Functions of Warehousing

A modern warehouse does far more than simply provide four walls to hold goods — it performs several distinct functions that add real value to the goods stored:

• Storage. The primary function — providing safe, physical space to hold goods from the time of production/purchase until they are required, protecting them from theft, damage and the weather.
• Price stabilisation. By holding surplus stock off the market during a glut (when supply is high and prices would otherwise crash) and releasing it later when supply tightens, warehousing helps even out excessive price fluctuations across the year, benefiting both producers and consumers.
• Risk-bearing. Once goods are placed in a warehouse, the warehouse-keeper takes on the risk of loss or damage to the goods while in their custody (subject to the terms of the storage agreement), relieving the owner of that risk during the storage period.
• Financing, through the warehouse receipt. A warehouse issues a warehouse receipt (or warehouse warrant) acknowledging that specified goods of a stated quantity and quality are held in its custody. This receipt is a valuable document of title — the depositor can pledge it with a bank to raise a loan against the value of the stored goods, without having to physically move or sell them, giving traders and farmers access to working capital while their goods are safely warehoused.
• Grading and packing. Many warehouses grade, sort, blend and repack goods (especially agricultural produce) into standard, more easily saleable lots before they are dispatched further, adding value beyond mere storage. …