Warehousing | Business Studies Form 2

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Warehousing - Business Studies Form 2

Background

Many producers buy raw materials in bulk and also produce in large quantities. This necessitates need for storage for their raw materials and finished goods until such a time when they will be needed. Warehouses play this role and creates utility in the products.

Most warehouses are located near a transport terminus.

Objectives

By the end of the topic you should be able to:

  • Explain the meaning and importance of warehousing to business
  • Discuss the essentials of a warehouse
  • Identify various types of warehouse
  • Explain the advantages and disadvantages of each type of warehouse

Warehouses


Meaning of warehousing

A warehouse is a building used to store goods until the time when they are required. They are also known as silos, godowns or depots. Warehousing therefore is the process of receiving, recording, storing and releasing of goods from the store when required.

Grain silos in Nakuru town

Importance of Warehousing

Some of the importance of Warehousing includes:

    Storage

Goods are stored in the warehouse until the need for them arises.

  • Steady Supply of Goods

Warehousing ensures goods are stored during surplus and released during shortage. This ensures steady supply of goods and stable prices.

    Improvement of quality

Warehousing helps to improve the quality of some goods for example bananas.

    Protection

Warehousing ensures that goods are protected from physical damage and adverse whether conditions

  • Preparation of goods for sale

This is done by packing, sorting, grading, branding and blending.

  • Bridging the gap between production and consumption

Warehousing ensures that goods are kept in the warehouse after production and released when they are needed by consumers.

Essentials of a good Warehouse

A good warehouse should have the following features ;

Ideal location.

Should be accessible to the user.

Specialized personnel.

Should have well trained and efficient staff to handle the activities of the warehouse.

Adequate handling equipment.

Should have appropriate handling facilities for different types of goods e.g. refrigerators, forklift and shelves.

Adequate space

Should be spacious enough to allow for easy movement and accommodation of goods and personnel

Support services

Should have access to infrastructural facilities such as water, power and communication.

Security

Should be secure from fire, explosions, and release of toxic substances and free from pests.

Legal requirements;

Should adhere to the government rules and regulations regarding warehousing e.g. Structural requirements and storage of goods.

Record keeping

There should be proper record system to monitor movement of goods into and out of the warehouse.

Transport network

Should be served by an efficient transport system to ensure ease movement of goods in and out of the warehouse.


Types of Warehouses

There are three types of warehouses:

  • Public warehouses
  • Private warehouses
  • Bonded warehouses

Private warehouse

Private warehouse is Owned and used by individual businesses.Business people rent space in the private warehouses where they keep their goods and get them at their convinient time.

Inside a warehouse

Advantages

Advantages of Private warehouse include:

  • They save the owner cost of hiring storage facilities.
    • The owner can design warehouse to suit his requirements.
    • The owner has full control of the warehouse.
    • Disadvantages

      Disadvantages of Private warehouse include:

      • It is expensive to construct
      • The owner meets all operations on his own
      • Underutilized especially when the owner is unable to buy in bulk
      • They may be used to store illegal goods.

Public warehouse

Public warehouse is Owned by business people who rent them to the public.Anybody can rent the spaces and use it to store goods for a duration of time.Such warehouses can be found near major terminals for example airports,sea ports and other land transport terminus.They are also found in business hubs like Eastleign and Industrial Areas.

Advantages

Advantages of Public warehouse includes

  • They are investments that generate income for the owners
  • The security and safety of the warehouse is not the responsibility of the user
  • They are located in places served with good transport and communication network
  • They provide secure storage space for hire to the business community

Disadvantages

Disadvantages of Public warehouse includes

  • They are expensive to hire.
  • The users have limited control over the activities of the warehouse
  • The location of the warehouse may not be convenient to all traders
  • They may lack specialized equipment required to handle specific goods .

Bonded warehouse

Bonded warehouse is used to store goods that are awaiting payment of custom duty.Goods can only be removed from the warehouse upon production of a release warrant. Bonded warehouses are mostly found near the points of entry for example border ports and towns.

Most imported goods are first put in bonded warehouses awaiting payment of duty .

Advantages of Bonded warehouse

Advantages of Bonded warehouse include:

  • Goods can be sold while in the warehouse.
  • Goods can be re-exported without paying custom duty.
  • Goods are inspected while in the warehouse hence controlling importation of illegal goods.
  • They enable the government to collect revenue
  • Provides vital statistical information to the government on imported goods .

Disadvantages of Bonded warehouse

Disadvantages of Bonded warehouse include:

  • Incase the owner of the goods is unable to pay for custom duty the goods can be auctioned.
  • The owner of the goods has no control of the warehouse.
  • Lengthy procedures in clearing the goods
  • The longer the goods stay in the warehouse the higher the cost of hiring space in the warehouse .

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Importance of Warehousing

Some of the importance of Warehousing includes

  • Storage
  • Goods are stored in the warehouse until the need for them arises.

  • Steady supply of goods
  • Warehousing ensures goods are stored during surplus and released during shortage. This ensures steady supply of goods and stable prices.

  • Improvement of quality
  • Warehousing helps to improve the quality of some goods for example bananas

  • Protection
  • Warehousing ensures that goods are protected from physical damage and adverse weather conditions.


  • Preparation of goods for sale
  • This is done by packing, sorting, grading, branding and blending.

  • Bridging the gap between production and consumption
  • Warehousing ensures that goods are kept in the warehouse when they are produced and released when they are needed by consumers

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