These are similar to private carriers in transportation service. Services are provided to others by firms that have warehousing space, storage facility, and material handling equipment for their own use and are used a lot in logistical systems. These are designed to handle the most general packaged products or commodities, which would not require specialized storage or handling arrangement. The products usually stored are food grains, paper rolls, bulk material (cement, fertilizers), furniture, chemicals etc.
A major advantage of a public warehouse is that they provide financial flexibility and economies of scale. More operating and management expertise is provided, as warehousing is the core business for such firms. Variable costs are lower compared to private facilities. With more customers and higher volumes, the fixed costs are spread over resulting in economies of scale. Public warehouses are of great use to firms, which are newly formed, and have the desire of expanding their distribution network and thus needn‘t invest in developing a private warehouse.
They can alternatively hire a space in a public warehouse or channel their funds into other activities, which generate more revenue. This would improve their performance and thus increase the return on investment. Location flexibility is also available through public
warehouses. Firms can also close storage facilities in one market and open at other places without any financial losses.
