What is a Warehouse
A warehouse is a planned space for the efficient storage and handling of goods before distribution. They bridge the gap between production and consumption (or distribution to customers). Raw materials, unfinished or finished goods can be stored in warehouses. They are used by manufactures, importers, exporters and wholesalers among other users. Warehouses are normally large plain buildings in industrial parks outside cities and towns. There are various types of warehouses namely private, public and bonded warehouses to name a few.
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Public warehouses belong to the government and semi government bodies and are made available to anyone who may be in need of them. They are built by governments in order to promote trade and industry. Some large companies also make use of these warehouses. To use the public warehouse traders and businesses pay rent to store their products. The main purpose of public warehouses is to assist small traders and small businesses that cannot afford to set up their own. Public warehouses also provide facilities for inspection of goods for potential buyers in addition to packaging and grading. In some countries these types of warehouses make use of mechanical devices for the handling of heavy and bulky goods. These warehouses can be used for business and personal use. Warehouses of this type are cheaper especially for start-ups, small to medium enterprises and for individuals.
This type of warehouse is privately owned and managed by wholesalers, distributors, large retail and online marketplaces. Examples are, those built by farmers close to the fields, warehouses built by wholesalers close to the stores and warehouses that are constructed by manufacturers near factories. In terms of cost these types of warehouses are more expensive than public warehouses. Maintaining them involves fixed and variable costs such as insurance, maintenance and operating costs. Normally, private businesses make use of public warehouses unless it is necessary for the business to own its own warehouse. This way the firm can build an advantage over its competitors.
Bonded warehouses are owned and managed by both government and private agencies and they are mainly located near ports. This type of warehouse is mainly used to store imported products before customs and duties have been charged on them. The companies that use them are given bonds by the relevant authorities. Duty on the products is only charged when they are released, so importers can keep their products in the warehouse duty free until they find buyers. Bonded warehouses have a reputation of being secure and safe. A bonded type of warehouse is also ideal for eCommerce companies that trade internationally.
A Smart warehouse is a type of warehouse where storage, processing and management are automated by AI (artificial intelligence). Robots and drones pack, weigh, transport and store products in the warehouse. Companies such as Amazon and Alibaba make use of these types of warehouses.
A consolidated warehouse is a type of warehouse that takes small shipments from different suppliers and groups them together into larger shipments before distributing them to buyers. Each shipment will be prepared for the same geographical location. These types of warehouse can be used by start-up companies and small to medium enterprises.
Warehouses that are owned and run by cooperative organisations are called cooperative warehouses. Warehouses of this type can be used by members of the cooperative and those outside the cooperative can store their goods in them. However, non-members of the cooperative are charged higher rates. Cooperative warehouses are run in order to help the members of the cooperative and make some reasonable profit.
Government warehouses are owned and controlled by the government. They can be considered as a form of public warehouses. These warehouses are reasonably priced but if a company is unable to pay their rent within a set time the government can dispose their goods to recover the rent.
A distribution centre is a type of warehouse where storage is temporary, and products are moved quickly within the supply chain. This type of warehouse usually has a lot of space to enable fast movement of large quantities of inventory over a short period of time. Stock is received and distributed to resellers and retailors within a short space of time. If the inventory includes perishable products the stock is often distributed in a day. In order to cut down on delivery time, storage facilities are located close to transportation centres. These warehouses are affordable to use plus the rates are dependent on the type of goods that need to be stored.
Major functions of warehouses
Certain products are produced/manufactured in one season. In order to ensure that they are available throughout the year storage is needed. In other cases, some products are produced all year round, but their demand varies. In addition, raw materials need to be stored to enable mass production on a continuous basis. All types of warehouses help companies maintain a consistent supply of products. Warehouses are also used for bulk breaking to supply to different buyers. The main functions of warehouses of all types are;
- Storage (Surplus commodities that are not required immediately can be stored)
- Price Stabilisation (Price fluctuations can be avoided, a fall in the price of products when the supply of the product is in season and an increase in the price when there is a shortage can be avoided if goods can be stored)
- Risk Bearing (Storing goods in other places exposes them to theft, fire and depreciation. Warehouses are set up in order to reduce the damage and theft of the products)
- Financing (warehousing can be a source of finance. The goods stored can be used as security. That way banks and other financial institutions can advance loans against the goods stored in the warehouse)
- Grading and packing (goods can be packed into convenient sizes. Certain products have to be processed for human consumption such as coffee and tobacco in addition to grading)