In this blog, we will understand the below following core concepts of Warehousing :
- Meaning and Importance of Warehousing
- Function of Warehousing
- Types of Warehousing
- Qualities of an Ideal Warehouse
The important function of storing products is properly performed through warehousing. The place where goods are stored is known as a warehouse. The term ‘ware’ means ‘article, or ‘merchandise’ and collectively warehouse is Considered building or room for storing goods. In common practice warehouses mean god owns. Warehousing is a significant function of marketing. It creates time utility and accumulates goods for a certain period to make equal distribution of the same goods throughout the year. It includes holding of goods in proper condition from its production until consumers need it. It protects goods from deterioration and helps-in carrying over the surplus goods to the place of consumption. Warehouses help businessmen to keep their surplus during slack season to them at the time of need.
DEFINITIONS: “A place (building or room or go down) in which goods or merchandise are stored for marketing is called a warehouse and the process of storing, assembling and grading etc. is called warehousing”.
ADVANTAGES OF WAREHOUSING
1. Seasonal Production:
Some products like agricultural goods are produced only in a particular season but they are required for consumption throughout the year. Warehousing or storage is necessary for commodities, so that they can be made available to its consumers throughout the year.
2. Seasonal Demand:
Some goods are produced throughout the year but these required only in a particular season e.g., umbrella, raincoats, warm clothes etc. This type of commodity is It produced throughout the year but is kept in store till the arrival of season.
3. Surplus Production:
Mostly surplus goods are manufactured in anticipation of demand. So, they have to be stored safely in warehouses till its demand. Thus, manufacturers store them for wholesalers and wholesalers. store them for retailers until consumers demand them.
4. Raw Material:
For the smooth working of production cycle in large-scale industry in modern era, it is necessary to store the raw material. This can help in the continuity of large-scale production.
Some goods require curing and processing before their final sales like coffee, seeds and fruits etc. Hence storing is necessary for these types of product.
6. Efficient Marketing:
To market the goods efficiently, adequate storing facilities should be available.
7.Protection of Goods:
Sufficient space, proper location, adequate equipment’s of a warehouse give protection to the goods against cold, heat, moisture, fire and thieves etc.
8. Stability in Prices:
To create equilibrium in demand and supply, it is necessary to keep surplus stock and release the same at the time of scarcity. This can help in maintaining the stability in prices.
9. More Prices/Value:
If the products like rice and tobacco etc., are properly kept for a long time in stores, the trader may receive higher prices of them.
10. More Sales:
Warehouses assist in maintaining continuous sale through regular supply of the goods. This avoids ‘out of stock’ conditions and increases the sales volume.
11. Employment Opportunities:
Warehousing is just like a big specialized industry, which provides employment opportunities to a large number of persons.
12. Loan Facility:
When goods are kept in a bonded or public warehouse, a receipt for the same is issued and loan can be obtained from banks against these receipts.
13. Re-export Trade:
The goods imported for the purpose of re-export can be kept in bonded warehouses till these are re-exported. The warehouse-keepers save time and money of the import agents. They collect and reship the goods without payment of import duty.
The warehouse-keepers pay income tax to the government on their own business income. The custom and excise duties are also collected through them.
15. Insurance Business:
The owners contribute their money in order to cover the their own and client’s risk. Thus, owners of the warehouse contribute their share for the development of insurance business
FUNCTIONS OF WAREHOUSING:
1. Proper Storage:
The storage of goods is the basic work of warehousing. warehouses perform their duties to bridge the gap between demand and supply. The necessity of storage arises when the business is able to produce surplus goods. In fact, storage provides protection to the owners against loss due to damage, leakage, and breakage of goods.
2. Judicious Supply:
The production may be seasonal or regular and its demand may also be regular or seasonal. In both cases, the supply of stock must be regular. The warehousing is a right step in this direction. The problem of shortage of goods does not arise in the presence of warehouse.
3. Price Stability:
A warehouse keeps and saves the surplus product and releases the same at the time of deficiency to keep equilibrium between demand and supply of the product. This can help in maintaining the price level throughout the market.
Before purchasing, a purchaser can inspect the stock in warehouse. Thus, it helps purchaser to buy goods of high quality. The warehouse-keepers take selective samples for showing them to the prospective buyers.
5. Risk Bearing:
The goods lying in storage may be lost or damaged by natural or personal reasons. The owners of goods can shift their risk on warehouse-keepers. The proper storage of goods protects them from the risks of heat, sun and dust.
6. Reduce Transport Cost:
Transport company charges full amount for one carriage even the goods are in small lots. The warehouses help the small traders to reduce their transport charges on shipment of goods because goods can be ordered in bulk. It also reduces the cost of loading and unloading.
7. Proper Protection to Goods:
Warehouses are designed to give proper protection to the goods stored therein: Different goods require different types of protection e.g. from cold, heat? moisture, diseases, fire thieves etc. Warehousing protects all types of accordingly.
8. Processing and Curing:
Some goods are kept in warehouses for processing or curing purposes for bringing these things into proper useable form. The fruits are kept for ripening, whereas coffee seeds and tobacco for processing.
9. Grading and Labelling:
The warehouse-keepers apply different standards for grading the products. Classification of goods removes the confusion of buyers. Warehouse-keepers also label the products after grading.
10. Packing and Loading:
The owner of the goods can ask the warehouse-keeper to pack the goods for safe delivery. He also performs loading and unloading functions through automatic machines or manual labour.
TYPES OF WAREHOUSE:
Following are the main types of warehouse. Private Warehouses, Public Warehouses & Bonded Warehouses.
Large business houses for the storage of their own stock private warehouses. Manufacturers, wholesalers and large retailers maintain such warehouses. Very few businessmen can afford to own their warehouses due to heavy cost of land and construction.
2. Public Warehouses:
A public warehouse or a duty-paid warehouse operates to store goods owned by any person in return for a storage fee or charge. The government licenses it, regulates its method of operation and charges. Anybody can keep his goods in such a warehouse by paying the prescribed charges. A public warehouse is legally bound to take due care of the goods kept in it. The owner of the warehouse is in the position of a bailee in charge of goods stored. He enjoys lien or legal claim on the goods till his charges or fee have been paid.
3. Bonded Warehouses:
Bonded warehouses are those licensed by the government to accept imported goods for storage before the payment of customs duty by the importers of such goods. These warehouses may be owned by dock authorities or by private individuals. Such warehouses work under the strict supervision and control of the custom authorities. The owner warehouse has to give an undertaking to the custom authorities that duties will be collected before goods are removed from the warehouse. Goods stored in such warehouses are said to be in a bond and, therefore, the warehouse is known as bounded warehouse.
CHARACTERISTICS OF AN IDEAL WAREHOUSE:
Following are the essential characteristics of an ideal warehouse.
Proper space should be available in the store. Proper space does not allow a commodity to deteriorate in quality, this can help in the availability of fresh and quality products.
2. Proper Location:
A warehouse should be constructed or located railway siding or on the harbour or port, so that the goods can be received and shipped at lower cost.
3. Transport Facility:
Warehouse must have sufficient space so that trucks can easily visit inside it. This will decrease the cost of loading and unloading the goods in warehouse.
It is necessary that there should be least loss in keeping goods at warehouse and the charges must be low. In other words, the cost of protecting goods should not be very high.
5. Protection to Goods:
Firstly; the warehouse should be watched throughout the day. Secondly, goods must be well protected against heat, moisture, cold and dryness etc.
As warehouses’ receipts or warrants can work as security for borrowing from bank, it is essential that warehouse must give facility of hypothecation of stocks.