Warehousing is crucial to the success of any business that handles physical goods. There are many components of successful warehouse operations, and we will discuss the benefits and functions of warehousing.
Benefits of Warehousing
Warehousing is when physical goods or inventory are stored in a storage facility before they are sold and distributed. Warehouses enable businesses to securely and safely store their products, ensuring that the products are protected and stored in an organised manner. Being able to control your warehouse storage and inventory management boosts your bottom line. Below are some of the other benefits you can expect.
1. Production support
One of the ways to reduce your lead times is through consistent and timely production support. Warehouse facilities have warehousing space and transport logistics expertise, enabling you to safely store your inventory until you require it. When the time comes when you need your inventory, your merchandise can be delivered where you need it.
2. Opportunity to expand
When you are not restricted by the need to store all your inventory, materials or components at your manufacturing facility, you can focus on your core business which is producing your products. When you outsource your storage to a warehouse, your business can use its existing space for product development and process involvement.
3. Minimise business risk
When your goods are stored in a warehouse, they are insured at the risk of the warehouse owner. Keeping your inventory at an off-site warehouse will minimise inventory loss from issues such as damage, theft, fire, etc. These risks are transferred to the warehouse.
Functions of Warehousing
We cannot emphasise the role of warehouses enough, and to understand its role, we will look at the different functions of warehousing.
A primary function of a warehouse is offering storage space for inventory, equipment or other items. This provides a facility where businesses can store their goods when they do not need them. It also prevents stock wastage and ensures that their stock is protected and safe. In a warehouse, you can store goods from when they are produced or purchased until their use or consumption. There are two kinds of storage; planned and extended storage. Planned storage is carefully estimated storage intended to meet steady customer demand.
Extended storage is caused by various factors such as promotional campaigns, demand seasonality, or speculative purchases. Promotional campaigns include sales promotions where extra stock must be stored to satisfy the expected higher demand for products. Demand seasonality is when demand rises during different seasons, and additional storage is required for that specific period. Lastly, speculative purchases are sometimes when goods are purchased in bulk due to higher price or lower price expectations in the future, which calls for more storage space.
2. Safeguarding goods
Warehousing protects stock from theft, loss, or damage due to unfavourable weather conditions, such as wind, dust, moisture and heat, etc. Warehouses can cater for different products and make arrangements to do so. For example, the warehouse can hire security guards to prevent theft, use insecticides to preserve goods, and arrange cold storage facilities for perishable goods. Since warehouse spaces consider all the risks and address them, it will significantly reduce losses due to wastage and spoilage of goods during storage.
3. Moving goods
The movement of goods consists of inbound activity where goods are unloaded and received by the warehouse. Secondly, there is transfer to storage when goods are transferred from the inbound area to the area for storage. Thirdly, there is order selection when items in the warehouse are chosen corresponding to the order that needs to be shipped and moved to the shipping area. Lastly, outbound activity refers to inspecting and loading goods for shipment. Moving goods inside a warehouse must be seamless as possible as this ensures uninterrupted orders. Therefore, the infrastructure of warehouses and the software systems used must be upgraded regularly.
Financing is another function of a warehouse, and it is a type of inventory financing which involves loans being provided by a financial institution to a company, processor, or manufacturer. Commodities, inventory, or goods are deposited in a warehouse and used as loan collateral. When merchandise is transferred to the warehouse, the depositor will receive a receipt which serves as evidence for the deposit of goods. The warehouses issue a certificate in favour of the owner of the goods, called “Warehouse-keeper’s-warrant”. The warrant can be passed on by simple endorsement and delivery. When the warehouse-keeper is storing goods, the owner can receive loans from financial institutions, and the certificate can be pledged as security. There are instances where warehouses can give money advances to the depositors for a short term where they can retain their goods as security.
5. Price stabilisation
Warehouses play an essential role in price stabilisation as they assist in controlling violent price fluctuations. They help by storing goods whenever supply exceeds market demand and then releasing the inventory when demand gains pace. Warehouses guarantee a regular supply of goods in the market as they help match supply with demand which is essential for price stabilisation. Whenever there is excess demand in the market, having too much stock flowing may decrease their prices, leading to losses for business owners. Therefore, warehouses would need to hold stock until the demand for the goods rises again.
6. Information management
Warehouse track and record information about materials and goods being sent into the warehouse and when they are stored and shipped out. The data maintained by the warehouse’s information system must be timely, precise and error-free. This enables warehouse managers and staff to generate accurate insights to ensure stock availability, stock replenishment, and stock processing requirements. The data generated can also be presented to higher management to make better and more informed decisions.
When looking at warehousing functions, we can see that warehousing plays a crucial role in the success of a business. Monitoring these functions is essential in guaranteeing that all warehouse operations become more efficient.