluctuating demand. You can use more space when the demand peaks up and at the same time save your logistics cost when demand is low.
Dedicated warehouses comes in play when the organizations want to have more control and visibility in their operations. Generally larger organizations with well established distribution network opt for dedicated warehouse. Better operational control helps organizations to quickly adapt to change in business strategies and make the supply chain more agile.
So the decision to go with dedicated warehouses is more of a strategical decision and is not completely influenced by cost.
You are correct about the fact that Shared warehouses are more cost efficient than dedicated ones. However when transactions are high and specially when flow of goods is inconsistent it is important for the business to be ready with both free resources and space however it is usually unlikely to be always managed in Shared facility. Apart from this some business also require resources with specific skills which cost more then regular semi or non skilled resources. Thus despite all the benefits of shared facility some clients opt to go with Dedicated ones.