What is warehouse? Warehouse roles in supply chain?


To name an important link in the supply chain that contribute significant role in keeping the quality goods since the material out as finished products at factories to untouched packages delivered to customers, the warehouse contributes to such transition.

But in fact, what is a warehouse? And since its role as transshipment then why is its role so important in the whole supply chain that businesses cannot replace or remove it? All of those questions will be resolved in this article.

What is warehouse?

In simple concept, warehouse is a specialized area that was designed to store one or numerous types of goods in large-scale business. The main functions of warehouse are storing goods in a defined period that comes with many storage conditions. Also,  this kind of facility can be used as a distribution center where businesses can store and distribute goods to smaller warehouses or directly to customers in the regions. 

Currently, many logistics companies developed and offered diversely types of warehouses for specified purposes, but in the essence, all of which are the place to store good, list of warehouse types including: 

  • Public warehouse: The most popular warehouse model in the supply chain. The nature of this warehouse is a sharing facility where many companies can send their goods to storage in the warehouse and under management of one warehouse owner, which is mostly by logistics companies to conduct warehouse service business.
  • Private warehouse: On the opposite of Public warehouse, Private warehouse is the facility established by companies to serve only their businesses without any other customers. The storage condition for private warehouse varies upon companies that owned the warehouse for its specific goods in the supply chain. But on the other hand, the role of this warehouse is similar to public ones.
  • Standard warehouse: The warehouse that stores goods in standard condition, for specific, standard condition is without temperature-controlled or specific goods handling techniques, only basic warehouse logistics services such as: storing, loading/unloading goods and other on-demand services.
  • Bonded warehouse: is the type of warehouse that is detached from nearby neighborhood and assigned by the customs department with the purpose of storing goods that await export or import. Bonded warehouse is less common than any other warehouses since this model only operates when customs department authorized warehouse owners in restricted locations.
  • Cold warehouse: A special type of warehouse where all the goods are stored in low temperature condition with added equipment to enhance the efficiency and quality of storage. The common specification of cold warehouse can be listed to: 
    • Temperature ranges from (-20) to 20 Celsius degrees depends on warehouse’s owner purpose or goods to storage
    • Humidity: +/- 50%
    • Storage: In pallet, compartment or other methods.
  • Distribution center: is the storage facility that mainly focuses on goods flow where the goods will be distributed to retailers, wholesalers or directly to customers. Distribution center also includes temperature storage conditions such as air conditioning or refrigeration. Other names of the distribution center are: fulfillment center, cross-dock facility or package handling center.
  • CFS: This is abbreviated for Container Freight Station which is a separated area for businesses and logistics companies to assemble and consolidate LCL goods to fit in containers (Road and maritime transport) or ULDs (For aviation transport).

Warehouse roles in supply chain 


The basic and most well-known function of warehouse in the supply chain, the warehouse creates a suitable environment to store one or various kinds of goods in a period. 

For manufacturing businesses, there are some periods when the production output is larger than the capacity of their warehouse, so the manufacturers need to rent a warehouse from third-party logistics companies to store or distribute goods. This rented warehouse is considered a secondary warehouse in their distribution model.

Other reasons to rent a warehouse can be: investment cost for private warehouses, convenient, professional operations, supply chain connection, etc.

Stabilizing goods prices

This can be explained as the following: The cause of raising the price is from the scarcity of the product in the market, the more scarcity the goods are, the higher price it is. Due to that problem, goods in the warehouse are a backup plan for companies when the price increases, which is precise for selling products and input raw material scenarios.

In case of the variation in market’s price, selling products or raw material in the warehouse can be a temporary buffer for companies to reduce the “shock” of “warping” price in the scarcity, before or after the increment.

Minimal the risks

Since the warehouse is a controlled area with infrastructure and equipment to isolate the environment inside from the outside. Furthermore, the operation in the facility also constantly monitor and resolve the threats that may reduce the quality of storage such as:

  • Fire, storm or flood risks
  • Pests, insects and fungus
  • Human errors
  • Oxidizing, corrosive chemicals

A standard warehouse is fully invested with sufficient infrastructure to ensure the quality of storage with: storage conditions (Temperature, air flows, humidity), recurrent pests control, professional personnel, goods insurances,…

Support other processes

Logistics companies provide a wide range of services from: packaging, goods handling, loading/unloading, reverse logistics or import/export procedures, customers can choose suitable plans in accordance with business’s state such as: retailers, wholesaler, ecommerce, etc. 

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