What is Warehousing?

6 min readJan 14, 2022

What is Warehousing?

Warehouses are used to store goods and are the act of storing large quantities of goods in an organized and efficient manner, making them easily accessible when needed.

Both of the words “warehouse” and “godown” are synonyms.

In another way, warehousing is the act of storing or conserving large quantities of products from their initial purchase or production until their use or sale.

It creates time utility because it bridges the time gap between product production and consumption.

Importance of Warehousing

Warehousing, as mentioned above, bridges the time gap between product production and consumer consumption.

This makes it more valuable, especially for large business operations.

The following article describes its importance, based on how it is used.

Storage of Raw Materials

Some raw materials need to be in stock in order to maintain production flows.

Such as:

Cotton,
Oilseeds,

and so on, are not available all year but these are used for production throughout the year.

These items should be kept in stock so that they can be used as needed.

Storage in Anticipation of Rising in Price

If the manufacturer predicts a rise in raw materials prices in the future, they like to purchase it in advance and keep it in stock.

It equally applies to traders of goods if they anticipate rising in price.

Storage of Finished Goods

Goods are usually produced in anticipation of demand, so they must be kept in stock until the sale occurs.

Some goods may be delivered throughout the year but only used/purchased during a specific period.

such as:

Electric fans, or
woolen clothes.

Some goods can be made during a given year but may not be used throughout the year.

Storage of Goods by the Wholesalers

Wholesalers purchase products in bulk and store them in warehouses to sell to retailers on a smaller scale from time to time.

Packaging and Grading

Warehouse goods can be classified into different grades based on their size and quality and packaging is used for easy handling and sales.

Use for Importers

Warehouses, also known as bonded warehouses, store imported goods until the importer is able to pay the customs duties and take delivery.

These warehousing techniques can be essential to the marketing chain as they increase goods’ value and time.

It helps to smoothen out fluctuations in demand and supply.

There is always a need for warehousing wherever there are Commerce and Business.

Types of Warehouses

We know that warehousing is a way to store different types of commodities.

To meet these storage requirements efficiently, there are many types of warehouses.

These are as follow:

Private Warehouses

Private warehouses are those warehouses that are owned by traders or manufacturers and used to store their goods stock exclusively.

Public Warehouses

Public warehouses are independent units that store goods from other companies.

Anyone on payment of fee can use these warehouses.

Government Warehouses

These warehouses can be controlled, operated, and managed by government agencies.

Examples of government warehouses include:

The Central Warehousing Corporation of India (CWCI),
State Warehousing Corporation (SWC), and
Food Corporation of India (FCI).

Both government and private companies can use these warehouses to store their products.

Bonded Warehouses

Bonded warehouses are used to store import goods that have not yet been paid the import duty and these warehouses are usually owned by the dock authorities and are placed near ports.

Co-operative Warehouses

Co-operative societies set up these warehouses for the benefit of their members and they offer warehousing services at very affordable rates.

What are the functions of warehousing?

Warehouses are designed to preserve goods on a large scale in an organized and systematic manner and they provide protection for goods from heat, wind, storms, and moisture.

Warehouses serve many other functions, including those listed below:

Storage of Goods

Warehouses are designed to store goods until they can be used, consumed, or sold.

Protection of Goods

Warehouses protect goods from damage or loss due to heat, dust, wind, moisture, and other factors and it can also make special arrangements for products according to their specific nature.

Risk Bearing

The warehouse keeper is responsible for ensuring that goods are not damaged or lost while being stored and he takes all precautions to ensure the safety of the goods.

Financing

A receipt is issued to the depositor when goods are stored in a warehouse and this receipt can be used to secure loans or advances from banks or other financial institutions.

Some warehouse keepers will also advance money to depositors for a brief period to secure the goods stored in their warehouses.