Functions of Warehousing means the wide ranges of activities, which are associated with the physical distribution of goods from end of production line to the final consumers. These activities include purchasing of goods, inventory management, storage, materials handling, protective packing and transportation. Warehousing is concerned with the storing function of good and commodities. Warehousing also refers to all the activities which are connected with the safe keeping of goods until they are needed for consumption. In the words of R.E Murphy, “Warehousing is concerned with storing function in the channel of distribution of goods”.
Functions of Warehousing
Below is the list of the important functions of warehousing, you need to remember business student and an entrepreneur:-
- Storage of surplus goods.
- Price stabilization.
- Risk bearing.
- Loan Facility.
- Advantages to the importers and exporters.
- Other functions.
- Storage of surplus goods
The basic functions of warehousing are to provide the facility of storage for the goods which are laying surplus with the businessman. The businessmen produce the goods in anticipation of their demand. They store and preserve the goods which are surplus. They make the goods available in the market when their supply is relatively scarce.
- Price stabilization
Warehousing also help in the stabilization of the prices of goods in the market. When the supply of goods in the market is in excess, the fall in the prices of goods can be avoided by storing some stocks in the warehouses. Similarly, in case of increasing demand, the rise in the prices of goods can be checked by releasing the goods from the warehouses. The warehouses thus help in the stabilization of prices and safeguard the businessman against the dangers of price fluctuations.
- Risk bearing
Risk bearing is also considered as one of the utmost important functions of warehousing. When the goods are handed over to the warehouse keeper by the businessman, the risk of loss or damage for the stored goods passes to the warehouse keeper.
- Loan Facility
The businessman can obtain short term finance from the lenders on the security of goods stored in the warehouses. The producers and manufacturers of goods can continue and increase production with the help of raised working capital from the lenders.
- Advantages to the importers and exporters
The importers can store the imported goods in the bonded warehouses at the port. When the import duty is paid by them, the goods are then released. The importers have the facility to remove the goods in parts after making payments of the duty and warehouse charges. The exporters can also keep the goods to be exported directly in the bonded warehouse. In the absence of warehouse, the exporters would have to take the goods to their own warehouse and again to the port for the exports. Thus, the double expenses of transport and storage are saved. No doubt, this is also from one of the utmost important functions of warehousing.
Advantages of Warehousing
The major advantages of the warehousing are as under:-
- Provides storage facility
The producers, manufactures, wholesalers, stockiest of goods who do not have their own stores or they have limited storage capacity can avail of the facility of preserving the goods in the warehouses. They need not curtail production due to the lack of storage facilities.
- Quick service to customers
The merchants can provide the good to the customers at smaller expenses and move quickly from the warehouses situated at convenient places.
- Payment of custom duties in installments
The importer can get the goods released in installments by making payments only on those portions of goods which is released. The importer is thus saved from the heavy payment of duty in lump sum.
- Transfer of ownership
The importer can transfer the ownership of goods stored without moving them from the warehouses. The importer can sell the goods by the delivery of the warehouse warrant with his endorsement. The buyer can also dispose of the whole consignment in the same way. The goods stored in warehouses can thus change hands several times in the world market.
- Protection against all risks
The goods which are stored in warehouses are insured against loss by fire, theft, deterioration etc. the warehousing thus offers protection against all risks except their change in price in the commodity market.
- Sale at favorable prices
The produces, manufacturers produce the goods in anticipation of their demand. If the supply of goods in the market is in excess, the producers can store the products in the warehouses and can sell them at favorable prices at the appropriate time.
- Raising of loans
Warehousing offers the facility of hypothecation of goods. The manufacturer cans raise loans from the banks on the security of goods stored in the warehouses. He can thus meet the requirements of working capital and can also pay his obligations in times of crises.
- Easy movement of goods
The public warehouses are mainly constructed at favorable points on railways routes and main roads. The movement of goods is facilitated at lesser fare rates and quickly.
- Increase in employments
The warehousing helps in the provision of employment to the skilled and semi skilled persons in various parts of the country.
- Regular supply
By preserving goods from the time of production to the time of consumption, the warehousing ensures the continue flow of goods in the market.
- Mass production
The warehousing has greatly helped in the widening of the area of market. Technological advances have now made it possible to produce goods on larger scale. The surplus production can now be safely, easily and at lesser cost preserved in warehouses. These then can be sold in the local and overseas market at favorable prices.
- Improvement in quality
The blending, processing, packing, labeling etc. done in the warehouses has helped in improving the quality and standard of grades for the products.
- Income to the State
The importers and exporters pay duty for the goods stored in the bonded warehouses to the government of the country. The warehouse keepers pay income tax. Warehousing thus provided revenue to the state.