Warehousing plays an important part in both home and international trade. As a result, different types of warehousing have been developed to make trade flow as smoothly as possible. Each warehouse serves the specific needs of primary producers, manufactures, wholesalers, retailers, importers and exporters.
PRIMARY PRODUCER’S WAREHOUSES
Most raw materials, e.g. coal, iron, ore, stone can be stored in the open air. It is not harmed by the weather. It is not likely to be stolen as its value lies in bulk quantities and it is long lasting.
Some primary producers, particularly farmers need specialised forms of storage.
Grains is stored in tall silos either on farms or at central depots. It needs to be protected from rotting and from being eaten by rats and mice. Pesticides are used to preserve the grain. Fruit is kept in cold storage to stop it from rotting. Farmers will also have barns to store seed, fertilisers, machinery and tools.
COLD STORAGE WAREHOUSES
These are temperature controlled warehouses which help to preserve perishable foods such as cheese for long periods. Produce such as apples may be kept cool in special compartments. Some products such as butter may be refrigerated to store it. Other products such as meat and fish may be frozen.
Cold storage warehouses are necessary to store produce which is produced at a particular times of the year – seasonal production so that it is available to meet the demand throughout the year.
Cold storage warehouses may be owned by specialist companies. They may be a part of a food processor’s factory complex. They may be a part of the warehousing facilities offered by general wholesalers.
The development of cold storage warehouses has enabled countries such as Australia, New Zealand, South Africa and Spain to develop their export businesses in dairy products, meat, fruit and vegetables. The Maldives, which is heavily dependent on exporting fish and fish products has also benefited from the development of cold storage warehouses as well as refrigerated containers on ships. Zambian, Zimbabwean and south African fruit and vegetables can be taken long distances to other markets in Botswana, Mozambique and Namibia using refrigerated trucks. Much produce comes from Spain to other European countries in large trucks equipped with refrigeration. General wholesalers and cash and carry warehouses will be able to extend the range of products they offer for sale by having a freezer section and refrigerated units. They can store ice-cream, meat, fish, cakes and ready-made meals.
MANUFACTURES’ AND RETAILERS WAREHOUSES
A manufacturer’s warehouse will be used to store raw materials, components and finished goods awaiting sale or transport. A manufacturer’s warehouse is likely to be on the same site as the factory with facilities for handling large quantities of goods. It provides a reservoir of raw materials to enable production to go on without interruption. The warehouse enables the manufacturer to produce to produce ahead of demand. It enables the manufacturer to store the goods for his factory shop. If the manufacturer serves all parts of the country, regional warehouses may be set up to serve particular areas.
Some manufacturers, particularly car makers such as Honda and Ford, import components from other parts of the world. They need to store these components until they are ready to use them.
Retailers may have warehouses, e.g. regional distribution centres. They are more likely to have store rooms attached to, or at the back of the shop premises. Retailers will not want to have large storage areas because they are likely to situated in areas where land prices are high and rents are expensive. Many retailers will not want to store too many goods because they will have too much working capital tied up in stock making for possible cash flow problems. They will rely either on manufacturers or on wholesalers to keep them supplied.
REGIONAL DISTRIBUTION CENTRES
Regional distribution centres are used by large-scale retailers such as supermarkets and multiple chain stores in many parts of the world to supply the branches of their business.
Examples of large-scale retailers using RDCs are;
- OK Bazaars (Southern Africa)
- PEP Stores (Southern Africa)
- Tesco (UK)
- Wal-Mart (USA and elsewhere)
- Cold storage (Singapore)
- Coles Supermarkets (Australia)
Regional distribution centres are very large warehouses situated usually at busy road junctions often where major highways meet. These RDCs provide easy access for the manufacturers who supply them. They are also as close as possible to the branches they supply. Owning a RDC reduces costs. The business usually own its own transport so saving transport costs. It also saves renting someone else’s warehouse. It ensures a constant supply to its branches.
CASH AND CARRY WAREHOUSES
Cash and carry warehouses have been operating for many years serving retailers within their local areas. Cash and carry warehouses offer self-service wholesaling. They are wholesale supermarkets. No credit is given to buyers. There are no deliveries of goods to buyers. There is no help with loading, no sales representatives and no invoicing. Few staff are employed in the warehouse because customers serve themselves. By reducing these expenses, the wholesaler is able to reduce prices so that the small-scale retailer is able to compete with supermarkets, hypermarkets and multiple chain stores.
The retailer can make as many visits to as he or she likes so the retailer is in fact using the cash and carry warehouse as the retailer’s warehouse for storage. The retailer is also offered other wholesaling functions in the cash and carry warehouse – breaking bulk, preparing goods for sale, display and special offers.
Cash and carry warehouse sell a wide variety of goods. Many of their products are food and drinks but they may also sell textiles, clothing, pet supplies, gardening supplies, hardware and general household goods. Most of the products are ranges that sell quickly. There is minimal display with goods stacked in small boxes or packs on the floor or on the shelves.
Cash and carry warehouses usually have long opening hours to help their customers – weekends, early morning, late into the evening. They usually have restricted access – people are admitted on production of a membership or identity card.
ADVANTAGES OF A CASH AND CARRY WAREHOUSE TO THE WHOLESALER
- More trade from more small-scale retailers.
- Can attract other businesses as customers such as restaurants, canteens and caterers.
- May also sell to other consumers who qualify for membership cards.
- No bad debts from buyers as they pay cash which helps the wholesaler to pay when purchasing from manufacturers.
DISADVANTAGES OF A CASH AND CARRY WAREHOUSE TO THE WHOLESALER
- Long working hours.
- Capital cost of checkouts and other equipment.
- Often large amounts of cash on the premises – danger of theft.
ADVANTAGES OF BUYING FROM A CASH AND CARRY WAREHOUSE TO THE SMALL-SCALE RETAILER
- Prices are cheaper than buying from a general wholesaler because the cash and carry warehouse’s expenses are lower.
- The retailer has immediate access to the warehouse at his or her convenience and does not have to wait for the deliveries.
- The retailer can obtain goods to answer sudden demand, e.g. for ice-cream.
- The retailer does not waste time on administrative work relating to placing orders, checking deliveries and settling monthly accounts.
- The warehouse is open at times convenient to the retailer.
DISADVANTAGES OF BUYING FROM A CASH AND CARRY WAREHOUSE TO THE SMALL-SCALE RETAILER
- No delivery so the retailer needs transport for collecting the goods that adds to the retailer’s costs.
- May not be convenient to visit the cash and carry warehouse when the retailer is short of stock. Shortages imply increased demand, meaning more customers. The retailer will find it difficult to leave the shop in order to restock.
- No credit available so the retailer must have the funds to be able to pay immediately for the goods purchased.
Bonded warehouses may be situated anywhere but they are found mainly at ports and airports or at border crossings. They are used for storing the dutiable goods on which duty has not yet been paid.
Bonded warehouses are usually privately owned. Their owners give a bond to the customs authorities that goods will not be removed until the necessary duties are paid. Customs officials supervise them. They prevent importers evading customs duties and disobeying import regulations.
Goods taken into bond include tea and coffee, wines and spirits, perfumes, electronic goods, televisions and cigarettes and tobacco. While in bond, goods can be processed, e.g. graded, blended, bottled, packaged but not manufactured.
Once the goods are in the bonded warehouse they cannot be removed until duty has been paid. When the duty is paid, a customs warrant is completed certified by the warehouse keeper and presented to customs officials so that goods can be released.
Goods may also be moved from one bonded warehouse to another bonded warehouse. An importer may have goods in bond Capetown in South Africa. He may transfer them to a bond warehouse in Johannesburg if he realises that the demand for his goods is greater in Johannesburg than in Capetown.
Bonded warehouses are used in a variety of circumstances. They will be used by importers of dutiable goods on which duty has not been paid. The importer may wish to postpone payment of duty. He may be looking for buyers. He may remove a sample of the goods, pay duty on the sample, in order to show it to potential buyers. He may sell the goods in bond and it will be the buyer who pays the duty. This enables the importer to economise on working capital because he does not have money tied up in import duty paid on unsold goods. If an importer has imported a very large of goods, the goods can be withdrawn in separate groups. This again helps to spread the payment of duty.
Bonded warehouses may be used by people who are involved in the re-export trade, the entrepot trade. They import the goods, may make them more saleable in the bonded warehouse and then export them again. By storing them in the bonded warehouse, the importer does not have to pay duty. This is particularly important in the tea trade. Teas may be imported from Sri Lanka and India, blended in London, packaged and exported to Canada.
Bonded warehouses located in cities and towns are important to producers of dutiable goods such as beer which are brewed for sale in the home market. While in the bonded warehouse, the brewer will not have to pay any duty. Only when the beer is used to be used will the duty be payable.
Scotch whisky is a major export for Scotland. It is subject to duty if it is consumed in the UK. If it is exported, no duty has to be paid. A bonded warehouse is important to the distiller of Scotch whisky because it can be left to mature without any payment of duty and then sold for export.
OTHER KINDS OF WAREHOUSES
TRANSPORT COMPANIES’ WAREHOUSES
Large transport companies and forwarding agents such as DHL and Swift have large warehouse at their depots. Goods in transit may be stored their especially if they have just been imported and are awaiting transport to customers within the country.
Some transport companies, particularly those who operate removal businesses, can store furniture and household effects for their customers.
Transport companies often move containers. In a sense, these are also warehouses. Goods are stored in them while awaiting delivery or export. This saves on the use of a warehouse building.
PUBLIC OR GOVRNMENT WAREHOUSES
These are used for storing imported goods which have been illegally brought into a country. The goods are impounded to ensure that customs duties are paid and import regulations are followed. If an importer fails to comply, the goods are sold off by the governments officials.
General warehouses provided by Port Authorities and Airport Authorities
Goods awaiting export or imported goods awaiting transport, may be stored in these warehouses. Some of the warehouses provided by ports and airport authorities will be bonded warehouses as mentioned above.