What are the Importance of Storage?

The Importance of Storage.

Warehouse perform a number of functions. These are:

Creation of time utility: There are products which are produced continuously throughout the year while consumption is seasonal. Storage enables goods to be made available to buyers whenever they are in demand.

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Creation of place utility: Another function of storage is to make goods available to a buyer at his place of business when he needs them. It creates place utility by warehouses location, e.g., a retailer can obtain goods within a few hours or minutes by contacting the wholesaler’s storage.

Finance function: Storage helps to obtain or raise loans by providing collateral security of the goods stored.

Creation of form utility: Certain commodities improve in quality or desirability while in storage, e.g., curing of tobacco, liquor etc. Thus, storage creates form utility in certain goods.

Stabilizing prices: Another functions of storage is to stabilize price by making the goods available in the market whenever there is demand.

Regular production: Storage performs the function of smoothing out irregularities in production, in the present age of competition, every manufacturer tries to produce in anticipation of demand so as to provide free supply in the market well in time.

Ability to Face Natural Calamities: Storage enables the society to face natural calamities such as floods, famine, drought, etc. In such emergencies, commodities can be made available from the storage.

Reduction of Risk: Storage reduces the risk of owner of goods as the owner of goods can store merchandise with reputed warehouses which absorb a part of the risk.

Saving in Transportation Costs: Storage allows accumulation of stock to be transported in bulk quantities so as to reduce the transportation costs.

Economies of large-scale: Storage enables a concern to achieve the economies of large-scale production, large scale buying and selling, etc. as the goods may be kept in stores.