Warehousing – SS2 Marketing Lesson Note (Second Term)

Warehousing is the storage of physical goods in a building until they are sold or sent to customers.

A classic warehouse with pallets (3D rendering)

Behavioural objectives

1. Define warehousing.
2. State the functions of warehousing.
3. Distinguish between storage warehousing and distribution warehousing.
4. Describe the six activities carried out in a warehouse.
5. Name the types of warehouses and state the functions of each.

What is warehousing?

Warehousing is the process of storing goods in bulk, for a time, before they are sold, shipped to other places or delivered to consumers.

• Warehouse: the building or space where the goods are kept.
• Warehouse keeper: the person or firm that looks after the goods.
• Users: manufacturers, wholesalers, retailers, importers and exporters.
• Examples: a depot holding cartons of noodles, a store of bagged cement, a cold room for frozen fish.

What are the functions of warehousing?

There are five main functions of warehousing: storage, price stabilisation, risk bearing, financing, and grading and packing.

1. Storage: goods not needed at once are kept and supplied to customers when they ask for them.
2. Price stabilisation: storing goods creates time utility, so prices do not fall when supply is high.
3. Risk bearing: warehouses are built to reduce losses from theft, deterioration, fire and explosion.
4. Financing: owners can borrow against stored goods, because the goods act as security.
5. Grading and packing: goods can be sorted by quality and packed in sizes the owner wants.

How does warehousing help price stabilisation?

• In the harvest season, supply is high and prices tend to fall.
• Traders store part of the goods instead of selling them all at once.
• In the slack season, the stored goods are released.
• Prices then do not rise sharply, so they stay fairly steady through the year.

How does warehousing help financing?

• The warehouse keeper may lend money against the goods stored.
• Banks and other financial institutions may lend against warehouse receipts.
• The owner uses the loan to run the business while the goods wait to be sold.

What are the types of warehousing?

There are two types of warehousing: storage warehousing and distribution warehousing.

What is storage warehousing?

Storage warehousing is the keeping of goods for a moderate or long period to balance the supply of manufacturers with the demand of consumers.

• Lower transport cost: it helps to reduce the transportation expenses of manufacturers.
• Handling equipment: cranes and forklifts load and unload cargo.
• Depot: it holds finished goods or spare parts for manufacturing companies.

What is distribution warehousing?

Distribution warehousing is the keeping of goods for a short period while they are gathered and sent on to buyers.

• Quick movement: it helps goods to be assembled and redistributed within a short time.
• Location: it is centralised when near the factory and decentralised when near the market.
• Flexibility: it can send goods to wholesalers, retailers and customers at the same time.

What is the difference between storage and distribution warehousing?

What activities take place in a warehouse?

There are six warehouse activities in order: receiving, put-away, storage, picking, packing and shipping.

1. What is receiving?

Receiving is the first warehouse activity, in which incoming goods are checked and accepted.

• Checks made: right product, right quantity, right condition and right time.
• Responsibility: the warehouse becomes accountable for the goods until they are shipped.
• Damaged goods: careful checking helps to filter them out and avoid liability for them.
• Effect of errors: mistakes here affect all later operations.

2. What is put-away?

Put-away is the movement of goods from the receiving dock to the best storage location in the warehouse.

• Faster storage: cargo is stored quickly and efficiently.
• Less travel: travel time is minimised.
• Safety: goods and workers are kept safe.
• Space: use of warehouse space is maximised.
• Easy tracking: cargo is easier to find, track and retrieve.

3. What is storage?

Storage is the keeping of goods in the most suitable space until they are needed.

• Space: done well, it makes full use of the available space.
• Labour: it increases the efficiency of workers.

4. What is picking?

Picking is the collection of products from storage to fill customer orders.

• Cost: it is usually the costliest warehouse activity.
• Efficiency: improving it reduces costs and raises efficiency.
• Accuracy: errors affect customer satisfaction directly.

5. What is packing?

Packing is the gathering of picked items in an order and the preparation of them for delivery to the customer.

• Protection: it keeps damage low once items leave the warehouse.
• Weight: packaging should be light so it does not add to the weight of the goods.
• Cost: packaging should be minimal to control cost.

6. What is shipping?

Shipping is the final warehouse activity, in which the order leaves the warehouse for the customer.

• Right order: the correct goods are sorted and loaded.
• Right customer: the order is sent to the correct buyer.
• Right transport: a suitable mode of transport is used.
• Safe and on time: the goods arrive undamaged and when promised.
• Earlier steps: picking, packing and put-away affect whether shipping succeeds.

What are the types of warehouses?

There are three types of warehouses covered here: the wholesaler’s warehouse, the retailer’s warehouse and the bonded warehouse.

1. What is a wholesaler’s warehouse?

A wholesaler’s warehouse is a store where a wholesaler keeps goods bought in bulk from manufacturers.

• Manufacturer’s depot: it holds goods for manufacturers.
• Pick-up point: retailers collect their goods from it.
• Jobs: it creates job opportunities.
• Bulk buyers: it is a place where bulk buyers shop.
• New products: it can be a place where new products are launched.

2. What is a retailer’s warehouse?

A retailer’s warehouse is a store where a retailer keeps stock to supply shops or customers.

• Stocking: it keeps products stocked correctly and safely.
• Orders: it processes orders and plans the dispatch of items to customers.
• Fulfilment: it helps fill orders well without running out of stock.

3. What is a bonded warehouse?

A bonded warehouse is a warehouse approved by customs, where imported goods are kept before customs duty is paid.

• Storage: it stores imported or exported goods.
• Delayed duty: payment of customs duty is postponed until the goods are released.
• Customs control: goods stay under the supervision of customs officers.

Evaluation

1. Define warehousing.
2. State four functions of warehousing.
3. Distinguish between storage warehousing and distribution warehousing.
4. List the six activities of a warehouse in the order in which they occur.
5. State two functions of a bonded warehouse.

Assignment

Explain how warehousing helps in price stabilisation and in financing, and state three functions of a wholesaler’s warehouse.