The words ‘warehouse’ and ‘godown’ are synonymous and so warehouse refers to a place used for storing goods, and warehousing refers to the activities involving storage of goods on a large-scale in a systematic and orderly manner and making them available conveniently when needed. In other words, warehousing means holding or preserving goods in huge quantities from the time of their purchase or production till their actual use or sale. Thus, it creates time utility by bridging the time gap between production and consumption of goods.

Importance of Warehousing

Warehousing bridges the time gap between production of goods and their consumption, and thus, serves useful purpose particularly for large-scale business operations.

  1. Storage of Raw Materials: To maintain continuity in production, a good quantity of raw materials is to be kept in stock. Not only that, some raw materials are only available in specific period of the year (cotton, oil seeds etc.) while these are used for production throughout the year. So, these have to be kept in stock for use as and when required.

  2. Storage in Anticipation of Rise in Price: In case the manufacturer anticipates a rise in prices of raw materials in future he or she likes to purchase it in advance and stock it. It equally applies to traders of goods if they expect price rise.

  3. Storage of Finished Goods: Since goods are generally produced in anticipation of demand, these need to be stored till sales take place. Not only that, some goods are produced round the year but purchased or used during a specified part of the year e.g. electric fans, woollen clothes. Similarly, some goods may be produced during a part of the year but used throughout the year like sugar.

  4. Storage of Goods by the Wholesalers: Wholesalers buy goods in bulk and maintain stock of goods in warehouses for sale in small quantities to retailers from time to time.

  5. Packaging and Grading: Goods in warehouses are divided into grades according to size or quality and packaging is done for convenient handling and sales.

  6. Use for Importers: Warehouses (known as bonded warehouse) are used for storage of imported goods till the importer is able to pay the customs duty and take delivery.

Warehousing is an important link in the chain of marketing and adds to the time and place value of goods. It also smoothens out fluctuations in their supply and demand. So, wherever there is trade and commerce, there is need for warehousing.

Types of Warehouses

Warehousing caters to the storage needs of various types of commodities. In order to meet their storage requirement effectively, various types of warehouses came into existence.

  1. Private Warehouses: The warehouses which are owned and operated by the manufacturers or traders to store exclusively their own stock of goods, are known as private warehouses.

  2. Public Warehouses: The public warehouse is an independent unit which stores goods of other firms. Any one can store his goods in these warehouses on payment of rent.

  3. Government Warehouses: These warehouses are owned, managed and controlled by the government. Central Warehousing Corporation of India, State Warehousing Corporation and Food Corporation of India are examples of government warehouses. Both government and private enterprises may use these warehouses to store their goods.

  4. Bonded Warehouses: Bonded warehouses to store imported goods for which import duty is yet to be paid. These warehouses are generally owned by dock authorities and found near the ports.

  5. Co-operative Warehouses: These warehouses are set up by the cooperative societies for the benefits of their members. They provide warehousing facilities at the most economical rates.

Functions of Warehouses

The warehouses preserve goods on a large-scale in a systematic and orderly manner. They provide protection to goods against heat, wind, storm, moisture, etc. and also minimise losses due to spoilage, wastage, etc. In addition to this, warehouses also perform a variety of other functions.

  1. Storage of Goods: The basic functions of warehouses is to store goods properly till they are required for use, consumption or sale.

  2. Protection of Goods: A warehouse provides protection to goods from loss or damage due to heat, dust, wind and moisture, etc. It makes special arrangements for different products according to their nature.

  3. Risk Bearing: The risk of loss or damage to goods in storage is borne by the warehouse keeper. So, he takes all precautions to ensure their safety.

  4. Financing: When goods are deposited in any warehouse, the depositor gets a receipt which acts as a proof of the goods in store. This receipt can be used as a security to obtain loans and advances from the banks and other financial institutions. Some warehouse keepers themselves advance money to the depositors for a short period against the security of their goods in their warehouses.

  5. Processing: Certain commodities are not consumed in the form they are produced. Processing is required to make them consumable. For example, paddy is polished, timber is seasoned, and fruits are ripened, etc. Sometimes warehouses also undertake these activities on behalf of the owners.

  6. Value Added Services: The warehouse keeper may also undertake to perform the functions of grading and branding of goods on behalf of the manufacturer, wholesaler or the importer of goods. He may provide facilities for mixing, blending and packaging of goods for convenience in handling and sale.

  7. Transportation: In some cases warehouses provide transport arrangement to the bulk depositors. It collects goods from the place of production and also sends goods to the place of delivery on request of the depositors.