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Warehousing – Types, Functions & Advantages


WAREHOUSING – TYPES, FUNCTIONS AND ADVANTAGES

WHAT IS A WAREHOUSE?

A warehouse is a commercial building for storage of goods. Warehouses are used by manufacturers, importers, exporters, wholesalers, transport businesses, customs, etc. They are usually large plain buildings in industrial areas of cities and towns and villages. They usually have loading docks to load and unload goods from trucks. Sometimes warehouses are designed for the loading and unloading of goods directly from railways, airports, or seaports. They often have cranes and forklifts for moving goods, which are usually placed on pallets loaded into pallet racks. Stored goods can include any raw materials, packing materials, spare parts, components, or finished goods associated with agriculture, manufacturing and production.

Characteristics of Ideal Warehouses

Any warehouse is said be an ideal warehouse if it possesses the following characteristics:

–  Warehouse should be located at a convenient place near highways, railway stations, airports and seaports where goods can be loaded and unloaded easily.

– Mechanical appliances should be there for loading and unloading the goods. This reduces the wastages in handling and also minimizes handling costs.

– Adequate space should be available inside the building to keep the goods in proper order.

– Ware houses meant for preservation of perishable items like fruits, vegetables, eggs and butter etc. should have cold storage facilities.

–  Proper arrangement should be made to protect the goods from sunlight, rain, wind, dust, moisture and pests.

– Sufficient parking space should be there inside the premises to facilitate easy and quick loading and unloading of goods.

–   Round   the   clock   security   arrangement   should   be   made   to   avoid   theft   of   goods.

– The building should be fitted with fire-fighting equipments to avoid loss of goods due to fire.

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TYPES OF WAREHOUSES

The various types of warehouses are:

Private Warehouses

The warehouses which are owned and managed by the manufacturers or traders to store, exclusively, their own stock of goods are known as private warehouses.

Generally these warehouses are constructed by the farmers near their fields, by wholesalers and retailers near their business centers and by manufacturers near their factories.

The design and the facilities provided therein are according to the nature of products to be stored.

Public Warehouses

The warehouses which are run to store goods for the general public are known as public warehouses.

Anyone    can    store    his    goods    in    these    warehouses    on    payment    of    rent.

–    An   individual,    a   partnership   firm   or   a   company   may   own   these   warehouses.

–    To start such warehouses a licence from the government is required.

The government also regulates the functions and operations of these warehouses. Mostly these warehouses are used by manufacturers, wholesalers, exporters, importers, government agencies, etc.

Government Warehouses

These warehouses are owned, managed and controlled by central or state governments or public corporations or local authorities. Both government and private enterprises may use these warehouses to store their goods.

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Bonded Warehouses

These warehouses are owned, managed and controlled by government as well as private agencies. Private bonded warehouses have to obtain license from the government. Bonded warehouses are used to store imported goods for which import duty is yet to be paid.

In case of imported goods the importers are not allowed to take away the goods from the ports till such duty is paid. These warehouses are generally owned by dock authorities and found near the ports.

Co-operative Warehouses

These warehouses are owned, managed and controlled by co-operative societies. They provide warehousing facilities at the most economical rates to the members of their society.

FUNCTIONS OF WAREHOUSING

Basic functions of a warehouse are storage of goods, movement of goods, and information management.

Storage of Goods

One of the traditional requirements of a warehouse is to store goods. The warehouse provides the space required for such storage and it is one of the important functions of a warehouse.

Movement of Goods

Movement of goods consist of inbound activity (unloading of goods brought to warehouse), transfer to storage (transferring the goods from the inbound area to the storage area), order selecting (selecting the good in the storage as per order to be shipped and transferring it to shipment area) and outbound activity (checking and loading the goods for shipment).

Information Management

Keeping a track of information regarding goods that have come into the warehouse, stored and that are shipped out of the warehouse. Also any other information pertaining to the warehouse is stored. The data captured by the information system in the warehouse is then passed on to the higher management in order to take better decisions.

Storage of goods

Secondary Functions of a Warehouse are: Protection of goods, Risk bearing, Financing, and Processing, Grading and Branding.

Protection of goods

A warehouse provides protection to goods from loss or damage due to heat, dust, wind and moisture, etc. It makes special arrangements for different products according to their nature. It cuts down losses due to spoilage and wastage during storage.

Risk bearing

Warehouses take over the risks incidental to storage of goods. Once goods are handed over to the warehouse-keeper for storage, the responsibility of these goods passes on to the warehouse-keeper. Thus, the risk of loss or damage to goods in storage is borne by the warehouse keeper. Since it is bound to return the goods in good condition, the warehouse becomes responsible for any loss, theft or damage etc., thus, it takes all precautions to prevent any mishap.

Financing

When goods are deposited in any warehouse, the depositor gets a receipt, which acts as a proof about the deposit of goods. The warehouses can also issue a document in favour of the owner of the goods, which is called warehouse-keeper’s warrant. This warrant is a document of title and can be transferred by simple endorsement and delivery. So while the goods are in custody of the warehouse-keeper, the businessmen can obtain loans from banks and other financial institutions keeping this warrant as security. In some cases, warehouses also give advances of money to the depositors for a short period keeping their goods as security.

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Processing

Certain commodities are not consumed in the form they are produced. Processing is required to make them consumable. For example, salt is bagged, timber is seasoned, and fruits are ripened, etc. Sometimes warehouses also undertake these activities on behalf of the owners.

Grading and branding

On request warehouses also perform the functions of grading and branding of goods on behalf of the manufacturer, wholesaler or the importer of goods. It also provides facilities for mixing, blending and packaging of goods for the convenience of handling and sale.

ADVANTAGES OF WAREHOUSING

Warehousing offer many advantages to the business community. Whether it is industry or trade, it provides a number of benefits which are briefly discussed below:

Protection and Preservation of Goods

Warehouse provides necessary facilities to the businessmen for storing their goods when they are not required for sale. It provides protection to the stocks, ensures their safety and prevents wastage. It minimises losses from breakage, deterioration in quality, spoilage etc. Warehouses usually adopt latest technologies to avoid losses, as far as possible.

Regular Flow of Goods

Many commodities like rice, wheat etc. are produced during a particular season but are consumed throughout the year. Warehousing ensures regular supply of such seasonal commodities throughout the year.

Continuity in Production

Warehousing enables the manufacturers to carry on production continuously without bothering about the storage of raw materials. It helps to provide seasonal raw materials without any break, for production of finished goods

Convenient Location

Warehouses are generally located at convenient places near road, rail or waterways to facilitate movement of goods. Convenient location reduces the cost of transportation

Easy Handling

Modern warehouses are generally fitted with mechanical appliances to handle the goods. Heavy and bulky goods can be loaded and unloaded by using modern machines, which reduces cost of handling such goods. Mechanical handling also minimizes wastage during loading and unloading

Useful for Small Businessmen

Construction of own warehouse requires heavy capital investment, which small businessmen cannot afford. In this situation, by paying a nominal amount as rent, they can preserve their raw materials as well as finished products in public warehouses.

Creation of Employment

Warehouses creates employment opportunities both for skilled and unskilled workers in every part of the country. It is a source of income for the people, to improve their standards of living

Facilitates Sale of Goods

Various steps necessary for sale of goods such as inspection of goods by the prospective buyers, grading, branding, packaging and labeling can be carried on by the warehouses. Ownership of goods can be easily transferred to the buyer by transferring the warehouse keeper’s warrant.

Availability of Finance

Loans can be easily raised from banks and other financial institutions against the security of the warehouse-keeper’s warrant. In some cases warehouses also provide advance to the depositors of goods and keeping the goods as security.

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Reduces Risk of Loss

Goods in warehouses are well guarded and preserved. The warehouses can economically employ security staff to avoid theft, use insecticides for preservation and provide cold storage facility for perishable items. They can install fire-fighting equipment to avoid fire. The goods stored can also be insured for compensation in case of loss

SUMMARY

A warehouse is a commercial building for storage of goods. Warehouses are used by manufacturers, importers, exporters, wholesalers, transport businesses, customs, etc. They are usually large plain buildings in industrial areas of cities and towns and villages. Any warehouse is said be an ideal warehouse if it possesses the following characteristics:

–  Warehouse should be located at a convenient place near highways, railway stations, airports and seaports where goods can be loaded and unloaded easily.

–  Mechanical appliances should be there for loading and unloading the goods. This reduces the wastages in handling and also minimizes handling costs.

–  Adequate space should be available inside the building to keep the goods in proper order.

– Ware houses meant for preservation of perishable items like fruits, vegetables, eggs and butter etc. should have cold storage facilities.

–  Proper arrangement should be there to protect the goods from sunlight, rain, wind, dust, moisture and pests.

– Sufficient parking space should be there inside the premises to facilitate easy and quick loading and unloading of goods.

–    Round   the   clock   security   arrangement   should   be   there   to   avoid   theft   of   goods.

– The building should be fitted with latest fire-fighting equipments to avoid loss of goods due to fire.

The various types of warehouses are: Private, Public, Government, and Bonded warehouses.

Basic functions of a warehouse are movement of goods, storage of goods, and information management.

Warehousing offer many advantages to the business community. Whether it is industry or trade, it provides a number of benefits which are listed below:

– Protection and preservation of goods – Regular flow of goods

– Continuity in production

– Convenient location

– Easy handling

– Useful for small businessmen

– Creation of employment

– Facilitates sale of goods

– Availability of finance

– Reduces risk of loss


Comments

  1. akol john bosco says:

    simplified and uderstandable

  2. Eze Chekwube innocent says:

    Thanks, rich in precision.

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