Warehousing 1

Warehouse: This is a building or a part of a building where goods are received and stored until need arises for them.

-Other terms used to refer to a warehouse are depot, a godown or a silo.

Warehousing; This is the process of receiving goods into a warehouse,protecting such goods against all types of hazards and releasing them to users when need arises for them.

-There are three distinct stages in warehousing process namely:

i. Receiving goods into a warehouse

ii. Storing them

iii. Releasing them to users

Importance of warehousing to Business

i. 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.

ii. 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.

iii. 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.

iv. 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.

v. 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.

vi. 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.

vii. 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

viii. Specialisation: Warehousing encourages specialization in production and distribution.

Producers concentrate on producing while distributors store the goods for sale to the customers.

ix. 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.

x. Clearance of goods: Warehousing helps in clearance of goods i.e. goods entering the country can be inspected by the customs officials.

xi. Warehousing helps to improve the quality of goods e.g. goods like tobacco and wine mature with time.

xii. Warehousing enables buyers to inspect the goods before they buy them.

xiii. Wholesale warehouses may also operate as showrooms for traders.

Essentials of a warehouse

These are the features and resources a warehouse should have in order for it to function effectively.

These include:

i. Ideal location: A warehouse should be located at a suitable place to facilitate receipt and issue of goods e.g. a manufactures warehouse
should be located near his/her factory.

ii. Proper building: A warehouse should have proper buildings which are suitable for different types of goods to be stored.

iii. Equipment: A warehouse should be equipped with appropriate facilities for handling goods such as fork-lifts conveyer belts e.t.c.

It should also be well equipped with necessary storage facilities e.g. provision of refrigerated or cold storage for perishable goods such as meat and fruits.

iv. Accessibility: A warehouse should be accessible to its users.

It should therefore be linked with good and appropriate transport system to facilitate movement of goods in and out of the warehouse.

v. Safety and security: It should have/be fitted with safety equipment or facilities necessary for protection of goods against damaged caused by such things like water, fire or sunshine as well as for the protection of the personnel.

vi. Communication: A warehouse should have a good communication network or system for easy contact with its clients and suppliers.

vii. Qualified personnel: A warehouse should have well trained and efficient staff/personnel for proper management and efficient.

functioning of the warehouse.

viii. Recording system: There should be a proper

recording system in a warehouse to ensure that all movement of goods is properly monitored.

ix. A warehouse should be spacious enough to allow easy movement and accumulation of goods and personnel.

Types of warehouses

-Warehouses can be broadly classified into three namely:

a. Private warehouses

b. Public warehouses

c. Bonded warehoused

i) Private warehouses

These are warehouses that are owned by private individuals/organizations for the purpose of storing their own goods only.

They include:

a) Wholesalers warehouses

b) Producers warehouses

c) Retailers warehouses.

a) Wholesalers warehouses

These are warehouses for storing the wholesalers’ goods as they await distribution or sale.

They need warehouses because they buy goods in bulk from producers and store them until they are needed by retailers.

-The wholesalers warehouses also act as showrooms i.e. they display their goods in the warehouse.
-These warehouses also enable the wholesalers to prepare their goods for sale e.g. branding, blending, packing and sorting may be carried out in the warehouse.

b) Producers warehouses;

-These warehouses are owned by producers and they are for storing goods prior to their demand.

-The producers may be manufactures of finished goods or farmers.

-Such warehouses are built near the manufactures factories or the farmers
production points.

-Manufactures who export may locate some warehouses near ports through which they export e.g Mumias sugar warehouse, Bamburi Portland cement warehouse e.t.c.

C) Retailers warehouses

Some large-retailers such as chain stores and supermarkets own warehouses for storing their large stores.

-It becomes necessary for such business to have warehousing facilities due to their large and bulky purchases dictated by the nature of their business.

-Goods are distributed from their warehouses to the retail outlets or to the branches.

Advantages of private warehouses

i. The owner has full control over its operation and may make major decisions without having to consult anyone.

ii. The warehouse is designed to suit the specific needs of the organizations.

iii. It enables special handling, storage and protection of goods by having special facilities which may not be available in a public warehouse.

iv. The owner is not tied down by procedures of receiving and issuing goods unlike in public warehouse.

v. The owner does not incur the cost of hiring space unlike with a public warehouse.

vi. The operation can be easily automated because the goods to be received stored and dispatched are already known.

Disadvantages of private warehouses

i. The initial construction cost of a warehouse is high.

ii. Under-utilization of personnel and facilities may occur especially in times of low volumes.

iii. They may not employ qualified management personnel and are consequently disadvantaged in dealing with management problem.

iv. Risks arising from dangers such as fire, pests, theft or damage are not spread.

ii) Public warehouses

These are warehouses owned by individuals or organizations who do business by renting space.

To those traders who are in need of storage facilities to store goods temporarily.

They have the following characteristics;

• Are owned and operated by individuals or companies who do not use them for storing their own goods.

• Are open to any member of the public who wish to rent storing space for their goods.

• The customers pay on the basis of space rented and the period of time required to store the goods.

• They are often situated near terminals as airports, sea-ports and railway station and industrial areas.

This facilitates the movement of goods in and out of the warehouse.

• The rent paid includes charges for insurance and other services i.e. goods are insured against loss or damage as a result of fire or theft while
they are still in the warehouse.

• They provide other services apart from storing the goods e.g. grading,packaging,preparing export samples, preparing market reports and clerical documents.

• Imported goods can be sold while they are still in the public warehouse.

If such a transaction takes place the goods may change ownership without being physically moved out of the warehouse.

This becomes possible if the importer has signed a document called ‘a warehouse warrant’(which is a negotiable instrument out of order), it is issued by the new owner after the transaction has taken place.