Different functions of warehousing / several benefits of warehousing
Functions of Warehousing
1. Storage: This is the basic function of warehousing. Surplus commodities which are not needed immediately can be stored in warehouses. They can be supplied as and when needed by the customers.
2. Price Stabilization: Warehouses play an important role in the process of price stabilization. It is achieved by the creation of time utility by warehousing. Fall in the prices of goods when their supply is in abundance and rise in their prices during the slack season are avoided.
3. Risk bearing: When the goods are stored in warehouses they are exposed to many risks in the form of theft, deterioration, exploration, fire etc. Warehouses are constructed in such a way as to minimise these risks. Contract of bailment operates when the goods are stored in ware houses.
The person keeping the goods in warehouses acts as boiler and warehouse keeper acts as boiler. A warehouse keeper has to take the reasonable care of the goods and safeguard them against various risks. For any loss or damage sustained by goods, warehouse keeper shall be liable to the owner of the goods.
4. Financing: Loans can be raised from the warehouse keeper against the goods stored by the owner. Goods act as security for the warehouse keeper. Similarly, banks and other financial institutions also advance loans against warehouse receipts. In this manner, warehousing acts as a source of finance for the businessmen for meeting business operations.
5. Grading and Packing: Warehouses nowadays provide the facilities of packing, processing and grading of goods. Goods can be packed in convenient sizes as per the instructions of the owner.
Importance of Warehousing In the Development of Trade and Commerce:
Warehousing or storage refers to the holding and preservation of goods until they are dispatched to the consumers. Generally, there is a time gap between the production and consumption of products. By bridging this gap. storage creates time utility.
There is need for storing the goods so as to make them available to buyers as and when required. Some amount of goods is stored at every stage in the marketing process. Proper and adequate arrangements to retail the goods in perfect condition are essential for success in marketing. Storage enables a firm to carry on production in anticipation of demand in future.
A warehouse is a place used for the storage or accumulation of goods. It may also be defined as an establishment that assumes responsibility for the safe custody of goods. Warehouses enable the businessmen to carry on production throughout the year and to sell their products, whenever there is adequate demand.
Need for warehouse arises also because some goods are produced only in a particular season but are demanded throughout the year. Similarly certain products are produced throughout the year but demanded only during a particular season. Warehousing facilitates production and distribution on a large scale.
Benefits from Warehouses
1. Regular production: Raw materials need to be stored to enable mass production to be carried on continuously. Sometimes, goods are stored in anticipation of a rise in prices. Warehouses enable manufacturers to produce goods in anticipation of demand in future.
2. Time utility: A warehouse creates time utility by bringing the time gap between the production and consumption of goods. It helps in making available the goods whenever required or demanded by the customers. Some goods are produced throughout the year but demanded only during particular seasons, e.g., wool, raincoat, umbrella, heater, etc. on the other hand, some products are demanded throughout the year but they are produced in certain region, e.g., wheat, rice, potatoes, etc. Goods like rice, tobacco, liquor and jaggery become more valuable with the passage of time.
3. Store of surplus goods: Basically, a warehouse acts as a store of surplus goods which are not needed immediately. Goods are often produced in anticipation of demand and need to be preserved properly until they are demanded by the customers. Goods which are not required immediately can be stored in a warehouse to meet the demand in future.
4. Price stabilization: Warehouses reduce violent fluctuations in prices by storing goods when their supply exceeds demand and by releasing them when the demand is more than immediate productions. Warehouses ensure a regular supply of goods in the market. This matching of supply with demand helps to stabilize prices.
5. Minimization of risk: Warehouses provide for the safe custody of goods. Perishable products can be preserved in cold storage. By keeping their goods in warehouses, businessmen can minimize the loss from damage, fire, theft etc. The goods kept in the warehouse are generally insured. In case of loss or damage to the goods, the owner of goods can get full compensation from the insurance company.
6. Packing and grading : Certain products have to be conditioned or processed to make them fit for human use, e.g., coffee, tobacco, etc. A modern warehouse provides facilities for processing, packing, blending, grading etc., of the goods for the purpose of sale. The prospective buyers can inspect the goods kept in a warehouse.
7. Financing: Warehouses provide a receipt to the owner of goods for the goods kept in the warehouse. The owner can borrow money against the security of goods by making an endorsement on the warehouse receipt. In some countries, warehouse authorities advance money against the goods deposited in the warehouse. By keeping the imported goods in a bonded warehouse, a businessman can pay customs duty in installments.
