Warehouses play a number of vital roles in the supply chain. First and foremost, they give businesses a safe and well-organized place to store items, enabling them to build up inventory and discharge it as needed. In order to track, organise, and control the movement of items and ensure proper stock levels and effective rotation, warehouses are also essential to inventory management. Furthermore, warehouses are essential for swiftly processing and completing customer orders. By carrying out these duties, warehouses aid in the efficient movement of goods and promote the supply chain's overall efficacy.
Goods are the primary driver for not only business growth but also economic growth. Goods are a lifeline for businesses related to goods-producing sectors such as manufacturing, construction, and agriculture. The storage of goods is as pivotal for the survival and growth of the business. This need is fulfilled by the warehouses that are primarily used for storing goods. However, in practical life, warehouses are multi-purpose storage units whose function extends beyond storing goods.
Did you Know? State-of-the-art and smart warehouses are adopting AI technologies like virtual reality (VR), wearables, and the Internet of Things (IoT) to enhance inventory visibility, lower operating costs, improve picking efficiency and other numerous benefits.
What Is Warehousing?
Warehousing is the process of storing goods in bulk that are sold or distributed in the future. Warehousing is vital to logistics and supply chain management (SCM), especially for large businesses. It comes with many functions and benefits, and typically most businesses use warehouses for different business operations, although the primary intention is to store the goods. Not only this, but warehousing is also an outstanding resource that assists inventory control and management. Whether your business is a startup, MSME, small company, or MNC dealing in retail or e-commerce space, find how warehousing benefits your business on a large scale.
Read on to discover the 9 amazing functions of warehouses to scale up your business logistics and SCM game.
Top 9 Key Functions of Warehouses
As it looks, warehousing is not just any immaterial process. It is on par with other vital business processes and can earn a profitable ROI through efficient incorporation. Warehousing provides a better customer experience through on-time order processing and timely shipments, generating augmented profits and business revenue. It also creates time utility along with better inventory management. Let’s go into detail and explore the top 9 amazing functions of warehouses.
The main function of the warehouse is to store physical goods. Warehouse also provides space for storing equipment, inventory, raw materials, and other items. Goods sold later and over-demand can be stored safely in a warehouse. The warehouse storage also provides safety and protection to the stored goods ensuring no wastage of stock. The storage function of the warehouse enables seamless business operations.
Warehouses generally include:
- Retail stores that secure goods and supply them as per customer demand.
- Distribution centres that store physical goods and distribute them to desired locations.
- Manufacturing plants of production businesses that house raw materials, finished goods, and other supplies.
- Cold storage stores temperature-sensitive supplies such as medicine and perishable food, plants and cosmetics.
- Smart warehouses that use technology to automate the process of warehousing, including picking, packing, shipping, and tracking the inventory with minimal human involvement.
Businesses make use of two types of storage, one being the planned storage that is used to meet regular customer demand, and the other one is extended storage. Extended storage is additional storage that is maintained over planned storage to meet the demand season, promotional campaigns, and speculative purchases.
2. Safeguarding Physical Goods
The subordinate role of warehousing is to protect and safeguard the goods from loss, wastage, and theft. The goods are also protected from damage caused by adverse weather conditions like heat, moisture, wind, and dust, ensuring no wastage of goods. The warehouse storage management can ensure no theft of goods by employing security staff and prevent fire accidents by installing fire extinguishers, storing flammable materials in a safe place, ensuring proper waste management, and employing fire fighting devices. This way, huge business losses can be curbed by cutting down losses arising from the spoilage of goods.
3. Preserving Perishable Goods
Manufacturers, wholesalers, retailers, exporters and various types of businesses, including transport and customs, require warehouses to store their business products safely. However, few require cold chains or storage to store their temperature-dependent products like fruits and veggies, meat, seafood, dairy, frozen foods like ice cream and ready-to-eat supplies, beverages, chemical products, drugs, etc. These cold chains contain temperature-sensitive environments to preserve perishable goods by preventing spoilage.
4. Warehouse Financing
Warehouse financing is popular among small businesses and manufacturers as this is a secured loan with flexible terms, unlike unsecured loans or short-term working capital financing. This refers to inventory financing, where the owner of goods can obtain a loan by keeping the warehouse goods as security or collateral for the loan. This type of financing is much cheaper, and the borrowers can gain various benefits through this function of warehouse management. Borrowers also take advantage of their raw materials and goods stored in warehouses to obtain loans from financial institutions that are otherwise kept idle. By providing the receipt or warehouse-keeper’s warrant issued by the warehouse management to the banks, the owner of goods or borrowers are at many advantages to gain leverage for their business. Some public warehouses also provide money advances to the depositors against their goods stored in the warehouse as security.
5. Stabilisation of Market Price
The other pivotal function of warehouse management includes stabilising market prices that directly impact the business revenue. Warehouses assist in controlling fierce price fluctuations by storing goods when the supply exceeds demand and releasing goods when the demand bounces back to its original or higher level. Warehouses play a key role in price stabilisation by matching supply with demand.
6. Enriched Services
The additional role of warehousing comes into the picture through its value-added services to businesses. These enriched services are not witnessed in conventional warehousing but are becoming popular in modern warehouses due to their various benefits. These services are only a few advantages of SCM optimisation and on-time delivery to customers. These value-addition services also take the burden off the businesses, enabling them to concentrate on core business activities resulting in lower costs.
These value-addition warehouse services include:
- Customisation, branding, grading, re-branding, labelling, stamping, gift packing, bundling, re-packing, barcode printing, invoice printing, quality checking, product disposal, insurance, etc.
- Processing involves making goods consumable through processing them, including processing coffee beans, polishing paddy, seasoning timber, fruit ripening, etc.
- Customisation services include bundles or customised products based on customer demand or market requirements. These services range from bundling, localising, kitting, SKU building,
7. Movement of Goods
One of the regular functions of warehouses includes ensuring the smooth movement of goods inside the storage area and guaranteeing uninterrupted orders. To enable this, the warehouse infrastructure and the software employed are updated frequently whenever needed. This also allows improved inventory control, enabling an accurate inventory management software system. The typical movement of goods inside the warehouse looks like the following:
- Inbound activity – Unloading of goods at the warehouse.
- Transfer – The transfer of goods from the inbound area to the storage area.
- Order picking – Choosing the ordered product and transferring it to the shipment area.
- Outbound activity – Inspecting and loading the ordered goods for shipping
8. Risk Minimisation
Businesses can rest assured as warehouses store their goods in safe custody. This ensures no goods are damaged, stolen, or burnt from the fire, minimising overall inventory loss. Generally, the goods stored in warehouses are insured. So, in case of damage to the goods, the insurance company provides total compensation to the owner of goods on account of loss arising from lost goods. Also, from the moment the goods enter the warehouse storage, the risk of loss or damage to the goods and liability of goods automatically transfers to the warehouse keeper. With this, the warehouse keeper ensures no accidents occur to the goods as they are now obligated to return them in their original condition. Manufacturers, wholesalers, and retailers all benefit from this warehouse management function. For example, suppose you are a wholesale distribution business dealing in temperature-sensitive and perishable supplies like food and medicine.
In that case, you can claim total compensation from the insurance company for damaged food or spoilt drugs preserved in cold chains. This way, various parties can minimise risk to their business by using the warehouse storage facility.
9. Additional Functions
The further functions of warehouses are the added leverage to any business that takes advantage of the warehousing facilities.
These additional functions of warehouse management include:
- Place utility – The easy movement of goods is enabled by the situation of warehouses. As most of the warehouses are located near roads, airports, waterways, or rail, this ensures the smooth movement of goods with fewer bottlenecks.
- Time utility – The extra role of warehousing includes creating time utility. Warehouses bridge the gap between the production and consumption of goods. In this way, warehouses store goods when they are in less demand and release them as and when the customers demand them.
- Rental income – Sometimes, warehouses serve as a good source of rental income for the owners. Here, the warehouse is rented out to entities or people who require storing their goods or for other purposes.
We explained the functions of a warehouse in a detailed manner that can level up your business processes and other benefits. By taking advantage of this blog, businesses can realise the importance of the functions of warehouses. If employed in the right way, warehousing can extensively contribute to the success of your business.
Witness the power of warehousing through properly employing and monitoring these functions.
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