Warehousing: Functions, Kinds and Features of an Ideal Warehouse

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Functions, Kinds and Features of an Ideal Warehouse are as follows:

Meaning of Warehousing:

'A warehousing is an establishment for the storage and accumulation of goods'. Storage of goods takes place through the network of warehouses specially constructed for the purpose. Warehousing plays a vital role in modern business. It renders a very important service to the producers, wholesalers and retailers. Warehousing is concerned with the assumption of responsibility for the storage of goods.

Functions of Warehousing:

Warehousing aids in equalizing supplies over a period of time.

It renders invaluable service to community by performing important functions which are given below:

1. Storage of Goods:

The primary function of warehousing is to store the stocks of surplus products so as to make them available whenever there is storage of these goods.

2. Stabilising Prices:

By performing the primary function of storage and balancing the demand and supply of goods, warehousing helps in stabilising the prices.

3. Sharing of Risk:

Warehouse keeper bears the risk of loss or damage for goods in storage. Thus, the risk in keeping the goods is transferred to the warehouse keeper as soon as the goods are handed over to him for storage.

4. Financing:

Warehousing performs another important function of financing against the security of goods deposited in the warehouses.

5. Other Functions:

In addition to storage, stabilising of prices, sharing of risk and financing, warehouse- keeper performs a number of other functions such as:

(a) He takes representative samples and breaks-up large stocks into smaller lots.

(b) He opens and repacks goods at the time of inspection by the custom authorities.

(c) He delivers goods in whole or in part to the buyer as per the instructions of the depositors of goods.

(d) He helps in expansion of market.

(e) Warehousing aids foreign trade.

Kinds of Warehouses:

There are many kinds of warehouses.

The classification of warehouses can be discussed from several viewpoints:

A. On the basis of their Structure:

Warehouses are constructed in different ways to meet the special storage requirements. The selection of a particular type of a warehouse for storage of goods depends upon a number of factors such as nature of goods, quality, climatic conditions etc.

On the basis of their structure, following are some of the important kinds of warehouses:

1. Classical Warehouses:

It is a single storey building divided into various compartments through a concrete wall. These warehouses are generally used for storage of general merchandise. Racks and lift trucks may also be provided in such type of warehouses for the convenience in storage.

2. Silo:

A silo is a vertical structure equipped with mechanical devices such as conveyor belts, automatic aeration and temperature control arrangements. Silos are ideally suited for bulk storage. Large cities where land and labour costs are very high make use of silos for the storage of food-grains and other commodities.

3. Bins:

Bins are small cylindrical hexagonal and cubical structures for bulk storage of varying capacity. These are mostly man-operated but can be operated mechanically also.

4. Elevator:

Elevator represents big vertical premise into which grain is discharged directly from or to railway wagon or ship.

5. Portable Warehouse:

A portable warehouse is one which can be removed and set in a short period of 2-3 days. It can withstand high winds and heavy showers.

6. Automatic Warehouse:

An automatic warehouse is one in which whole or a substantial part of receipt, store and despatch operations are performed without manual handling of goods. It reduces the total cost of distribution of goods.

B. On the basis of Ownership:

1. Private Warehouses:

Private warehouses are owned by big business houses, wholesalers and manufacturers who store their own stocks in these warehouses. Such warehouses are not meant for use of the business community in general. The expenses of running, maintenance, insurance, etc. are all met by the owners themselves. Being meant for private use, they have a limited value.

2. Public Warehouses:

Public warehouses are meant for use of businessmen at large. Any businessman can store his goods in such warehouses. These types of warehouses have to obtain a licence from the Government and have to follow instructions framed by Government. There may be public warehouses specialising in one or more kind of products only. But in any case, public warehouses undertake the responsibility of protecting other's goods in consideration of some charges.

Public warehouses provide a number of advantages:

(a) They are generally constructed on modern lines to provide best facilities.

(b) They are beneficial to small businessmen who cannot own their own storage houses.

(c) They are, usually, located at central points.

(d) The receipt issued by warehouse-keeper serves as a collateral security to raise loans.

(e) They offer facilities like grading, branding and packaging.

(f) They provide other useful facilities like loading, unloading, transportation, prompt delivery, etc.

3. Co-operative Warehouses:

A co-operative warehouse is a joint effort of people who form a co-operative society to run the same. Now-a-days, a large number of co-operative warehouses are coming up in the country. For example, there are cooperative cold storages in Punjab, Maharashtra, Mysore and West Bengal. The success of such a warehouse depends upon the loyalty of its members, utilisation of space and availability of finances.

4. Household Warehouses:

These types of warehouses are not very common in our country. They provide temporary facility to store furniture, rugs, furs, paintings, etc. The reasons for the growth of such warehouses abroad are high rentals of houses and separation of families through divorce.

5. Bonded and Duty Paid Warehouses:

These warehouses are used by the importer of goods from other countries. The port trust and custom authorities maintain two types of warehouses — Bonded and Duty Paid. These warehouses are situated near the dock area and are very useful to importers who do not have godown of their own to store the imported goods or who, for business reasons, do not wish to carry them to their own godowns.

The goods on which the duty has already been paid by the importer can be kept in the duty paid warehouses for which a receipt called 'warehouse receipt' is issued to him. This receipt is a document of title and is transferable.

The bonded warehouses are meant for goods on which duty has not been paid by the importer. If the importer cannot pay the duty, he may keep the goods in Bonded warehouses for which he is issued a receipt, called 'Dock Warrant'. Dock Warrant, also like warehouse receipts, in a document of title and is transferable.

The bonded warehouses are used by the importer when:

1. He has no godown of his own.

2. He cannot pay the duty immediately.

3. He wants to re-export the goods and thereby does not want to pay the duty in instalments.

4. He wants to pay the duty in instalments.

A nominal rent is charged for the use of these warehouses. One special advantage of these warehouses is that the importer can sell the goods and transfer the title of goods merely by endorsing warehouse receipt or dock-warrant. This will save the importer from the trouble and expenses of carrying the goods from the warehouses to his godown.

C. On the basis of services rendered:

1. Special Commodity Warehouses:

They are specially constructed for the storage of a particular type of a commodity such as cotton, petroleum products, wool, etc. These warehouses provide, in addition to storage facilities, services such as inspection, grading, conditioning, etc.

2. Cold Storage and Refrigerated Warehouses:

These warehouses specialise in storing perishable products like fruits, vegetables, eggs, butter, etc. These products cannot be stored in ordinary warehouses as they may be spoiled by exposure to temperature fluctuations.

3. Bank Warehouses:

Some of the banks also maintain warehouses to keep the goods as security against credit/finance provided to various clients.

4. General Merchandise Warehouses:

The products which do not require special storage may be stored in general merchandise warehouses.

Documents used in Warehousing:

The important documents used in warehousing are:

(i) Warehouse Warrant:

It is a document issued by warehouse keeper to the persons storing goods as a document of title of such goods. The ownership of the goods stored can be transferred by the transfer of warehouse warrant.

(ii) Delivery Order:

If only a part of the goods stored are to be transferred the holder of the warehouse warrant issues a delivery order for that portion of goods which are to be transferred. Warehouse-keeper makes a note of the goods delivered in the warrant.

(iii) Warehouse-keeper's receipt:

It is a receipt of acknowledgement of the goods by the warehouse- keeper. The difference of this receipt from a warehouse warrant is that this receipt is not a document of title to goods while warrant is document of title.

Features of an Ideal Warehouse:

A warehouse is an establishment for the storage and accumulation of goods. It is a highly specialised function that plays a vital role in modern business.

An ideal warehouse should have the following features:

1. Safety:

The basic function of warehouses is to assume the responsibility to store the goods safely over an agreed period of time. An ideal warehouse should protect goods from all possible dangers such as heat, humidity, evaporation, fire, rain, theft etc.

2. Proper Location:

An ideal warehouse should be situated at a proper location convenient to customers, sellers and other concerned parties.

3. Sufficient Space:

There should be sufficient space for present as well as future requirements of space for storage.

4. Scientific Layout:

An ideal warehouse must have scientific layout to facilitate easy supervision and effective control.

5. Economy:

An ideal warehouse must provide the maximum service at the lowest cost, i.e., it should be such as to be economical to operate and maintain.

6. Other Services:

An ideal warehouse should provide certain other services such as packing, financing and sharing of risk etc..


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