The rate of return from warehousing business is low and the gestation period is rather long.

The Rate of Return (ROR) from warehousing business is low and the gestation period is rather long.

Warehousing has several strategic decisions like number of warehouses, warehouse capacity, their location, and type of ownership (leased or owned). These involve heavy investments.

A warehouse is involved in various functions like assortment, storage of goods; etc. These start generating revenue over and above the investment made, as the warehouse change for consignment held, as per the time period.

The cost of owning of a warehouse involves initial cost and financing the same. Similarly, owning more warehouses would mean better customer service, but involves ownership and maintenance costs. 

By making the product available at place where it is needed and when it is needed, the distribution system adds both time and place utilities to the product.

For achieving this, company must critically decide on number of warehouses and the type of type of transport system to be used for product delivery.

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