BENEFITS OF WAREHOUSES
BENEFITS OF WAREHOUSES
Raw materials need to be stored to enable mass production to be carried on continuously. Sometimes, goods are stored in anticipation of a rise in prices. Warehouses enable manufacturers to produce goods in anticipation of demand in future.
A warehouse creates time utility by bringing the time gap between the production and consumption of goods. It helps in making available goods whenever required or demanded by the customers. Some goods are produced the whole year but demanded only during particular seasons e.g., wool, raincoat, umbrella heater etc. On the other hand, some products are demanded whole year but produced in a certain region e.g., Potatoes, wheat, rice etc.
Storage of surplus goods
Goods are often produced in anticipation of demand and need to be preserved properly until they are demanded by the customers. Goods that are not required immediately can be stored in a warehouse to meet the demand in future.
Warehouses reduce violent fluctuations in prices by storing goods when their supply exceeds demand and by releasing them when the demand is more than immediate productions. The warehouse ensures a regular supply of goods in the market. This matching of supply with demand helps to stabilise prices.
Minimization of risks
Warehouses provide for the safe custody of goods. Perishable products can be preserved in cold storage. By keeping their goods in warehouses, businessmen can minimise the loss from damage, fire, theft etc. The goods kept in the warehouse are generally insured. In case of loss or damage to the goods, the owner of the goods can get full compensation from the insurance company.
Packing and grading
Certain products have to be conditioned or processed to make them fit for human use, e.g., tobacco, coffee etc. A modern warehouse provides facilities for processing, packing, blending grading etc., of the goods for the purpose of sale. The prospective buyers can inspect the goods kept in a warehouse.
Warehouses provide a receipt to the owner of goods for the storage of goods in the warehouse. The owner can borrow money against the security of the goods by making an endorsement on the warehouse receipt. In some countries, warehouse authorities advance money against the goods deposited in the warehouse. By keeping the imported goods in a bonded warehouse, a businessman can pay customs duty in instalments.
Opportunity for Business Expansion
The businessman can focus on his core business/production when he has enough space to store their products for a longer span. Once this restriction has been removed, a business can create an opportunity for product development and process improvement.
Creation of Employment
Warehouses create employment opportunities both for skilled and unskilled workers in every part of the country. It is a source of income for the people, to improve their standard of living.