Importance of warehousing to Business

Business studies study module
  • Steady/continuous flow of goods: Producers can produce and store goods awaiting demand through warehousing e.g. agricultural products that are produced seasonally are made available throughout the year
  • Stability in prices: Warehousing ensures that there is no surplus or shortage of goods. It ensures that goods are stored when in plenty and released to the market as their need arises. This helps to keep their prices fairly stable
  • Security: Warehousing ensures that goods are protected against physical damage and adverse weather conditions. This also ensures that the quality of the goods is maintained until they are demanded. Goods are also protected from loss through pilferage and theft.
  • Bridging the time lay/difference between production and consumption: many goods are produced in anticipation of demand. Such goods must be stored until their demand arises e.g. gumboots, umbrellas and sports equipment are needed seasonally but are manufactured in advance and stored in a warehouse so as to be released to the users when need arises for them.
  • Continuous/uninterrupted production schedules: Manufactures are able to buy raw materials in large quantities and store them awaiting their need to arise. This prevents interruption of the production process because of lack of raw materials
  • Preparation of goods for sale: While in the warehouse, goods can be prepared for sale e.g. they can be blended, packed, graded or sorted out.
  • Sale of goods: Goods may be sold while still in the warehouse. If sold while still in a bonded warehouse, duty passes to the buyer
  • Specialisation: Warehousing encourages specialization in production and distribution. Producers concentrate on producing while distributors store the goods for sale to the customers.
  • Unexpected demand can be met: The government collects agricultural goods e.g. cereals and stores them as buffer stocks to be used in times of disaster or serious shortages.
  • Clearance of goods: Warehousing helps in clearance of goods i.e. goods entering the country can be inspected by the customs officials.
  • Warehousing helps to improve the quality of goods e.g. goods like tobacco and wine mature with time.
  • Warehousing enables buyers to inspect the goods before they buy them.
  • Wholesale warehouses may also operate as showrooms for traders.

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