Warehousing – SS2 Commerce Lesson Note (Third Term)

Warehousing is the process of storing physical inventory for sale or distribution. Warehouses are used by all different types of businesses that need to temporarily store products in bulk before either shipping them to other locations or individually to end consumers.

Functions of warehousing

1. Storage: Surplus commodities which are not needed immediately can be stored in warehouses. They can be supplied as and when needed by the customers.
2. Price Stabilization: Warehouses play an important role in the process of price stabilization. It is achieved by the creation of time utility by warehousing. Fall in the prices of goods when their supply is in abundance and a rise in their prices during the slack season are avoided.
3. Risk bearing: When the goods are not stored in warehouses they are exposed to many risks in the form of theft, deterioration, exploration, fire etc. Warehouses are constructed in such a way as to minimize these risks.
4. Financing: Loans can be raised from the warehouse keeper against the goods stored by the owner. Goods act as security for the warehouse keeper. Similarly, banks and other financial institutions also advance loans against warehouse receipts. In this manner, warehousing acts as a source of finance for the businessmen for meeting business operations.
5. Grading and Packing: Warehouses nowadays provide the facilities for packing, processing and grading of goods. Goods can be packed in convenient sizes as per the instructions of the owner.