What is a warehouse? Explain its different functions.

Solution: 

A warehouse is defined as "an establishment for the storage or accumulation of goods."

Warehousing refers to the storage of goods and consists of all those activities which are connected with the storage and preservation of goods. It is a means of storing goods.

 

Functions of Warehouses:

 

1) Storage:

This is the basic function of warehousing. Surplus commodities that 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. In warehouses, usually large stock of goods is kept.

 

3) Risk bearing:

When the goods are stored in warehouses they are exposed to many risks in the form of theft, deterioration, fire, etc. Warehouses are constructed in such a way that they minimize these risks.

 

4) Financing:

Loans can be raised from the warehouse keeper or from financial institutions against the goods stored by the owner. Goods act as security for the warehouse keeper or for financial institutions. 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 of packing, processing, and grading of goods. Goods can be packed in convenient sizes as per the instructions of the owner.

 

6) Transportation:

Warehouses can provide transportation facility to bulk depositors. It collects goods from the place of production and also sends goods to the place of delivery at the request of the owner.

 

7) Time and Place Utility:

Warehouses create time utility by preserving the goods until they are demanded. It also creates place utility by providing the goods at the place, where they are required.

 

8) Processing:

Certain commodities are not consumed in the form they are produced. Processing is required to make them consumable. e.g. Paddy is polished, fruits are ripened, etc. Sometimes warehouses undertake such activities on behalf of the owners.