Meaning of Warehousing
Warehousing is a process of properly storing and handling goods in warehouses that are to be distributed or sold later. Warehouses are large commercial buildings where products are stored safely in advance. This process has an efficient role in providing a smooth and regular flow of goods or other materials and avoids any shortage like situations. Warehouses provide a proper place for arranging and controlling all products which help in boosting productivity and reduce the overall cost. It helps businesses in fulfilling the orders of customers on time.
The warehousing process creates time utility by bridging the gap between the production and consumption time period. Apart from using the warehouse as the place of storage, it is also used for packaging and grading of products. Warehouses reduce the fluctuations in the price of the product by holding it when its supply exceeds in the market and by releasing it when its demand is more than its regular supply. There are generally 3 types of warehouses: Public warehouses, Private warehouses, and Bonded warehouses.
Role of Warehousing
- Provides Storage facility- Warehouses provides space for storing surplus goods of businesses. All the goods which are not needed immediately in the market are stored in warehouses till their demand arises.
- Maintain Regular supply– Warehouses ensure the regular supply of goods in the market without any interruption. It avoids all shortage like situations and stores a large number of goods safely from the period of production until their consumption.
- Creates Time utility- Storing of goods in warehouses helps in the creation of time utility. Warehouses bridge the gap between the production and consumption of products. It plays an important role in always supplying the goods as per the market demands.
- Minimizes Risk- Warehouses minimizes the risk involved in the handling of goods. It provides safe custody of goods and saves them from damage, theft, fire, etc. Once the goods are stored in warehouse, it is the responsibility of warehouse owners to properly store all the products.
- Facilitates Movement of Goods- Warehouses have facilitated the easy movement of goods to customers. Most of the warehouses are constructed at convenient points like near roads, railway routes, docks etc. Goods can be easily transported to their destination points easily.
- Mass Production- Companies are able to do large scale production of their products due to the presence of large warehouses. All the surplus goods are stored safely and at economical prices in warehouses.
- Generates Employment- Warehousing helps in generating large employment in the country. There are large numbers of skilled and unskilled peoples who are involved in the operations of different warehouses.
Functions of Warehousing
- Storage of Goods: Storing goods safely till their demand arises is one of the primary functions performed by warehouses. Warehouses provide space where business can easily store and preserve all those goods which are not needed immediately.
- Risk Bearing: Warehouses transfers the risk involved in handling goods from the owner of goods to warehouse owners. Once goods are handed over to the warehouse owners, it is their obligation to look after all these goods.
- Movement of Goods: Warehouses help in the movement of goods from business to the ultimate customers. It involves several activities like unloading of goods brought to warehouse and sending them to storage area, selecting the goods and loading them for shipment.
- Price Stabilization: Warehouses reduces the fluctuations in the prices of the goods. It stabilizes the product prices by holding on goods when their supply exceeds in the market whereas releasing them as their supply is less than the demand in the market.
- Financing: Warehousing helps in raising finance for the business. Warehouse keeper provides receipt of goods to the owner, once goods are submitted to them for storage. Businessmen can easily raise loans against the warehouse receipt from banks and other financial institutions. Goods stored in warehouses act as a security for availing financial services.
- Grading and Packing: Grading and packing of goods is another important function performed by warehouses. Nowadays warehouses pack the goods in convenient packages and do the grading of goods into different categories as per their standards and quality.