Key Takeaways

• A Warehouse does more than store goods; it can also handle Inventory, Packing, Distribution, and Order Fulfillment.
• Different types of warehouses are designed to support different products and business models.
• General goods, food, temperature-controlled products, chemicals, and high-value goods should not automatically be stored in the same type of Warehouse without checking the relevant Requirements.
• Before choosing a warehouse, consider Location, Storage Condition, Inventory System, Handling, and Transportation alongside the price.
• Import–export businesses should plan their Warehouse arrangements in line with their Supply Chain and transportation methods.

A warehouse, or Warehouse, is an important part of the Supply Chain because most goods do not travel directly from the manufacturer to the customer. They may need to go through receiving, storage, inspection, packing, shipment consolidation, or distribution to different destinations.

Businesses that choose a warehouse unsuitable for their products may face high space costs, damaged goods, inventory discrepancies, or delivery delays.

Therefore, before selecting a Warehouse, it is important to understand how the functions and purposes of different warehouse types vary.

What Is a Warehouse?

A Warehouse is a facility used to receive, store, manage, and move goods during a particular stage of the Supply Chain. It may store everything from raw materials and work-in-progress goods to Finished Goods ready for distribution to customers.

Warehouse processes may include

• Receiving
• Inspection
• Put Away
• Storage
• Inventory Management
• Picking
• Packing
• Consolidation
• Dispatch

Some warehouses provide storage space only, while others offer additional Logistics services such as Packing, Order Fulfillment, and Distribution.

Therefore, the term Warehouse does not mean that every facility offers the same Service Scope.

What Role Does a Warehouse Play in the Supply Chain?

A Warehouse acts as a link between Supply and Demand.

For example, a factory may produce 10,000 units, but customers may not order all of them at once. The goods must therefore be stored and released gradually as Orders come in.

Similarly, an Import business may bring in goods from overseas by the Container to achieve a suitable cost per Unit. After customs clearance, the goods may be moved to a Warehouse before being distributed to branches, Dealers, or Customers.

A Warehouse therefore affects

• Inventory
• Lead Time
• Transportation
• Customer Service
• Working Capital
• Total Logistics Cost

Warehouse selection should be considered as part of the overall Supply Chain, rather than based only on the rental cost of the space.

Suggested Internal Link: What Is Supply Chain Management? A Deep Dive into 5 Key Processes Businesses Should Know

What Are the 9 Types of Warehouses?

Warehouses can be classified in several ways based on Ownership, Function, and the nature of the goods. Businesses can understand the main options through the following nine types.

1. Private Warehouse

A Private Warehouse is a warehouse owned or operated by a company to support its own goods and business operations.

It is often suitable for organizations with high product Volume and ongoing space requirements, such as

• Manufacturers
• Large Importers
• Distributors
• Retail Chains
• Large E-Commerce businesses

One advantage is that a business can directly tailor the Layout, Process, Equipment, and Warehouse systems to its own products.

However, the business must bear several costs, such as

• Building costs or long-term rent
• Staff
• Equipment
• WMS
• Security
• Maintenance
• Utilities

This option is therefore suitable for businesses with sufficient Volume and the ability to use the Warehouse's Capacity consistently.

2. Public Warehouse or Shared Warehouse

A Public Warehouse is a facility that allows multiple businesses to share space or services under agreed pricing and terms.

It is suitable for businesses that

• Do not have their own Warehouse
• Do not have enough Volume to justify a Private Warehouse
• Experience seasonal changes in Demand
• Need additional space temporarily
• Want to reduce Fixed Cost

The advantage is that businesses do not need to invest in building an entire Warehouse operation from scratch, and can generally adjust the space used according to actual inventory levels.

However, before choosing a provider, check

• Storage Fee calculation
• Minimum Charge
• Handling Fee
• Receiving Fee
• Picking Fee
• Operating Hours
• Security
• Inventory System
• Liability

This helps establish the actual Total Warehouse Cost.

3. Distribution Center

A Distribution Center, or DC, is primarily designed to receive goods, store them for a period of time, and distribute them efficiently to multiple Destinations.

For example, goods may move from a factory to a DC and then be allocated to

• Individual retail branches
• Dealers
• Regional Warehouses
• Customers

A Distribution Center therefore emphasizes product Flow and distribution speed more than a Warehouse intended for long-term storage.

Processes may include

• Receiving
• Sorting
• Inventory Allocation
• Picking
• Packing
• Route Planning
• Dispatch

It is suitable for businesses with a large number of Orders that must be distributed across multiple locations.

4. Cross-Docking Warehouse

Cross Docking is an operating model designed to minimize the time goods spend in a Warehouse.

Goods arrive at a Facility, are sorted or regrouped, and are then sent onward to their destinations within a relatively short period. They may not need to be placed in long-term Storage Locations.

An example Flow is

Supplier → Cross Dock → Sorting → Delivery

It is suitable for

• Fast-moving goods
• Retail Distribution
• Shipments with clearly defined Destinations
• Businesses seeking to reduce Inventory Holding

An advantage is that it can reduce Storage Time and some handling steps.

However, Cross Docking requires accurate Transportation planning and data. If inbound vehicles or onward delivery schedules are not aligned, the process may be disrupted.

5. Fulfillment Center

A Fulfillment Center is designed specifically to support Order Fulfillment, particularly for E-Commerce and Online Retail businesses.

When an Order is received, the system may carry out processes such as

• Receiving the order
• Picking products
• Packing products
• Printing Shipping Labels
• Dispatch
• Coordinating Last-Mile Delivery

Some systems can integrate with Marketplaces or E-Commerce Platforms to help manage Stock and Orders.

A Fulfillment Center differs from a general Warehouse because it focuses on managing Orders through to shipment, rather than simply providing storage space.

It is suitable for businesses with many individual-item Orders that want to Outsource back-end Logistics operations.

6. General Warehouse

A General Warehouse accommodates ordinary goods that do not require special environmental controls.

Examples include

• Clothing
• Office supplies
• Household goods
• Packaging
• Certain types of Machinery Parts
• Consumer Goods
• Dry goods without special Requirements

Even a general warehouse must consider

• Cleanliness
• Humidity
• Pest Control
• Security
• Fire Protection
• Load Capacity
• Storage Method

Requirements can differ depending on the type of goods being stored.

7. Cold Storage and Temperature-Controlled Warehouse

A Cold Storage facility is designed to control temperature for goods that are sensitive to environmental conditions.

Examples include

• Fresh food
• Chilled food
• Frozen food
• Food ingredients
• Certain Pharma products
• Products with specific Temperature Requirements

However, these products do not all require the same temperature.

Businesses must check each Product's Requirements to determine whether it needs

• Ambient
• Temperature Controlled
• Chilled
• Frozen

Temperature may need to be controlled during both Storage and Transportation if the goods must remain within a Cold Chain.

Storing temperature-sensitive goods in an unsuitable Warehouse can cause them to deteriorate or become unusable, even if they still look normal on the outside.

8. Hazardous Goods Warehouse

Goods classified as Hazardous Material or Dangerous Goods should not automatically be stored in a General Warehouse.

Examples may include

• Chemicals
• Flammable Liquids
• Gas
• Paint
• Adhesive
• Aerosols
• Certain types of Batteries

The Warehouse must be designed and managed according to the Requirements of each product type, such as

• Storage Separation
• Ventilation
• Fire Protection
• Spill Control
• Safety Equipment
• Emergency Procedure
• Label
• Documentation

Before goods are accepted into the warehouse, check the SDS to identify the relevant Hazard Classification and Storage Requirements.

9. Specialized Warehouse

Some products require more specialized Security or Handling than ordinary goods.

Examples include

• High-value goods
• Luxury Goods
• Electronics
• Artwork
• Precision Equipment
• Pharmaceutical Products
• Goods requiring humidity control
• Fragile goods

Warehouses for these products may need additional systems, such as

• Access Control
• CCTV
• Restricted Area
• Humidity Control
• Special Handling
• Inventory Traceability

Warehouse selection should therefore begin with Product Requirements, rather than simply choosing the lowest-priced space.

What Is the Difference Between a Warehouse and a Distribution Center?

The terms are often used similarly, but their main focuses differ.

Warehouse

Focuses on receiving and storing goods. Storage periods may be short or long, depending on the business.

Distribution Center

Focuses on moving goods in and out efficiently to distribute them to different Destinations.

A Distribution Center therefore often involves more Sorting, Picking, Allocation, and Transportation processes than a Warehouse used primarily for Storage.

In actual operations, however, one Facility can function as both a Warehouse and a Distribution Center.

What Is the Difference Between a Warehouse and a Fulfillment Center?

A Warehouse focuses on storage space and Inventory management.

A Fulfillment Center focuses on the process from the time an Order is received until the goods are sent to the customer, for example

Order → Pick → Pack → Ship

An E-Commerce business with a large number of Orders may therefore need Fulfillment Services rather than simply renting Warehouse space.

By contrast, an Importer bringing in large Lots and shipping goods out by Pallet or in Bulk may need Warehousing and Distribution services more than per-Order Fulfillment.

What Should You Consider When Choosing a Warehouse?

When choosing a Warehouse, do not compare only the price per square meter or storage fee. Consider its suitability for the entire Operation.

Important factors include

• Location
• Product type
• Storage Requirement
• Usable space
• Capacity
• Inventory Turnover
• Accessibility
• Transportation
• Security
• Warehouse Management System
• Handling Equipment
• Operating Hours
• Service Scope
• Total costs

For example, a Warehouse with lower rent but located far from the Port or Customer may result in higher Transportation Costs, making its Total Cost greater than that of a Warehouse with higher Storage Fees.

Why Is Warehouse Location Important?

Location affects both Transportation Cost and Lead Time.

Businesses should consider which points the Warehouse is closest to, such as

• Port
• Airport
• Border
• Factory
• Supplier
• Customer
• Distribution Area

For example, an Importer bringing in large volumes by sea may consider a Warehouse with convenient connections to the Port and road network.

An E-Commerce business shipping to consumers nationwide, however, may place greater importance on access to Carriers and the Distribution Network.

There is no single best Location for every business.

What Is a WMS, and Why Is It Important for a Warehouse?

A WMS, or Warehouse Management System, is a system that helps manage activities within a Warehouse.

It can manage information such as

• Receiving
• Storage Location
• SKU
• Stock Quantity
• Lot
• Serial Number
• Picking
• Inventory Movement
• Dispatch

As the number of products and Orders increases, relying only on Spreadsheets or Manual Records may increase the risk of inventory discrepancies.

A WMS helps improve Inventory Visibility, but system capabilities vary depending on the Software and how each Warehouse implements it.

How Are FIFO and FEFO Used in a Warehouse?

Warehousing is not simply about finding available space. Stock rotation principles must also be appropriate for the goods.

FIFO – First In, First Out

Goods that enter the Warehouse first are released first. This is suitable for general goods when the goal is to prevent Stock from remaining in storage for too long.

FEFO – First Expired, First Out

Goods with the earliest expiry dates are released first. This is suitable for products with a Shelf Life, such as

• Food
• Cosmetics
• Medicines
• Dietary supplements

For products with an Expiry Date, FIFO alone may not be sufficient if different Lots have different expiry dates.

Suggested Internal Link: What Are FIFO, LIFO, and FEFO? Stock Picking and Inventory Management Principles for Different Products

How Should Import–Export Businesses Plan Their Warehouse Operations?

Import–Export businesses should integrate Warehouse planning with International Transportation from the outset.

An example Import Flow is

Supplier → International Transport → Customs → Warehouse → Distribution → Customer

An Export Flow may be

Supplier / Factory → Warehouse → Consolidation / Packing → Export Customs → International Transport

A Warehouse can therefore support activities such as

• Consolidating goods from multiple Suppliers
• Preparing Export goods
• Packing
• Palletizing
• Checking the number of Packages
• Preparing Shipping Marks
• Holding Inventory while awaiting Shipment
• Distributing imported goods after Customs clearance

Choosing a Location and Service Scope that align with Transportation helps reduce repeated handling and unnecessary costs.

What Costs Are Involved in Warehousing?

Warehouse service costs include more than Storage Fees.

Possible charges include

• Receiving
• Unloading
• Storage
• Handling
• Put Away
• Picking
• Packing
• Pallet
• Labeling
• Inventory Management
• Loading
• Value-Added Service
• Transportation

Some warehouses calculate charges based on

• CBM
• Pallet
• SKU
• Unit
• Bin
• Square Meter
• Day
• Month

Ask for the complete Rate Structure before comparing service providers.

The lowest space rental rate does not necessarily mean the lowest Total Warehouse Cost if Handling or Service Charges are high.

When Should a Business Use an External Warehouse?

Outsourcing warehousing may be suitable when a business

• Does not have enough storage space
• Does not want to invest in its own Warehouse
• Experiences seasonal fluctuations in Volume
• Needs temporary space
• Is increasing its Import volume
• Has multiple Suppliers and needs Consolidation
• Needs support with Packing or Distribution
• Wants to expand into new markets without adding significant Fixed Assets

However, a business with high and stable Volume over the long term may benefit from the greater Control offered by a Private Warehouse.

Compare Total Cost and Operational Requirements before making a decision.

What Information Should Be Prepared Before Sending Goods to a Warehouse?

To help the Warehouse allocate space and handle goods appropriately, prepare information such as

• Product Description
• Product quantity
• Number of SKUs
• Number of Packages
• Dimension
• Gross Weight
• Pallet Size
• Storage Condition
• Expiry Date
• Lot Number
• Stackable / Non-Stackable
• Whether the goods are Dangerous Goods
• Inbound Frequency
• Outbound Frequency
• Required storage period
• Picking Requirement
• Packing Requirement

Inbound and Outbound Forecasts can help the warehouse plan Capacity more effectively than providing only the current Stock quantity.

Frequently Asked Questions About Warehouses (FAQ)

Are a Warehouse and a Storage Shed the Same Thing?

In everyday language, the terms may be used for similar storage spaces. In Logistics, however, a Warehouse usually refers to a Facility with structured processes for Receiving, Storage, Inventory, and Dispatch, rather than simply an area where goods are placed.

Does a Small Business Need Its Own Warehouse?

No. A business can use a Shared Warehouse or Outsourced Warehouse to avoid high Fixed Costs during the early stages of operation.

Can Food Be Stored in a General Warehouse?

It depends on the product type and Storage Requirements. Some food products can be stored at room temperature, while others require Temperature-Controlled or Cold Storage. Check the product Requirements before choosing a facility.

Can a Warehouse Provide Packing Services?

Some warehouses offer Value-Added Services such as Picking, Packing, Labeling, or Palletizing, but not all do. Check the Service Scope before choosing a provider.

Should You Choose a Warehouse Closer to the Port or Closer to Customers?

It depends on the Supply Chain. If large volumes are imported from overseas, proximity to the Port may help reduce inbound costs. If goods are shipped to many customers, a Location closer to the Distribution Area may be more suitable. Compare Transportation Costs across the entire system.

Warehouse and Logistics Services with CPL INTER

CPL INTER provides Logistics services for Import–Export businesses, including Warehouse, Packing, and international transportation planning by air, sea, and road.

Businesses that need storage space, cargo consolidation, or shipment preparation before Import–Export can provide details such as product type, number of Packages, dimensions, weight, Storage Requirements, storage period, and transportation method. The CPL INTER team can then help assess a Service Scope suited to the goods and Supply Chain.

Tel: 02-519-4426 / 091-519-4426 LINE: @cplinter

Written by: CPL Inter Logistics Operations Team, specialists in international freight and customs clearance, with more than 15 years of experience and an internationally recognized ISO 9001:2015 quality management system.