Warehousing: Function, Benefits and Types of Warehousing!

A warehouse may be defined as a place used for the storage or accumulation of goods. The function of
storage can be carried out successful with the help of warehouses used for storing the goods.

Warehousing can also be defined as assumption of responsibility for the storage 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:

1. Storage:

This is the basic function of warehousing. Surplus commodities which are not needed immediately can be
stored in warehouses. They can be supplied as and when needed by the customers.

2. Price Stabilization:

Warehouses play an important role in the process of price stabilization. It is achieved by the creation of
time utility by warehousing. Fall in the prices of goods when their supply is in abundance and rise in their
prices during the slack season are avoided.

3. 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 minimise these risks.
Contract of bailment operates when the goods are stored in wave-houses.

The person keeping the goods in warehouses acts as boiler and warehouse keeper acts as boiler. A
warehouse keeper has to take the reasonable care of the goods and safeguard them against various risks.
For any loss or damage sustained by goods, warehouse keeper shall be liable to the owner of the goods.

4. Financing:

Loans can be raised from the warehouse keeper against the goods stored by the owner. Goods act as
security for the warehouse keeper. Similarly, banks and other financial institutions also advance loans
against warehouse receipts. In this manner, warehousing acts as a source of finance for the businessmen
for meeting business operations.

5. Grading and Packing:

Warehouses nowadays provide the facilities of packing, processing and grading of goods. Goods can be
packed in convenient sizes as per the instructions of the owner.

Importance of Warehousing In the Development of Trade and Commerce:

Warehousing or storage refers to the holding and preservation of goods until they are dispatched to the
consumers. Generally, there is a time gap between the production and consumption of products. By
bridging this gap, storage creates time utility.

There is need for storing the goods so as to make them available to buyers as and when required. Some
amount of goods is stored at every stage in the marketing process. Proper and adequate arrangements to
retail the goods in perfect condition are essential for success in marketing. Storage enables a firm to carry
on production in anticipation of demand in future.
A warehouse is a place used for the storage or accumulation of goods. It may also be defined as an
establishment that assumes responsibility for the safe custody of goods. Warehouses enable the
businessmen to carry on production throughout the year and to sell their products, whenever there is
adequate demand.

Need for warehouse arises also because some goods are produced only in a particular season but are
demanded throughout the year. Similarly certain products are produced throughout the year but demanded
only during a particular season. Warehousing facilitates production and distribution on a large scale.

Benefits from Warehouses:

1. Regular production:

Raw materials need to be stored to enable mass production to be carried on continuously. Sometimes,
goods are stored in anticipation of a rise in prices. Warehouses enable manufacturers to produce goods in
anticipation of demand in future.

2. Time utility:

A warehouse creates time utility by bringing the time gap between the production and consumption of
goods. It helps in making available the goods whenever required or demanded by the customers.

Some goods are produced throughout the year but demanded only during particular seasons, e.g., wool,
raincoat, umbrella, heater, etc. on the other hand, some products are demanded throughout the year but
they are produced in certain region, e.g., wheat, rice, potatoes, etc. Goods like rice, tobacco, liquor and
jaggery become more valuable with the passage of time.

3. Store of surplus goods:

Basically, a warehouse acts as a store of surplus goods which are not needed immediately. Goods are
often produced in anticipation of demand and need to be preserved properly until they are demanded by
the customers. Goods which are not required immediately can be stored in a warehouse to meet the
demand in future.

4. Price stabilization:

Warehouses reduce violent fluctuations in prices by storing goods when their supply exceeds demand and
by releasing them when the demand is more than immediate productions. Warehouses ensure a regular
supply of goods in the market. This matching of supply with demand helps to stabilise prices.

5. Minimisation of risk:

Warehouses provide for the safe custody of goods. Perishable products can be preserved in cold storage.
By keeping their goods in warehouses, businessmen can minimise the loss from damage, fire, theft etc.
The goods kept in the warehouse are generally insured. In case of loss or damage to the goods, the owner
of goods can get full compensation from the insurance company.

6. Packing and grading:

Certain products have to be conditioned or processed to make them fit for human use, e.g., coffee,
tobacco, etc. A modern warehouse provides facilities for processing, packing, blending, grading etc., of
the goods for the purpose of sale. The prospective buyers can inspect the goods kept in a warehouse.
7. Financing:

Warehouses provide a receipt to the owner of goods for the goods kept in the warehouse. The owner can
borrow money against the security of goods by making an endorsement on the warehouse receipt. In some
countries, warehouse authorities advance money against the goods deposited in the warehouse. By
keeping the imported goods in a bonded warehouse, a businessman can pay customs duty in instalments.

Types of Warehouses:

Warehouses can be classified into four groups viz:

(a) Private warehouses

(b) Public warehouses

(c) Bonded warehouses

(d) Other type of warehouses

Other type of Warehouses:

These include:

(a) Special Commodity Warehouses.

(b) Cold Storages or Refrigerated Warehouses.

(c) Institutional Warehouses.

(A) Special Commodity Warehouses:

These warehouses are constituted for storing a particular type of commodity, e.g., tobacco, cotton, wheat
etc. Mature of commodity is important in selecting the type of warehouse. For storing petrol, storage
tanks are needed and for storing agricultural products, godowns are needed.

(B) Cold Storage or Refrigerated Warehouses:

These are the warehouses which are used for storing perishable commodities like eggs, butter, fruits,
vegetables, fish, fresh meat etc. Goods stored in cold storages can be held for longer time. Infact, cold
storages have made possible the regular supply of certain commodities throughout the year.

For example, fruits and vegetables of all types can be made available to the people throughout the year.
Refrigerated warehouses have greatly improved the modern way of life.

(C) Institutional Warehouses:

Different institutions and bodies have their own warehouses on account of the nature of their operations.
For example, Banks, Railways, Food Corporation of India etc. has their own warehouses for conducting
their activities. Banks keep the stock of the parties in these warehouses as security against the loans
advanced.
Railways maintain warehouses to store large quantity of goods. Goods to be dispatched to different parts
of the country are kept in warehouses before they are sent. Similarly, goods received for the purpose of
delivery are kept till they are disbursed to the claimant.

Various transport agencies also maintain warehouses for storing the goods which are to be dispatched and
received. Food Corporation of India has built many big warehouses throughout the country for storing
agricultural products.

Understanding the various types of warehouses.

There are different kinds of warehouses and the classification of warehouses can be made from the
following viewpoints:
 On the basis of structure.
 On the basis of ownership.
 On the basis of service rendered.

On the basis of Structure

Warehouse are built in different ways to meet the special requirement for storage. Different
warehouses are constructed for specific goods. While selecting the types of warehouse, one has to take
into consideration the factors like the nature of goods, the quality and the climatic condition. From the
point of view of structure, the following types of warehouses are found:
i. Classical warehouse: It is a big hall of single storey building divided into various big or small rooms to
store of general nature.
ii. Silo: It is a vertical structure room equipped with mechanical devices. The loading and unloading
functions are effected through mechanical devices.
iii. These are generally in the shape of big tanks or bunkers.
iv. Bins: Bins are small cylindrical cabins of different sizes meant to store varieties of products. These are
manually operated and provide bulk storage facility.
v. Elevator: Elevator is a big vertical premise and are of craned types. These are used for lifting and de-
lifting of products. From the elevator goods are directly discharged from wagons.
vi. Portable warehouse: It is a type of temporary warehouse which can be removed or set in a short time.
These warehouses have enough capacity to withstand rains and winds.

On the basis of Ownership

From ownership point of views, there are different types of warehouses:
i. Private warehouses: Private warehouses are owned by big business houses like producers, wholesalers
ad big retailers. These big business houses store their goods in these warehouses. These are not given to
outsiders on hire. These warehouses are found in rural and sub-urban areas.
ii. Public warehouses: Public warehouses are used by general businessmen on payment of a rent or
charges. These warehouse obtain license from the government and follow the specific rules of the
government for its maintenance.
iii. Household warehouses: These warehouses provides storage facility for household equipments like
furniture, rugs, furs and paintings. These warehouses are found in western countries.
iv. Co-operative warehouse: These warehouses are organized on co-operative basis and run on joint
efforts of the people. These are made in rural areas for storage of agricultural goods. The best example of
a co-operative warehouse is cold storage.
v. Bonded warehouse: Bonded warehouses are maintained by port trust and custom authorities. These
are meant to store imported goods from the foreign countries.

On the basis of Service Rendered

From the point of view of service rendered, there are different types of warehouses like:
i. Specific Commodity warehouses: These warehouses are meant to store specific goods like cotton,
petroleum products and wool. These warehouses are specially constructed to accommodate the above
articles.
ii. Cold Storage: These are meant to store agricultural products of perishable nature. Perishable goods
like fruits, vegetables, eggs and butter are stored in these warehouses.
iii. Bank warehouses: These warehouses are maintained by banks to keep goods as securities. The goods
received by banks against credits or loans are kept in these warehouses.
iv. General Merchandise warehouse: Goods which do not require any special storage facility are stored
in these warehouses.