Warehousing 2

Advantages of a public warehouses

i. A public warehouse serves a number of customers that deal with the same product.

It assembles the small orders from these customers and places one order for all of them.

This enables them to enjoy economies of large scale buying and delivery of goods to a warehouse.

ii. Goods stored in a public warehouse may be sold without their physical movement from the warehouse.

iii. Traders can rent space to store their goods.

iv. Traders do not have to construct their own warehouses/do not have to tie up capital in storage buildings and handling equipment.

v. Goods are insured against risks such as damage by fire and theft.

vi. A trader may get a short term loan from the warehousing firm by using the goods held as collateral security.

vii. Apart from the handling, sorting and documentation of goods additional services such as bottling, bagging and repairs of damaged goods can be offered by public warehouses.

viii. Sharing equipment and machinery enables the users to reduce handling costs.

ix. Inspection, re-packaging and labeling services provide users of public warehouses the expertise they themselves may not have.

Disadvantages of public warehouses

i. The hirer is denied the opportunity to physically handle the goods and is forced to compete for attention with other hirers of the warehouse.

If the hirer had his/her own warehouse, he/she would have absolute authority on the goods and therefore enjoy individual attention.

ii. The hirer may lose contact with his/her customers since they get goods from a rented warehouse, away from the hirers premises.

iii. The hirer may get poor services or miss space altogether during peak seasons due to stiff competition for the same facility.

iv. Documentation involving receipt and release of goods in a public warehouse is likely to be a long and complicated procedure due to the large number of clients involved.

v. Continued renting of space can even be more expensive than constructing one’s own warehouse in the long run.

vi. Public warehouses are sometimes situated far away from the hirer’s premises unlike private ones which are usually within the vicinity of the
owner’s premises.

vii. The operations of a general merchandise public warehouse are difficult to automatic because different kinds of goods need different methods and equipment to handle them.

iii) Bonded warehouses

These are public warehouses for keeping imported goods until customs duties have been paid against them. They are mainly located at the points through which goods enter a country

-Imported goods are kept in this type of warehouses if the owner has not paid customs duties. Such goods are said to be “goods under bond”or “goods in bond”.

-Bonded warehouses are so called because the owners of such warehouses give a ‘bond’ to the customs authorities i.e. a sum of money as guarantee that they will not release goods from the warehouses until customs duties have
been paid.

-The importer may withdraw the goods either in part or in full after the customs duties have been paid for the goods he/she intends to collect.

-If the goods are sold while still in a bonded warehouse, the new owner of the goods pays the duty before taking them out of the warehouse.

-If the goods re-exported to another country while still in a bonded warehouse, the importer does not have to pay the customs duties e.g an importer may.

import some goods and further prepare them for sale inside a bonded.

warehouse and can then re-export them without having paid the customs duties.

-When the importer pays the duties to the customs officials, a “release warrant” is issued. This is a document that enables the importer to have
his/her goods released from a bonded warehouse
-Bonded warehouses have resident customs officials who monitor the movement of goods in and out of a bonded warehouse.

Features of a bonded warehouse

i. Goods are bonded until customs duty is paid.

ii. Goods can be re-exported while in the warehouse.

iii. Storage charges are made on all goods stored in the warehouse,

iv. Goods can be sold while still under bond.

v. Goods can be inspected and prepared for sale i.e. they can be repacked,branded and blended while in the warehouse.

vi. Goods are released only on the production of a release warrant.

Advantages of bonded warehouse to the importer

• While in bond, goods can be prepared for sale.

• The owner can look for the market for the goods before paying the duty

• Some goods lose weight while in the warehouse so the duty paid becomes lower if based on weight.

• If goods are sold while still in the bonded warehouse, the duty passes to the buyer.

• The importer has more time to arrange for payment of customs duty.

• Security is provided for the goods, so the importer is relived of the task of providing security for his/her goods.

• Some goods improve in quality while in a warehouse for example, wine and tobacco.

Advantages of Bonded warehouse to the Government

i. The government gets revenue by levying duty on the goods

ii. The government is able to control the entry of harmful goods

iii. The government is able to verify the documents for goods in transit.

iv. The government is able to check on the quantity, quality and the.nature/type of goods imported.

v. The government is able to check on illegal goods entering the country.

Disadvantages of a bonded warehouse

i. The importer may eventually fail to pay customs duties. This forces the customs authorities to auction the bonded goods in order to recover the duties.

ii. When the importer withdraws goods from a bonded warehouse he/she ends up paying a higher duty if he/she had paid the duty at once.

iii. The importer incurs costs in hiring a bonded warehouse as opposed to if he/she had a private warehouse.

Free warehouses

These are warehouses in which tax-free goods are kept awaiting sale or collection by owners.

- Goods stored in these warehouses can be either locally produced, requiring no taxation or imported goods for which customs duties have already been paid.

NOTE: i) All warehouses apart from bonded warehouses are free warehouses since goods held in them are not subject to control by customs authorities.

This includes all private and public warehouses

ii) Locally produced goods are stored in free warehouses since no custom duties are paid for them.

Advantages of free warehouses

• Owners of goods stored need not to pay any taxes, thus the goods cannot be auctioned for failure to pay customs duties.

• It is cheaper to store goods in free warehouses as compared to bonded warehouses since there are no customs duties levied.

• Clearence of the goods from the warehouse is simple since a “release warrant” to prove payments of duties is necessary.

• These warehouses are located at places that are convenient to users.

Disadvantages of free warehouses

• The Government does not benefit since no customs duty is levied on the goods stored.

• Some unscrupulous traders might use them to store durable goods so as to evade tax.

• Checking and security of goods is more relaxed hence the possibility of storing illegal goods.

Current trends and emerging issues in warehousing

Warehousing technology is undergoing important changes in both building design and handling in storage equipment.

These may include;

i) Warehousing design

- In modern times, there is an increasing emphasis on high ceiling warehouses to permit storage of more goods and to make it
possible for the movement of fork lift trucks and stuck-cranes.

ii) Handling of goods

- Handling includes the steps involved in moving of goods to and from storage. There is widespread use of modern machines in most warehouses such as conveyer belts, tracks, forklifts and stuck cranes.

The use of automated stucker cranes which more by remote control in a fixed path on guide rails, is a new development in warehousing.

- Computerization has also greatly helped in monitoring the movement of stock in and out of storage. This has eased the handling, especially in loading and unloading of goods.

iii) Storage of goods

- Storage is the condition of the goods at rest in their assigned areas of the warehouse.

Most warehouses are currently using storage racks that permit replacement or retrieval of goods without disturbing neighbouring goods.


iii) Environmental pollution

- Goods that expired or spoilt while in the warehouse are sometimes discarded in a manner or in areas that may cause pollution to the environment e.g. expired chemicals are sometimes thrown into rivers and oceans thereby endangering the marine life.


- Other times they are burned causing air pollution with toxic gases. Some goods when thrown on land are dangerous to human life.

- To avoid the effects of improper disposal of expired or spoilt goods the warehouse owners should come up with methods that are environmentally friendly such as recycling of these goods.

They should also be socially responsible for whatever goes out from their warehouses