Q.What purpose is served by wholesalers providing warehousing facilities?

Wholesalers take delivery of finished goods from the factory and keep them in their godowns or warehouses. This serves several purposes:

• It provides time utility — goods are held until retailers or consumers actually need them.
• It relieves the manufacturer of arranging storage and helps keep production going smoothly through the year.
• It relieves the retailer of holding large stocks, so they can run on a smaller working capital.
• While storing, the wholesaler also bears the risks of the goods (fall in prices, theft, spoilage, fire).

What warehousing by wholesalers means. Wholesalers take delivery of finished goods from the factory and keep them in their own godowns or warehouses until retailers or consumers demand them. This single service quietly does several important jobs in the chain of distribution.

Purposes served:

• Creates time utility: By keeping goods available at the time they are needed, wholesalers bridge the gap between the moment of production and the moment of demand. A product made today but wanted next month is stored safely and released when required — this is time utility.
• Facilitates continuity of production: Because wholesalers buy goods as and when they are produced and store them, manufacturers can keep production going smoothly throughout the year instead of stopping whenever immediate demand is low.
• Relieves the manufacturer of storage: Taking delivery straight from the factory reduces the manufacturer's burden of arranging warehouse space, letting the producer concentrate on production.
• Relieves the retailer of holding large stocks: Retailers can buy in small lots as needed rather than stocking huge quantities, so they operate with a smaller amount of working capital.
• Absorbs storage risk: While the goods sit in the wholesaler's warehouse, the wholesaler bears the risks of fall in prices, theft, pilferage, spoilage and fire — protecting both the manufacturer and the retailer to that extent.