The efficient functioning of global supply chains is dependent on several factors. An important cog in the complex movement of goods is the warehouse. Carriers procure merchandise from manufacturers or distributors from warehouses. These commercial storage and loading spaces for finished and semi-finished goods are critical to the smooth operations of the complex supply chain. The warehouse market size, worldwide in 2021 was at USD 263458.0 million. It is projected to expand at a CAGR of 7.23% to reach 400541.0 million by 2027. In India, the warehouse market is expected to receive over 10 billion USD in investment by 2025.
The warehouse sector is evolving continually and heading to newer business models called cooperative warehouses. Let us explore this concept and learn about its advantages for businesses.
What Do Cooperative Warehouses Mean?
A cooperative warehouse is much like cooperative farming. It is a shared storage facility that a group of businesses that have similar goals and needs own and operate. The uniqueness of co-op warehouses is that both members and other businesses can make use of the facility for a predetermined price. Thus, co-op members pay reduced rates with these types of warehouses.
How is a Cooperative Warehouse Different From a Public Warehouse?
There are several differences in the operations and handling of cooperative warehouses and traditional warehouses like public or private warehouses.
Public warehouses are either rented entirely or businesses may own the entire facility. In the case of cooperative warehouses the management and ownership of the facility are different. These emerging warehouse models are owned, managed, and controlled by cooperative societies. The purpose is to offer the least possible costs for storing and forwarding products. Cooperative warehousing facilities can be provided at the most economical rates to the members of their society.
Public warehouses focus on commercial viability. Hence, rates are maximum for every area used in the warehouse. On the other hand, cooperative warehouses are not overly focused on profit-making. Instead, they want to offer accessible storage facilities as the rates that they charge are not as high as other types of warehouses. They assist members who need help to afford to rent warehouses at the usual rate.
The cooperative warehouse model allows businesses to buy shares or other forms of contract as it is built with money from member companies. There are various commercial categories under which companies can be part of a cooperative warehouse.
The most common is to offer cooperative warehouse spaces for rental services. The responsibility of managing the building, warehouse operations, transferring goods and administration are handled by the society. However, the underlying approach to taking on tenants is that they share the same industrial needs. This factor of selective tenancy differentiates cooperative warehouses from public warehouses. The pricing mechanism in public warehouses is also different from cooperative warehouses as it may not be in line with a particular industry or market conditions.
Advantages of Using a Cooperative Warehouse
Cooperative warehouses offer several benefits such as:
- Cost-efficiency: By sharing resources and space, businesses can reduce employee expenses, depreciation of warehouse machines, lifts and operational costs like water, electricity, building repairs, heating and cooling.
- Lesser employees: Warehousing is all about ground-level work of lifting, moving, and packing products and cartons. Typically, a warehouse has a few work hours for an employee. A cooperative warehouse, with a large number of members, will only need a few full-time employees compared to the huge staff requirement in a public warehouse.
- Bulk purchasing and tailor-made offers: Cooperative warehouses can provide quantity price discounts. It also helps leverage their collective buying power to negotiate better member deals. For example, agricultural producers like apple growers can win better prices as a group. Besides, co-op warehousing depots can provide tailor-made offers for eCommerce businesses, such as order fulfillment.
- Gain industry knowledge: Since same industry businesses operate in the cooperative warehouse, companies can connect better and improve their functions. The common ’know-how’ helps individual businesses to minimise costs, improve processes and become profitable in the long run.
Thus, cooperative warehouses encourage streamlined supply chains, automated processes and greater transparency. Some of the first industries to consolidate their storage-and-forwarding spaces and costs via cooperative warehouses are wineries and farmers.
Disadvantages of a Cooperative Warehouse
Some disadvantages of cooperative warehouses are:
- Relocation: Moving a business to a new location can be challenging for cooperative warehouses.
- Joint decisions: Cooperative warehouses require joint decisions.
- Equal voting rights: Members have equal voting rights, regardless of investment. This may not be suitable for investor-driven businesses.
- Legal limits: There are legal limits on dividend payments on shares. This may not be suitable for investor-driven businesses.
- Lack of incentive: In a cooperative society, everyone is the owner of the society. Over time, this can lead to a lack of incentive and initiative.
Other disadvantages of cooperative societies are the limited capital, lack of motivation among some members and the rise in differences and factionalism amongst members. Sometimes, rigid rules and regulations may impact the decision-making process and lead to misdirection of services. Co-opted warehouses may have poor services as there is a lack of competition and an increased dependency on existing warehouses.
Shiprocket: Providing Reliable Warehousing Solutions to Businesses
Shiprocket is a logistics provider for eCommerce businesses. It offers a range of warehousing services like inventory management, logistics, and order fulfillment across 220 global destinations. It serves more than 29,000 pin codes in India.
It is a machine learning-based platform that offers members recommendations on choosing courier services, printing shipping labels, and tracking orders. Based on its deep network of partners, Shiprocket offers discounted rates to ship with FedEx, DHL, Aramex and more.
Shiprocket offers real-time, customised services for businesses that want to outsource their warehousing and fulfillment operations. It connects businesses to multiple warehouses across India.
Shiprocket’s fulfillment solution offers its member businesses a unique, pro-technology platform. It allows sellers to store inventory closer to their customers in different warehouses across the country. Sellers can manage their inventory, orders, and shipments using Shiprocket’s WMS, channel integration, OMS, and logistics tech.
Shiprocket has several warehouses across India. Its fulfillment solution offers end-to-end warehousing and order fulfillment services. This includes inventory management, shipping orders, and more.
Conclusion
Cooperative warehouses highlight the growing use of technology in improving supply chains. Businesses in many industries, especially winery and farming find this to be the most cost-effective and productive option for holding their produce. Even as new warehousing solutions emerge, integrated service providers like Shiprocket are further enabling businesses with blended shipping services.
If your company emphasises community, shared responsibility, and a broad range of services, then cooperative warehouses will be the right choice for you. However, if your business is small to medium-sized and requires high flexibility and quick decision-making, you may carefully consider your all available possibilities.
Companies are working on optimising the layout and design of warehousing to encourage efficiency. It is expected to see higher utilisation of artificial intelligence and machine learning as part of data analytics and predictive data to improve warehouse layouts.
There are several stages in warehousing – receiving goods, storage of goods, and upon order placement, picking, packing and shipping the products.
Warehouses are commercial spaces and can be expected to have a lifespan of 50 to 60 years. However, if it is used for industrial materials such as chemicals they may have higher maintenance.
