PUBLIC WAREHOUSE USE CLIMBING FOR MERCHANDISE

PUBLIC WAREHOUSE USE CLIMBING FOR MERCHANDISE

The use of public warehouses to store merchandise is expected to increase significantly by 1991 as more and more companies shut down privately operated facilities.

The American Warehousemen's Association said the public warehouse share of total merchandise storage could increase to between 16 percent and 18 percent by 1991 from a 13.5 percent share this year.AWA also estimated that companies that use public warehouses have seen an 18 percent growth in their businesses in the past two years.

Part of the reason for the shift to public warehousing and storage is that companies want a better return on assets and investment, said Jerry Leatham, president of the AWA.

The warehousemen's group represents 500 public warehouses in 2,000 locations worldwide and has launched a marketing campaign to get more companies to use public warehouses.

Mr. Leatham said companies today are returning to their core business or the operations that got them really started, or at least what they think is their best business.

At the same time, the core businesses are being scrutinized as the company looks for ways to cut costs, staff and overhead, he said.

Public warehousing is a part of distribution and it's a part of the logistics system. But really what we're talking about here is a financial play, he said.

More and more companies are, quite frankly, deciding to get out of doing their own warehousing just like they've decided to get out of doing a lot of other jobs that were auxiliary to their own business, he added.

In addition, he said, in the past decade the real interest rate, or the difference between the prime and the rate of inflation, has been extremely high.

That really makes it almost impossible for a company that's really doing its homework to justify . . . doing its own warehousing. Would it pass the corporate test as far as meeting their internal rate of return. It's very difficult to do, he added.

One company that's starting to put a larger and larger chunk of its merchandise into public warehouses is Kraft Inc.

Kraft, based at Glenview, Ill., is using outside warehouses more and more, said R.L. Price, vice president for transportation operations.

He said part of the reason is a shortage of space in our own facilities.