No capital investment required
This is a major advantage of public warehousing as no capital investment involved (e.g. Start up cost of operations hiring and training personnel) from the user to do one’s own warehousing. Public warehousing costs only deals with variable costs such as when volume increases, costs increases.
Reduced Risk (Low opportunity cost)
Since there is no capital investment required for public warehouse, the user firm can switch to another facility in a short period of time. Thus, if there is another attractive location with lower rent, the user firm can easily switch warehouse.
Lower freight rates.
Since 3PLs handles the requirements of many firms. It is more economical and easier for them to consolidate shipments. With a larger volume for each shipment, freight rates are lower.
Constraints
Communication problem
As the 3PL handles many different products, there is a potential problem of incompatible computer terminals and systems. They may not have another terminal just to suit the needs of just one customer. Thus, the lack of standardization in contractual agreements makes communication regarding contractual obligations difficult.
Lack of specialized services
3PLs have many warehouse locations. However, specialized services needed may not always be available in a specific location. Most public warehouse facilities provide local services which may not be suitable for the big MNC who requires more specialized services.
Space may not be available
Public warehousing space may not be available when and where a firms wants it. Shortage of space can happen in some places especially during peak season, and this may affect the firm's operations.
References: Management paradise
Public/Private warehousing
12Manage - 3PL
dcm @ 1/18/2009 02:27:00 AM 
