Functions of Warehouses

Functions of Warehouses

Warehouses render invaluable services to the society by performing the following functions:

i. Storage

There is a time gap between the time of production and the time of consumption and a gap between demand and supply. The surplus goods are stored properly for the purpose of supplying them at right place and the right time.

ii. Price Stabilization

Warehousing ensures price stabilization by supplying goods as and when demanded. It acts as a cushion to absorb price fluctuations and supplies the goods at more or less uniform prices throughout the year.

iii. Equalization of Demand and Supply

Warehousing equalizes the demand and supply of goods by storing thee goods when they are not demanded and releasing them when there is a demand. Thus the consumers get the commodities regularly even during the off-season periods.

iv. Business Finance

Based on the goods deposited in a warehouse, the depositor can get finance from banks and other financial institutions by showing the receipt issued by the warehouse keeper.

v. Risk bearing

In case of damage to the goods, warehouse keeper compensates the loss caused to the owner of the goods. Thus, warehouses bear the loss of risk involved in storage of goods.

vi. Preparation for sale

Modern warehouses undertake thefunctions of sorting, packing and labelling for the purpose of making the goods suitable for marketing. Hence warehousing is needed for making the goods suitable for sale.

vii. Widening the marketing area

A manufacturer can sell the goods to different marketing areas by establishing branch warehouses or taking the service of rental warehouses at the required places. Thus warehousing widens the market for the goods.

viii. Value added services

Warehouses also provide certain value added services, such as in transit mixing, grading, packaging and labelling. Sometimes, goods are repacked and labelled again at the time of inspection by prospective buyers.