A warehouse may be defined as a place used for the storage or accumulation of goods. By storing the goods throughout the year and releasing them as and when they are needed, warehousing creates time utility.
Functions of warehousing
The function of storage can be carried out successfully with the help of warehouses used for storing the goods. The functions of warehousing are discussed as follows:
This is the basic function of warehousing. Surplus commodities that are not needed immediately can be stored in warehouses. They can be supplied as and when needed by the customers.
In this function, the warehouse receives and consolidates, materials/goods from different production plants and dispatches the same to a particular customer on a single transportation shipment.
- Break the bulk
The warehouse performs the function of dividing the bulk quantity of goods received from the production plants into smaller quantities. These smaller quantities are then transported according to the requirements of clients to their places of business.
- 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 minimize these risks. Contract of bailment operates when the goods are stored in wave-houses.
The next function of warehousing is the seasonal storage of goods to select businesses. Goods or raw materials that are not required immediately for sale or manufacturing are stored in warehouses. They are made available to businesses depending on customers’ demand. Agricultural products that are harvested at specific times with subsequent consumption throughout the year also need to be stored and released in lots.
- Regular Production and Regular Supply
Warehousing helps in the regular production of goods. Storing raw materials helps to continue the production process. Such goods produced regularly even during the off-season and are kept safe in-store to supply when demanded. Storage or warehousing plays an important role in the regular supply of goods. Paddy, rice, maize, wheat, potato, etc. are produced in a certain season. But they are used around the year.
- Value-added services
Certain value-added services are also provided by the warehouses, such as in transit mixing, packaging, and labeling. Goods sometimes need to be opened and repackaged and labeled again at the time of inspection by prospective buyers. Grading according to the quantity and dividing goods into smaller lots is another function.
- Price stabilization
By adjusting the supply of goods with the demand situation, warehousing performs the function of stabilizing prices. It is achieved by the creation of time utility by warehousing. Falls in the prices of goods when their supply is in abundance and rise in their prices during the slack season is avoided. Thus, prices are controlled when supply is increasing and demand is slack and vice versa.
Loans can be raised from the warehouse keeper against the goods stored by the owner. Goods act as security for the warehouse keeper. Warehouse owners advance money to the owners on the security of goods and further supply goods on credit terms to customers. In this manner, warehousing acts as a source of finance for the businessmen for meeting business operations.