Storage and Warehousing | Meaning, Functions, Advantages, Kinds

What is Storage?

A manufacturer needs to keep adequate stock of raw materials to ensure smooth production. A trader has to maintain adequate stock of the products he sells to meet the demand. Maintenance of stocks of raw materials and finished products calls for storage. Storage helps to preserve goods at a particular place until these are required elsewhere.

Functions of Storage

1. To preserve goods that are produced only during a particular season but are demanded throughout the year (agricultural goods).

2. To preserve goods that are produced throughout the year but demanded during a particular season (crackers, umbrellas, etc.).

3. To preserve the quality of certain goods, which in the absence of proper storage will deteriorate.

4. To enable businessmen to make speculative gain, i.e., to wait and sell at a higher price.

5. To protect goods from pests and insects.

6. To ensure smooth production and distribution.

What is Warehousing?

The meaning of the word ‘ware‘ is ‘article‘. A warehouse is a place where goods are stored. It is otherwise known as a ‘godown‘. It is usually found away from the place of business of a merchant. The advantages of warehouse are listed below.

Advantages of Warehouse

The following are some of the advantages of warehouse.

1. It protects the goods until they are moved to the factory (to be used in production) or to the market (for sale).

2. It provides place for goods that are received in bulk.

3. It facilitates easy sale of goods when it is located near the market.

4. It facilitates uninterrupted sale. ‘Out of stock’ situation is avoided.

5. The ‘warehouse receipt‘ issued to a merchant, who has stored his goods in a public warehouse, also enables him to get financial assistance. A warehouse receipt is a document of title.

6. It helps to equalize price by matching the demand and supply position.

7. It provides employment opportunities to many.

8. Cold storage provides longer life to certain easily perishable items like fish, dairy products, etc.

9. It facilitates large-scale production of goods. The producer need not bother about storage.

10. It is necessary to perform certain marketing activities like grading, packing, etc.

Different kinds of Warehouses

There are different kinds of warehouses. A ‘private warehouse‘ is one, which is maintained by a merchant for his own use. A ‘public warehouse‘ provides storage facility to any individual or business unit. ‘Bonded Warehouses‘ are located near ports. It enables an importer to take delivery of his goods after paying the customs duties.

1. Public Warehouse

Its activities are regulated and controlled by the Government. Any member of the public can utilize the services of the public warehouse. The rent payable is determined by the Government and it will always be a very nominal amount. These warehouses have been built on scientific lines and therefore, they offer complete protection to the goods that are stored against spoilage, theft or damage. These warehouses are fully equipped with such devices as the crane that makes loading and unloading easier.

Private warehouses cannot afford to have such facilities. Skilled laborers work in these warehouses who can give expert advice to the customers. The receipt issued by these warehouses can be provided as a collateral security for a loan.

2. Bonded Warehouse

It is located near ports. It is owned by the Dock Authorities. An importer who is unable to pay his duties immediately can have his goods placed in the bonded warehouse. For this, he has to enter into a bond along with sureties assuring payment of the duty. He can collect the goods after paying his dues.

Delivery of a part of the goods can be effected by remitting the proportionate duty. The importers are allowed to do further processing on the goods kept in the bonded warehouse like mixing, packing, etc. They can take the buyers to such a warehouse to enable the latter to inspect the goods. This enables the importer to sell the imported goods while they are lying in the warehouse. It also enables the importer to export the imported goods without paying any duties.

The Central Warehousing Corporation (CWC)

It was established in India in the year 1957 to provide warehouses at suitable places in the country. It provides storage facilities to individuals, co-operative societies and others. It also provides facilities for transporting agricultural goods from the place of production to the place of warehouse.

The CWC acts as the agent of the Government for the purchase, sale, storage and distribution of agricultural goods, seeds, manures, etc. It also subscribes to the share capital of the State Warehousing Corporations.

The State Warehousing Warehousing Corporation (SWC)

Every State in India can establish its own Warehousing Corporation by getting the approval of the Central Warehousing Corporation. The respective State Government will contribute 50% of the capital and the CWC will contribute 50%.

The State Warehousing Corporation will provide warehouses in places other than those reserved for the Central Warehousing Corporation. It can also act as the agent of the Central or the State Government or the CWC.