Sql-server – Better defining a parent-child relationship on a table

Our team is developing a new system and it has a Warehouse table that must have a hierarchical relationship between entries since a customer can have 1st, 2nd, 3rd and Nth degree warehouses.

We first thought that this was the best way to do it. By creating a Parent and a Child column on the table and then making Parent the FK to Child (on the same table) but friend DBA told us that there is a different way.

So, for instance, we had thought about making a table like this:

CREATE TABLE Warehouse(
filterId INT PRIMARY KEY IDENTITY,
parentId INT NOT NULL,
active BOOL DEFAULT 1,
warehouseName VARCHAR(30) NOT NULL,
FOREIGN KEY parentId REFERENCES Warehouse(filterId)

| FILTERID   | PARENTID | ACTIVE | WAREHOUSENAME |
--------------------------------------------------
|          1 |        0 |      1 | N WAREHOUSE 1 |
|          2 |        1 |      1 | ROOM 1        |
|          3 |        1 |      1 | ROOM 2        |
|          4 |        1 |      1 | ROOM 3        |
|          5 |        1 |      1 | ROOM 4        |
|          6 |        2 |      1 | SHELF 1       |
|          7 |        2 |      1 | SHELF 2       |
|          8 |        2 |      1 | SHELF 3       |
|          9 |        2 |      1 | SHELF 4       |
|         10 |        2 |      1 | SHELF 5       |
|         11 |        2 |      1 | SHELF 6       |
|         12 |        2 |      0 | SHELF 7       |
|         13 |        3 |      1 | BOX 1         |
|         14 |        3 |      0 | BOX 2         |
|         15 |        3 |      1 | BOX 3         |
|         16 |        3 |      1 | BOX 4         |
--------------------------------------------------

But this DBA said that we should work on something like this:

CREATE TABLE Warehouse(
filterId VARCHAR(20) PRIMARY KEY,
active BOOLEAN DEFAULT 1,
warehouseName VARCHAR(30) NOT NULL)

| FILTERID   | ACTIVE | WAREHOUSENAME |
---------------------------------------
| 1.00       |      1 | N WAREHOUSE 1 |
| 1.01       |      1 | ROOM 1        |
| 1.02       |      1 | ROOM 2        |
| 1.03       |      1 | ROOM 3        |
| 1.04       |      1 | ROOM 4        |
| 1.01.01    |      1 | SHELF 1       |
| 1.01.02    |      1 | SHELF 2       |
| 1.01.03    |      1 | SHELF 3       |
| 1.01.04    |      1 | SHELF 4       |
| 1.01.05    |      1 | SHELF 5       |
| 1.01.06    |      1 | SHELF 6       |
| 1.01.07    |      0 | SHELF 7       |
| 1.01.01.01 |      1 | BOX 1         |
| 1.01.01.02 |      0 | BOX 2         |
| 1.01.01.03 |      1 | BOX 3         |
| 1.01.01.04 |      1 | BOX 4         |
---------------------------------------

Which way should we follow?

On one hand we have a relationship between parentId and filterId; on the other we do not have any relationship, but it is easy to understand where does the entry belong.

Not all the warehouses are of the same level – that's what I mean by degree. They should be ordered like: For Customer A, 1 is parent of 1.1 and 1.2, 2 is parent of 2.1, 3 is parent of 3.1 and 4 is parent of 4.1 and 4.2 – but 1, 2, 3 and 4 are of the same level (1st level), and 1.1, 1.2, 2.1, 3.1, 4.1 and 4.2 are also of the same level (2nd level) but not of the same parents.