Warehousing and Storage (3)

Risk Reduction

The warehouse operator bears the responsibility for ensuring that the warehoused goods are stored, forwarded, and returned in the state in which they were received. Warehouse operatives may return goods that are obviously faulty or damaged to the supplier, so can act as a quality control point in the supply chain. This mitigates against the risk of damaged goods reaching the customer.

Third party warehouses shoulder most risk. If the goods they store on behalf of a customer are damaged or disappear, then the warehouse operating company pays for the replacements. To avoid this, warehousing companies may utilise sophisticated inventory monitory and security measures. Companies who use such warehousing service providers may achieve higher levels of visibility into their supply chain/inventory than they would otherwise have. This will reduce their risk of stockout and might enable them to price/discount their goods strategically. They also bear none of the financial obligations and risks that accompany owning or renting and operating their own warehouse. Companies using professional warehousing services will usually find better insurance rates as a result of contracting with reputable, sophisticated providers. This too lessens general business risk and allows companies to concentrate on their core competencies, safe in the knowledge that their inventory management is being handled by a specialist.

Financial

Whenever a manufacturer uses a warehouse for the storage of their goods, they will be issued a detailed receipt by the warehouse operator. The manufacturer can use the receipt as proof of ownership and imminent capital. The receipt – since it reports an inventory of goods awaiting sale – can be used as collateral or security on a loan or business credit. Should the manufacturer fail to make repayments in accordance with the conditions of the loan’s issuance, the lender can take possession of the manufacturer’s warehoused goods in lieu of payment. Thus, the receipt for the warehoused inventory can improve the manufacturer’s finances.