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Warehousing Services: Meaning, Types, and Function

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  • Last Updated : 07 Nov, 2022
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What is warehousing? 

When goods are held in stock to make them available as and when required, it is known as Warehousing. It helps businesses to overcome the problems of storage and makes goods available when needed and thus, helping in maintaining prices at a reasonable level. It is a planned place for storing commodities in a secure and efficient manner until they are needed for consumption. It is important for keeping pricing consistent and commodities available at the proper time. Warehouses (also known as distribution centres) are utilised by distributors, manufacturers, importers, exporters, enterprises, and wholesalers due to the diverse roles of warehousing.

Storage has always been a critical component of economic progress. Initially, the warehouse was seen as a static unit for maintaining and storing commodities in a scientific and methodical manner in order to preserve their original quality, worth, and utility. Typical warehouses received goods via rail, truck, or bullock waggon. The products were physically transferred to a warehouse storage area and hand-heaped in rows on the floor. In India, they are utilised by manufacturers, importers, exporters, wholesalers, transportation companies, customs, and so on. Today’s warehouses are more than just storage facilities; they are also logistical service providers that are cost-effective.

The main advantage is that you don’t have to worry about increasing product pricing because you can hold hundreds of goods in warehouses and sell them as needed. Otherwise, if you sell products based on orders instead of stock in warehouses, you will undoubtedly confront rising pricing.

Types of Warehouses

Following are the types of Warehouses:

1. Private Warehouses:

Private warehouses are run, owned, or leased by a firm that handles its own goods, such as a retail chain shop or a multi-brand multi-product corporation. In general, an efficient warehouse is built around a material handling system to maximise product movement efficiency. The benefit of private warehousing includes control, flexibility, and other benefits, like improved dealer relations.

2. Public Warehouses:

After paying a storage fee or charges, dealers, manufacturers, and members of the general public can utilise public warehouses to store their goods. The government supervises the operation of these warehouses by issuing licences to private companies. The warehouse owner acts as the owner of the goods’ agent, and is expected to take proper care of the commodities. These warehouses also provide additional services, such as rail and road transportation. It is very helpful for small manufacturers as they can’t afford to build their own warehouses. Other advantages include, opportunity to offer value-added services, like packing and labelling, etc.

3. Bonded Warehouses:

Bonded warehouses are government-licensed warehouses that receive imported goods prior to payment of tax and customs duty. These are items imported from other nations. Importers are not authorised to transfer goods from the ports or airport until all customs duties have been paid.

Sometimes importers are unable to pay the duty in full or do not require all of the items immediately. Customs authorities keep the items in bonded warehouses until the customs duty is paid. These items are referred to as being in bond. Facilities like, branding, packing, grading, blending, etc., are available here. Importers may bring their purchasers to check the products and repackage them to their specifications, which facilitates marketing of goods. Importers and buyers can remove goods in parts as needed, and import duty can be paid in instalments. The importer are not required to set aside or block cash for the payment of import duties before the products are sold or used. Even if he chooses to export the items stored in the bonded warehouse, he is not required to pay customs tax. Bonded warehouses, therefore, enable entrepot trade.

4. Government Warehouses:

Warehouses which are fully owned and managed by the government are known as Government Warehouses. All these warehouses are managed by the government through public-sector organisations. Food Corporation of India, State Trading Corporation, and Central Warehousing Corporation are a few examples.

5. Cooperative Warehouses:

Warehouses which are setup or established by some marketing or agricultural cooperative societies for cooperative members are known as Cooperative Warehouses.

Functions of Warehousing

The functions of Warehousing are as follows:

1. Consolidation:

The warehouse gathers and consolidates materials/goods from several manufacturing units before dispatching them to a specific client on a single transportation shipment. 

2. Break the bulk:

The warehouse divides the large number of products received from the manufacturing units into smaller quantities. These smaller quantities are subsequently transported to clients’ locations based on their requirements.

3. Stock piling:

The seasonal storing of commodities for specific businesses is the next role of warehousing. Warehouses hold goods or raw materials that are not immediately needed for sale or manufacture. They are made available to businesses based on demand from customers. Agricultural items harvested at specific times for consumption throughout the year is also kept and released in lots.

4. Value-added services:

Value-added services such as in transit mixing, packaging and labelling, etc., are provided by warehouses. Such services contribute to the optimization of supply chain management, production of increased value, and the effective delivery of items to customers. Bundling, customising, re-branding, re-packaging, processing, etc., are examples. When prospective buyers check the goods, they may need to be opened, packed, and labelled again. Grading and dividing commodities into smaller quantities is also done by warehouses.

5. Price stablisation:

Warehousing stabilises prices by adjusting the supply of goods in response to the demand. Prices are, therefore, regulated when supply is high, while demand is low, and vice versa.

They help in the regulation of price fluctuations by:

  • Stockpiling products when market supply exceeds market demand.
  • Releasing goods when demand increases.

6. Financing:

Financing is yet another of a warehouse’s various functions. Warehouse finance is a sort of inventory financing in which a financial institution provides a loan to a manufacturer or business. Goods, inventories, or commodities are stored in a warehouse and utilised as collateral for the loan in this situation. In other words, warehouse owners advance money to the owners in exchange for security of products, and then supply goods to customers on credit terms.

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