What is Warehousing? How it is Useful for Global Traders?
05 April 2018
Warehouse can be defined as the commercial building or godown for storage of goods. It is used for storing the goods by traders that will be distributed later. It is mainly used for preventing losses and damages that may arise out of defective and unsecured. Traders usually store the cargo in a warehouse and get it released when it is required for manufacturing or sales. For developing countries, warehousing facilitates in the form of cold chains, container yards, public and private warehouses are essential. However, a warehouse provides nothing more than storage. Here, we are discussing all about warehouses including types, need for warehousing, functions, advantages, documents required and procedure.
Types of Warehousing
Warehousing varies as per the need of customers, nature of products, ownership, and services reduced by warehouses. Let’s discuss the various types of warehousing.
Public warehouses are popular in India but they resulted in poor working efficiency. They are provided by central and state government in order to ensure the storage of essential items needed in future. They are used as storage services facilities for use of exporters, importers, retailers and manufacturers.
The main advantages of public warehousing include facilitates market expansion, no capital investment, reduced risks and costs in operations and duty deferment. While the disadvantages are communication problem with public authorities, lack of specialized services and poor space planning.
In recent year, private warehousing is getting popular due to several economics offerings are given to the private players. These are usually owned and maintained by the same firm or the channel suppliers. They ensure sound communication system between the production centre and warehousing units.
Higher control in operations, greater flexibility, tax benefits and sustainable long term operations are the main advantages of this type of warehousing. While its disadvantages are higher cost of warehousing, higher warehousing risks, lower rate of return and start-up cost.
These types of warehouses are a hybrid of the best qualities from the public and private warehousing. Contract warehousing facilities are a win-win situation for both the owner and clients as they have contributed to each other for their business. It offers long term relationships, shared risks and lower cost than public & private warehouses. Their contractors are expanding the services to include other logistics activities such as transportation, inventory control, order processing, customer services and reverse logistics.
Warehouses are automated with the help of computer and robotics technology. Automated warehouses are more popular in developed countries having expensive labour costs. They can handle a large number of small orders with the fully automated facility where few people are needed to handle large storage activity. They transport goods in smaller quantities to several remote and smaller areas.
Climate Controlled Warehouse
The demand for climate controlled warehouses has been increased in recent years. Many consumable products are needed to be stored for a longer time to increase their shell life to coordinate the demand and supply of seasonal fruits and vegetables. These warehouses can handle storage of many types of products needed special handling conditions such as freezers for frozen products and humidity controlled environments for delicate products like flowers, drugs etc.
Warehouses also act as a distribution centre. In this, the product storage is considered temporary activity and they are built to maintain the specific needs for fast consuming items. In these distribution centres, goods (like milk, bread, vegetables, fruits, fish and meat products) are received in bulk at night and shipped in small crates to several places.
What is the need for warehousing?
Warehousing is needed for mass production to meet the global demand. Some of the factors responsible for mass production strategy are cost competitiveness, reduction in tariff barriers, economies of scale and scope, low labour cost, technological integration and trade agreements. Warehousing facilities play an important role in providing rapid supplies to various destinations as per the demand.
Some products are fresh and have a limited shell life. Like milk, eggs, butter, fruits and vegetables need to be warehoused in cold chains to extend their life. Gulf countries like Iraq, Kuwait, UAE etc. warehouses these supplies for weeks as such items cannot be locally produced in large quantities over there.
Some products like sugar are seasonal in their production cycle but are consumed throughout the year. However, some items like textiles and leather are produced all over the year but demand picks up very fast during seasons.
Large manufacturing facilities need the supply of key inputs to be assembled into finished products. It also needs these inputs to be available in continuous mass production. One of the main reasons to be warehoused the products, traders believes that the prices will be rise in the near future and their profit margins will also be increased.
What are the functions of warehousing?
Warehouse protect the cargo through safe storage and custody of goods by eliminating the scope of loss, damage and theft. Traders store the goods in advance and sell it in the international market as per the requirement as there is a gap between the time of production and the time of consumption. Warehousing helps both producers and customers by coordinating uneven demand and supply patterns. It is difficult to do smooth trade supply chain for international deliveries of products. It helps in equalization between demand and supply as the products that are not in demand can be withdrawn and stored at warehousing facilities.
It help undertake functions such as sorting, packing, labelling or giving finishing touch to cargo for overseas sales. The commodities stored in warehouses act as security for availing finance from banks because they are considered current assets in accounting norms and standards. Mostly banks recognize warehousing receipts as security for giving finance to exporters and importers in order to meet their working capital needs.
Conditions the products is its one of the main functions as certain products like rice, cheese, tobacco, wine and wood need conditioning before being exported regionally or globally. The commodities in such cases can be warehoused for limited period to ensure their conditioning for better quality, flavour and durability.
Advantages of Warehousing
Warehouse reduces distribution cost by unloading the goods in bulk. They enable the international trader to have price and consignment control in their trade transaction. It is beneficial for those merchants who have very limited space for goods storage.
Warehouse helps the traders to submit the payment of duties by keeping the goods in a bonded warehouse and to serve customers on a real time basis and at a lower cost. Warehousing receipts have been recognized as assets for availing working capital loans.
It stabilizes the prices of goods by effecting the movement of products and creating time & place utilities. Its facilities help in determining the choice of way of distribution for a marketer. It assists in maintaining continuous sales and avoids the possibilities of out of stock position.
Documents Required in Warehousing
Documentation is the soul of international logistics operations. Check the following documents that are used in international trade logistics for warehousing of goods.
· Warehouse warrants
· Dock warrant
· Dock receipt
· Delivery order
· Warehouse keeper’s certificate
Procedure of Warehousing for Importers
Let’s take a look at the procedure of warehousing for importers to the imported and exportable of cargo.
1. If importers do not wish their imported products cleared for use in exportable goods, they can store the goods under custom controls at bonded warehouses without the payment of import duty for one year. The goods can be stored for three years if the importer is registered as EOU, EHTP, BTP or STPI.
2. The owner is allowed to inspect the goods, separate the damaged goods, sorting the goods for preservation and showing the goods for sale. It is subject to approval and sanction from the officer on payment of the prescribed fees under Section 64 of the custom act 1962.
3. The importers can get their goods cleared for home consumption by filing an ex-bond bill of entry & after payment of applicable imported duties.
4. The imported warehoused goods are allowed to be re-export out of the country without the payment of duty after the filing of a shipping bill or bill of export. In developing countries like India, such products can only be exported after payment of import duties to its neighbouring countries.
Therefore, warehouses are beneficial for importers. They use it to sell the products later. If you are an importer and want to increase the customers of your product. The market research company like Export Genius provides import export data including the list of actual buyers and suppliers in your country.
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