Warehousing refers to the act of storing and assorting products in order to create time utility in them. The basic purpose of warehousing activities is to arrange placement of goods and provide facilities to store them. The need for warehousing arises because there may be difference between the time a product is produced and the time it is required for consumption. Generally the efficiency of a firm in serving its customers will depend on where these warehouses are located and where are these to be delivered.
Usually larger the number of warehouses a firm has, lesser would be the time taken in serving customers at different locations but greater would be the cost of warehousing and viceversa.
Thus the firm has to strike a balance between the cost of warehousing and the level of customer service.
For products requiring long-term storage (such as agricultural products) the warehouses are located near production sites. This helps in minimizing the charges on transportation of the goods. On the other hand, the products which are bulky and hard to ship (machinery, automobiles) as well as perishable products (bakery, meat, vegetables) are kept at different locations near the market.
Following are the important benefits offered by warehouses:
- Protection of products from fire, sunlight, dust, theft, heat/cold, etc.
- Modern warehouses enable to store or preserve perishable products, like milk, fruits, vegetable, flowers, and certain types of chemicals, for reasonably longer period.
- Professional warehouses provide a lot of facilities, such as inspection, protection, records, displacement on demand, insurance, etc., at affordable charges.
- Producers and sellers can avail loans on the product stored in warehouses.