Warehouse is a godown or a commercial building for storing the goods. Warehouse is been used by the traders for storing goods that will be distributed later. It is mainly been used for the preventing damages and losses that may arise out of unsecured and defective incidents. Manufacturers/ traders usually store the cargo in warehouse and get it released as per the need. It provides nothing more than storage. Warehouse varies as per the nature of the product, need of customers, ownership and services. The various types of warehouses are –
- Private Warehouse
- Public Warehouse
- Automated Warehouse
- Contract Warehouse
- Distribution centers
- Climate controlled Warehouse
Reasons for having a Warehouse –
In order to meet the global demand, it is been needed for mass production. Some of the factors that are responsible for mass production strategy are reduction in tariff barriers, low labor cost, economies of scale and scope, cost competitiveness, trade agreements and technological integration.
Certain products have limited shell live due to it being fresh. Products like fruits, eggs, butter, milk and vegetables need to be warehoused in that of the cold chains to extend their life. Gulf countries like Kuwait, UAE, Iraq etc. warehouses these supplies for weeks as such items cannot be locally produced in large quantities there.
There are seasonal product productions such as sugar. It may be produced seasonally but is consumed all the year round, while there are products that get produced all the year round but the demand is during its season so warehouses are a boon in such situation.
One of the main reasons to be warehoused the products, traders believe that the prices will be rise in the near future and their profit margins will be increased.
Advantages of Warehousing –
- It reduces the distribution cost by unloading the goods in huge quantity.
- Its facilities help in determining the choice of way of distribution for a marketer.
- They help the international trader to have a control over the price
- Beneficial to those traders who have limited storage space for goods
- Stabilizes the prices of the goods by way of effecting the movement of products and creating time & place utilities
- Assists in maintaining regular sales and avoids the possibilities of out of stock position to a great extend
Functions of Warehousing –
- It protects the cargo through safe storage and custody of goods by way of eliminating the scope of damage, loss and theft.
- Traders store the products in advance and sell it in the global market as per the need as there is a gap between the time of consumption and the time of production.
- It helps producers as well as customers by co- ordinating uneven demand and supply patterns.
- It helps to undertake functions such as packing, sorting, labeling or giving final change to the cargo for overseas sales.
The commodities that are stored in warehouses act as security for availing finance from banks as they are considered as current assets as per accounting norms and standards.