Warehousing is a crucial aspect of the supply chain as it impacts the storage and management of inventory. Warehousing ensures that businesses are able to receive their orders on time. Warehousing has many elements, benefits, types and functions. In this article, we aim to assist you in understanding all things warehousing.
What is Warehousing?
Warehousing refers to the process of physically storing goods until they are sold or distributed to another location. Warehouses ensure that goods are stored safely in an organized manner in order to track where those goods are located, the date of their arrival, the time they were stored in the warehouse, and the quantity of those goods. Warehousing is a vital aspect of any business, regardless of the size. It is used by importers, producers, wholesalers, transport companies, etc.
Elements of Warehousing
Warehouses can be used for different things. Some of its elements include:
1. Warehouse Management
Warehouse management refers to the day to day operations that occur in the warehouse centre that ensure operational efficiency. These operations include the management of staff, stock, and equipment. Tasks like ensuring that the correct security gear is being used in the warehouse and that the staff have the licenses and certifications to use certain working equipment.
2. Warehouse Operations
Warehouse operations include roles that ensure that the warehouse is being efficient. Part of these operations includes keeping warehouse costs low, checking that you receive the correct amount of items, ensuring that there is enough space in the warehouse and that clients are always happy.
3. Warehouse Management Software
Warehouse Management Software (WMS) is a system that ensures all activities within the warehouse are being managed properly. WMS assists in improving stock management.
Benefits of Warehousing
Apart from the fact that warehouses store products, it has many other added advantages such as:
1. Better Inventory Accuracy
Since warehousing ensures that you have all your inventory in one place, you can know how much inventory you have at hand and how much you have moved.
2. Protection of Goods
A warehouse ensures that all your inventory is stored in a safe facility, especially for perishable goods, as you can ensure that they are stored in the appropriate conditions.
3. A Decrease in Overhead Costs
Warehousing assists in improving the management of inventory and the daily operations of a warehouse, which means that you can reuse your costs.
4. Central Location
If you choose to have a warehouse near the manufacturing hub or your customer, this will assist in having better transportation of goods and decrease the time required to move products to these places.
Types of Warehouses
Warehouses come in many different sizes and forms, such as:
1. Private Warehouses
Private warehouses are owned and managed by suppliers and resellers to fulfil their distribution activities. Examples of private warehouses are retailers renting out warehouses to store their items, warehouses used by producers that are near their places of work and warehouses that are either owned or leased by a wholesaler where they will store or distribute their inventory.
2. Public Warehouses
Warehouses that are owned by the government are referred to as public warehouses and they can be used by private entities to store their goods, as long as they can pay rent. These warehouses can be of assistance to small companies that need storage facilities but cannot afford to have their own.
3. Bonded Storage
Bonded storage refers to warehouses that are owned and managed by both the government and private firms. These warehouses are used to store imported products where an import duty has not been paid yet, and the private firms need to receive a license from the government. Bonded storage ensures that private firms pay their taxes to the government.
4. Co-operative Warehouses
Co-operative warehouses are owned by co-operative societies. They are meant to be accessible storage facilities as the rates that they charge are not as high as other types of warehouses. Co-operative warehouses are not intended to make a profit, but they are to assist those members who cannot afford to rent warehouses at the usual rate.
5. Distribution Centres
Distribution centres are storage facilities that can keep large amounts of inventory for a short period of time. Their purpose is to be used as a distribution system where goods are moved quickly from the supplier and then to the customer.
1. Maintain Price Stability
Warehouses play an important role in avoiding unexpected fluctuations in prices that occur, so you store goods when there is currently no demand for them. When demand increases for goods, and they are not in production, then you can sell them. Warehouses also guarantee a steady supply of items into the market, which assists in price stabilisation as there is always a match in supply and demand.
2. Creates Storage Space
The primary function of warehouses is to store goods, but they can also be used to store extra goods that are not in need at the moment. These goods are stored and need to be preserved until a time when there is a demand for them from customers.
3. Minimizes Risk
Warehouses can be the safest place where goods are stored. In the case of perishable goods, they can be kept in a cold storage facility to preserve them. They are also able to reduce the chance of goods incurring damage from theft or fire as all the goods within the warehouse are usually insured. In the event that those goods were to be stolen or are damaged, then the owner of the said goods would receive compensation from the insurance company.
4. Packing and Grading
Products such as coffee and tobacco need to go through processing and conditioning before they are safe for human use and consumption. Warehouses can be used to provide things like processing, packing, grading, etc. of goods until they reach the point of being safe for human use when they are sold. During this packing and grading process, interested buyers can inspect the goods while they are still in the warehouse.