A Business Tip on Choosing the Right Storing Facility

Storing is the marketing function of holding goods. It provides time utility. Storing is necessary when production of goods doesn't match consumption. This is common with mass production. Nippon Steel, for example, might produce thousands of steel bars of one size before changing the machines to produce another size. Changing the production line can be costly and time-consuming. It's often cheaper to produce large quantities of one size - and store the unsold quantity - than to have shorter production runs. Thus, storing goods allows the producer to achieve economics of scale in production.

New cars can be stored outside on the dealer's lot. Fuel oil can be stored in a specially designed tank. Coal and other raw materials can be stored in open pits. But most products must be stored inside protective buildings. Often, firms can choose between two of the more common types of specialized storing facilities: private warehouses and public warehouses. The right choice may reduce costs - and serve customers better.

Private warehouses:

These are storing facilities owned or leased by companies for their own use. Most manufacturers, wholesalers, and retailers have some storing facilities either in their main buildings or in a warehouse district. A sales manager often is responsible for managing a manufacturer's finished-goods warehouse - especially if sales branches aren't near the factory. In retailing, storing is so closely tied to selling that the buyers may control this function.

Firms use private warehouses when a large volume of goods must be stored regularly. Private warehouses can be expensive, however. If the need changes, the extra space may be hard - or impossible - to rent to others.

Public warehouses:

These are independent storing facilities. They can provide all the services that a company's own warehouse can provide. A company might choose a public warehouse if it doesn't have a regular need for space. For example, Tonka Toys uses public warehouses because its business is seasonal. Tonka pays for the space only when it is used. Public warehouses are also useful for manufacturers who must maintain stocks in many locations - including foreign countries.

In most countries, public warehouses are located in all major metropolitan areas and many smaller cities. Many rural towns also have public warehouses for locally produced agricultural commodities.

Keep in mind that storing helps keep prices steady. Some products - such as agricultural commodities - can only be produced seasonally although they are in demand year-round. If crops could not be stored when they mature, all of the crop would be thrown onto the market - and prices might drop sharply. Consumers might benefit temporarily from this surplus. But later in the year - when supplies were scarce and prices high - they would suffer. Storing thus helps stabilize prices during the consumption period - although prices usually do rise slightly over time to cover storing costs.

Some buyers purchase in large quantities to get quantity discounts from the producer or transporter. Then the extra goods must be stored until there is demand. And goods are sometimes stored as a hedge against future price rises, strikes, shipping interruptions, and other disruptions. [Read the Original Article]