Meaning of storage and warehousing. Explain the need for storage.
Storage is an important function of any business and it is an inseparable element of trade. It involves keeping a quantity of goods for use when required. The proper and effective arrangement of retaining the goods in a condition free from risks or spoilage so that these are available at the time of need to the consumers. The stocking or holding of stock is done to equalize demand and supply. Storage bridges the time gap between production and consumption. Thus holding stock between the time of production and final consumption is termed as storage. Storage provides a depth to the market by preserving goods.
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Storage of goods is facilitated by a network of warehouse specially built for this purpose. It renders a great deal of services to the producers and middlemen because warehousing is concerned with the assumption of risks and responsibility for storage of goods. A warehouse denotes an establishment for storage and accumulation of goods. Thus a warehouse is an arrangement by which goods are stored when they are not immediately needed and are kept in such a manner that they are protected from deterioration.
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Storage plays vital role because it creates both time and place utility for the products.
It is helpful in stabilizing prices and performs finance functions by providing finance.
Need for Storage
The need for storage arises because of the time gap between production of goods and their final consumption. The necessity of storage can be attributed to the following factors:
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i. Now-a-days, production is carried on large scale and it is round-about one. Large scale production can be carried on smoothly when raw-materials are stored in large quantities to ensure steady and continuous production.
ii. Production is carried on in anticipation of demand and not for immediate sale. This necessitate storage of goods for a future date.
iii. Certain goods are produced throughout the year but their demand is seasonal. Such goods are required to be stored so that they can be available in the state of more demand.
iv. Certain commodities are demanded throughout the year but their production is seasonal. Such goods are required to be stored so that they can be made available throughout the year.
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v. Some goods are to be stored to get a better taste and flavor. Rice and pickles are not consumed immediately and their taste is increased on storage for a long period.
vi. Storage of goods is made with a speculative intention of earning more profit.
vii. It facilitated dispersion of goods from production centre to the market.