Meaning of Warehousing
Warehousing is one of the important auxiliaries to trade.
‘Warehousing’ refers to the activities involving storage of goods on a large scale in a systematic and orderly manner and making them available conveniently when needed.
The place where goods are kept is called ‘warehouse’. The person in-charge of warehouse is called ‘warehouse-keeper’.
It creates time utility by bridging the time gap between production and consumption of goods.
Need for warehousing
The agricultural commodities are harvested during certain seasons, but their consumption or use takes place throughout the year. Therefore, there is a need for proper storage or warehousing for these commodities.
Certain goods are demanded seasonally, like woollen garments in winters or umbrellas in the rainy season. But, the production of these goods takes place throughout the year to meet the seasonal demand.
Manufacturers produce goods in huge quantity to enjoy the benefits of large-scale production, which is more economical. Finished products, which are produced on a large scale, need to be stored properly till they are cleared by sales.
Industrial and agricultural goods are produced at some specific places but are consumed throughout the country. So, it is essential to stock these goods near the place of consumption to make these available to the consumers without any delay.
Continuous production of goods in factories requires adequate supply of raw materials. So there is a need to keep sufficient quantity of stock of raw material in the warehouses to ensure continuous production.
To maintain a reasonable level of the price of the goods in the market there is a need to keep sufficient stock in the warehouses. Scarcity in supply of goods may increase their price in the market. Excess production and supply may also lead to fall in prices of the product. By maintaining a balance of supply of goods warehousing leads to price stabilization.
Types of warehouses
- Private Warehouses
- Public Warehouses
- Government Warehouses
- Bonded Warehouses
- Co-operative 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 centres and by manufacturers near their factories. The design and the facilities provided therein are according to the nature of products to be stored.
The warehouses which are run to store goods of the general public are known as public warehouses. Anyone can store his goods in these warehouses on payment basis. These warehouses can be owned by an individual, a partnership firm or a company. To start such warehouses a license 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.
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. Central Warehousing Corporation of India, State Warehousing Corporation and Food Corporation of India are examples of agencies maintaining government warehouses.
Bonded warehouses are used to store imported goods for which import duty is yet to be paid. These warehouses are owned, managed and controlled by government as well as private agencies. Private bonded warehouses have to obtain license from the government. 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.
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.
Characteristics of Ideal Warehouses
A warehouse is said be an ideal warehouse if it possesses certain characteristics, which are given below:
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 for storage to keep the goods in proper order.
Cold storage facilities:
Warehouses meant for preservation of perishable items like fruits, vegetables, eggs and butter etc. should have cold storage facilities.
Proper arrangements should be there to protect the goods from sunlight, rain, wind, dust, moisture, pests etc.
Sufficient parking space:
Sufficient parking space should be there inside the premises to facilitate easy and quick loading and unloading of goods.
Round the clock security arrangements should be there to avoid theft of goods.
Fire-fighting equipment :
The building should be fitted with latest fire-fighting equipment to avoid loss of goods due to fire.
Functions of Warehouses
Storage of goods:
The basic function of warehouses is to store large stock of goods. These goods are stored from the time of their production or purchase till their consumption or use.
Protection of goods:
A warehouse provides protection to goods from loss or damage due to heat, dust, wind and moisture, etc. It cuts down losses due to spoilage and wastage during storage.
Risk bearing :
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.
When goods are deposited in any warehouse, the depositor gets a receipt, which acts as a proof about the deposit of goods. The businessmen can obtain loans from banks and other financial institutions keeping this receipt as security. In some cases, warehouses also give advance of money to the depositors for a short period .
Certain commodities need processing to make them consumable. For example, paddy is polished, timber is seasoned, fruits are ripened, etc. Sometimes warehouses also undertake these activities on behalf of the owners.
Grading and branding:
Warehouses also provide facilities for grading and branding of goods ,mixing, blending and packaging of goods for the convenience of handling and sale.
Warehouses provide transport arrangements to the bulk depositors. It collects goods from the place of production and also sends goods to the place of delivery on request of the depositors.
Advantages of Warehousing
Protection and Preservation of goods:
Warehouse provide 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:
Warehouse enables the manufacturers to carry on production continuously. It helps in providing seasonal raw material without any break, for production of finished goods.
Warehouses are generally located at convenient places near road, rail or waterways to facilitate movement of goods. Convenient location reduces the cost of transportation.
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 reduce 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 create 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 on the security of the warehouse keeper’s warrant. In some cases warehouses also provide advance to the depositors of goods on keeping the goods as security.
Reduces risk of loss:
Goods in warehouses are well guarded and preserved. The warehouses employ security staff to avoid theft, use insecticides 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.