UNIT 4 WAREHOUSING

Structure
4.0 Objectives
4.1 Introduction
,
4.2 Concept of Warehousing
4.3 Elements of Warehousing
4.4 Functions of Warehousing
4.5 Warehousing as an Instrument of Economic Development
4.6 Warehousing Alternatives
.4.7 Advantages of a Public Warehouse
4.8 Cost Structure
4.9 Warehousing Corporations in India
4.9.1 Objectives and Functions of Warehousing Corporations
4.9.2 Functions of Central Warehousing Corporation
' 4.9.3 Warehousing Network in India

4.10 Diversified Warehousing Activities of Central Warehousing Corporation

4.10.1 Custom Bonded Warehouses
4.10 2 Excise Bonded Warehouses'
4.10.3 Leased Warehouses
4.10.4 Operation of CFSs
4.10.5 Transit Warehouses
4.10.6 Air Cargo Complexes
4.10.7 Specialised Storage Arrangements
4.11 Warehousing in ~lobalisatidn~ r a
4.12 LetUsSumUp
4.13 Key Words
4.14 Answers to Check Your Progress
4.15 Terminal Questions

4.0 OBJECTIVES
After studying this unit, you should be able to :
explain the concept of warehousing
identlfy the elements of warehousing
describe the functions and importanceof warehousing
describe the system of public warehousing in India
spell out the diversified warehousing activities of Central Warehousing Corporation

4.1 INTRODUCTION
Warehousing has been one of the most important component in the field of agricultural or
industrial activity as a whole. It forms an integral part in the orderly marketing chain as an
important component of the logistics of distribution. For a developing economy, a
warehousing system which provides adequate and safe storage of products on scientific
lilies is vital.

50
 Warehousing was initially linked to the age of agriculture. The descriptions in genesis of the use
of grenaries to store food and thus prevent famine in Egypt emphasises the social benefit and
commercial utility of warehousing. As we entered the industrial era, warehousing was
recognised as a useful resevoir for mass production. When actual demand was unknown or
uncertain it was prudent for a manufacturer to build a stock of f i ~ s h e dgoods so that the
customer could get it without delay, When capital was cheap and the concept of Just In Time
(JIT) was unknown, the philosophy of market* was to ensure that no sale was lost for want of
inventory.
The industrial era was accompanied by major changes in transport and international trade.
Warehousitlg has a "Ham and Eggs" relationship with transport and the warehouse design is
influenced by the predominant transportation available. Store houses constructed at piers served
as a consolidation and distribution point for goods moving by ship, and warehouses constructed
at rail centres would act as the Terminal Warehouses. Similarly, the rail road industry develops
storage in transit which allows the user to move goods from origin to destination. In this unit,
you will learn about the concept and functions of warehousing, its various alternatives and the
warehousing network in India including custom bonded warehouses, operation of container
freight stations, transit warehouses and air complexes.

4.2 CONCEPT OF WAREHOUSING

T.he words 'warehouse' and 'godown' are synonymous. The termslike warehouse, depositor,
warehouseman, etc. have been duly defined in the relevant State Warehousing Acts under which
public warehouses in India are licensed and regulated for operation for specific commodities.
The definitions of these terms as given in the Bombay Warehousing Act, 1959, are as follows :
Warehouse means any building structure or other protected enclosure which is used or may be
used for the purpose of storing goods on behalf of the depositors but does not include cloak
rooms attached to hotels, railway stations, the premises of other public carriers and the like.
Depositor means a person who deposits goods with a warehouseman for storing in his
warehouse and includes any person who lawfully holds the receipt issued by the warehouseman
in respect of the goods and derives title too by endorsement or transfer from the depositor or his
lawful transferee.
Warehouseman means a person who has obtained a licence under this Act for the purpose of
canying out his business of warehousing.
The rights and obligations of warehouseman are outlined in the respective State Warehousing
Acts and the rules framed thereunder. The warehouseman is required to take care of the goods
deposited in his custody as a inan of ordinary prudence would take care of his own goods. He
acts as a bailee and accepts goods for safe keeping. He charges from the bailer certain
consideration called storage charges. He acquires lien on the goods deposited with him for
recovery of his dues.
5

4.3 ELEMENTS OF WAREH'OUSING

The major elements ofwareh6using are : (1) space, (2) equipment, and (3) people. The
warehouse space is a commodity, and like any other commodity, its price can show great
volatility with changes in demand. At times, this commodity can become so scarce that the
acquisition of additional space seems nearly impossible. Scarcity or high cost of space can be
alleviated through changes in use or specifications of the other two warehousing components -
people and equipment. However, where space is relatively cheap, people and equipment are
used in a totally different fashion.
Equipment consists of material handling devices, racks, *ol*6fir coi~eyors,bag &ckers,'and ,

all of the hardware and software used to make warehouse functional. While some equipment is
specially designed to save space, some equipment is used for preservation treatments like
sprayers, fullligation covers etc. in case of perishable comnlodities. The useful life of most
intcrnatlonal warehousing equipment is substantially shorter than the useful life of the warehouse building.
Markctlng Loglrtlcr While warehousing equipment depreciate in value, the warehouse building may appreciate in
Syntcm
value over time.
The most critical component in warehousing is People. The personal performance of
warehouse workers often makes the difference between high and low quality warehousing. By
comparison, the variations in quality of building and equipment are typically small.
Thus,a judicious employment of the three components, namely, space, equipment and people
normally can affect the performance and the overall cost of the warehousing facility.
Efficiency in warehousing, however, starts with planning for the requirement and matching
resources against the actual need.

4.4 FUNCTIONS OF WAREHOUSING

Warehousing bridges the gap between the economic methods of production and the needs of
the consumer. The task is to provide what is required, when it is required, in the conditions in
which it is required, and to do all these things economically. In essence, warehousing provides
time and place utility for any product through efficient management of space and time.
To evaluate the role of warehousing in business one needs to appreciate the ways in which
warehousing functions and adds value to products. The common functions of warehousing are:
1 Stockpiling
2 ProductMixing
3 Consolidation
4 Distribution
Stockpiling :It refers to the use of the warehouse as a reservoir to handle production
overflows. Such reservoirs are needed under two situations (i) seasonal production and level
demand and (ii) level production and seasonal demand. For example, the canner of tomato
products builds a warehouse inventory at harvest time, while customer demand for the product
is fairly level throughout the year. Against this, in case of the toy manufacturer, the highest
demand comes at certain seasons or holidays, but the manufacturer may need to stockpile in
order to accommodate seasonal demand. In either case, the warehouse is the reservoir used to
balance supply and demand.
Product Mixing : A manufacturer who has product-oriented factories in different locations
also has the opportunityto use a product mixing warehouse to combine the items in the entire
line. For example, one food manufacturer has factories in several communities, with each
factory to order full carloads or truckloads containing a mixture of the entire line, warehousing
points are selected at locations that permit economical mixing of the product.
Consolidation : It refers to the use of warehousing for gathering goods that are to be shipped
to final destination. Warehousing costs are justified by savings in outbound shipping costs
achieved through volume loads. In one case, a fast-food company uses consolidation
warehouses to serve clusters of retail stores, thereby reducing costs and frequency of small
shipments to the stores. Suppliers of the food company are instructed to place volume loads of
their products in these consolidation centers. This enables the fast-food company to cut its
transportation costs by moving its supplies closer to its food serving outlets. At the same time,
the food retailer reduces inventory costs by arranging for its suppliers to retain title to these
inventories until they are shipped from the consolidation center.
Distribution :It is the reverse of consolidation. Like consolidation, it is justified primarily by
the freight savings achieved in higher volume shipments. Distribution involves the push of
finished products by the manufacturer to the market, whereas consolidation involves the pull of
supplies by the customer. Both consolidation and distribution provide service improvements
by positioning merchandise at a convenient location. Both involve cost tradeoffs that balance
warehousing expenses against transportation savings. Both provide improved time and place
utility for inventories.
4.5 WAREHOUSING AS AN INSTRUMENT OF
ECONOMIC DEVELOPMENT
No economic sector is free froin storage. In the primary sector it is necessary at the farm and
natural resource level, in thc secondary sector it is essential at the processing and
max~uf'acturitiglevel, and in the tertiary sector it is inevitable for the domestic, import and

One of the indicators of economic development of a country is the growth of its storage
facilities . The necessity for storage arises fundamentally out of lack of adjustment between
the time and place of production of goods and time and place of their consumption. Storage is
also required for inter-temporal and inter-spatial adjustments. The need for storage also arises
from division of labour.

Any programme or project of agricultural and industrial development should have component
of storagefwarehousing . Those who have ignored this important aspect of physical
distribution at the stage of initial planning have learnt it the hard way, It is now recognised that
th~.;efacilities require careful planning.

Warehousing is an important link in the chain of marketing. Warehouses add to the time and
place value of goods. These also smoothen out fluctuations in supply and demand which are
often influenced by natural events and national polices. With the gradual change in the pattern
of production, intra and interstate trading activities, modes of transport and the systems of
marketing, different types of warehouses have emerged to suit the requirementsof trade.
Wherever there is trade and commerce, there is need for warehousing s e ~ c e s Warehouses
.
provide flexibility and versatility in distribution and movement of goods, space cost and labour
cost economy and accurate budgeting of distribution costs.

Check Your Progress A

1 Define 'warehouse'.
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i ...............................
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2 Which is tlz most critical component in warehousing? How doe8 it atfkct tho quality of
warel~ousing?
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3 State the obligations of a warehouseman.

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53
lnternatlonal 4 State whether the following statements are True or False.
Market lag Loglrtlcm
Syrtem
i) Warehousing has 'Ham and Eggs' relationship with transport.

ii) Warehousing creates gaps between economic methods of production and the
needs of consumer.

iii) Wardouse and godown serve two different pulposes.

iv) High cost of space can be alleviated through changes in use of specifications of
the other two warehousing components.

v) Both cansolidation and distribution involve cast trade off that balance
warehousing expenses against transport swings.

vi) Storage has no relevance to inter-temporal and inter-spatial adjustments.

4.6 WAREHOUSING ALTERNATIVES

Depending upon the estent of user control, the following three types of warehousing
alternativesare available.

1 Private Warehouse

2 Public Warehouse

3 Contract or Dedicated Warehouse.

The private warehouse is operated by the user and offers the advantage of total
cantrol. Where storagevolume is large and handling volume is constant, the private
warehouse is often the most economical. However, the private warehouse carries the
burden of fixed cast and total exposure in the event of labour disruption. Warehousing
clearly has its own required management skills, and the private warehouse operator
must attract and maintain such skills in his management team.
The public warehouse is an independent unit which offers warehousing sewices to
more than one user. The public operator does not own the merchandise that is stored
and. usually, the wvarehouse company is independent of the firms owning the inventory.
By sctving a number of customers, the warehouseman is able to balance the variations
of inventory or of handling the workload, and, therefore, develops relatively level
d ~ ~ a mfor
d sstoragc space and personnel. As an independent contractor, the public
warehouseman is immune to involvement in the labour disputes of any clients.
A public warehouse is required to obtain a licence from the Licensing Authority. The
Licensing Authority satisfies itself about the storageworthinessof the godown before
granting a licence. The warehouseman is also required to obtain weigher, grader and
sampler licences. A licensed warehouse can issue a receipt for the goods deposited in
the warehouse in the prescribed form called a Warehouse Receipt. This receipt may be
marked as Negotiable or Non-negotiable. If the Warehousc Receipt is Negotiable, tlic
Depasitor can draw advance from any bank against the pledge of the VJarehouse
Receipt or sell the goods without physical handling.
The contract or dedicated warehousing is a combination of public and private
warehousing services. Linllke the public warchousc which offers a month to month
agreement. the contract warc'lousc usually has a long-term arrangement This contract
may be used to govern supplementalwarehousing services such as packaging, assembly.
or other estraordina~activities. In such cases. the contract provides an element of
stability in procuring services.

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- W.rtka~rr~

-4.7 ADVANTAGES OF A PUBLIC WAREHOUSE

The advantage of using a public warehouse are:
1 Storage facilities can be availed of at desired locations as and when required, and at a
known cost.

2 The goods can be despatched to the warehouses with the warehouseman as the consignee
for tlie clearance of the goods at the railhead and transportation to the warehouse.
3 The goods can be delivered or despatched to the nominees/allotees of the depositor.
4 Entire inventory lnanagement is done by the warehouseman and the depositor is
completely free from these costs and botherations.
5 The goods are handled properly and preserved scientifically by the trained technical
personnel without any damage or deterioration during handling and storage.
6 The goods can also be insured against all risks like fire, flood ,thefts, etc. at nominal
cost and the depositor is indemnified against such losses.
7 The goods can be kept in tlie public warehouse till the market price is found remunerative
enough for the d~sposalof goods and, thus. distress sale can be avoided.

8 Advance can be obtaincd against the pledge of the warehouse receipt from banks.

9 Uncertaintics in the availability of raw materials or finished pducts due to supply

dislocation are avoided.

10 Public Warehouse helps in the physical distribution of goods like foodgrains, fertilizers,
public distribution items, consumer goods, etc. and, therefore, helps in marketing of
products

11 Public warehouse cdn also be used for grading. standardisationand packing of products,
if tlie arrangements are on dedicated and long term usage basis.

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-41.8 COST STRUCTURE
\.Vareliousing constitutes a significant portion of logistics cost which is the aggregate of the
fi~llow~ng :
1 Warehouse operating costs.
2 warcl~ouscinventoc costs,
3 To and fro transport costs. and
4 Handling costs.
All warehousing costs are a nlisture of fixed and t ariable costs. The fixed costs in a
vvlarehsouing operation account for more than half of the overall costs in that operation. To these
costs tlic thrd Farp warehousing operator mus: add a piofit However. in deciding the
~rarch~us!ng/siorage charges. thc public xvarcbouscrnan must decidc what level of unit
t hrcughpilt n 111 be used to establish the rate.

lVarcl:c..~~~rip
:s a capital intcnsil c ~~-idcsfn
!::?asrclatn c i i hrch r,l::~ of fixcd assets. Suitable1
rSca1 :and f2r ccn~tmctiono f xvarc!lcusc is oficn aoa inaiiabie. zna whcrcvcr it 1s available the
?pep- .-,?? . ?n addt!:rr. tbc ccst cCccns:ixct~c*r,1s alsc c ~ r r ; 113
~-,-,..,.,-d.-.,.

, i "- . I
t- r-
i ~ V. i,;; %; is:ug bu<lt~c\s vet to;-. 3:73 ZCSQ~~OI:~ C T . C-5~yep long.
\\.;;-,hi rfi...~;~ t- -',vq*;\ ~ ~ c T L / ?reeds
~ c . gokcrnnlent sri~poC 3t9bi!cW Z ~ C ~ O U IS
S encv~raged
J ~ ~ ~
)-- -)lq7tC G : ~ 7 l r + C c

55
InternatlonnI Check Your Progress B
Marketing Loglstlcs

1 Distinguish between a private warehouse and a public warehouse.

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2 "The rate of return from warehousing business is low and the gestation period is rather
long" Comment.
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3 Choose the most appropriate answer.

i) The private warehouse offers the advantage of
a) total control
b) low cost
c) privacy
ii) Dedicated warehousing offers
a) huge inventory facility
b) month to month arrangement
C) an element of stability
iii) Warehousing
a) is a capital intensive Industry
b) has high rate of return
c) does not need government support
iv) The fixed cost in warehousing operation account for
a) on0 third of the overall cost of operation
. b) nlorc than half of the overall cost of operation
c) insignificantportion of the overall cost of operation
v) Warehouse receipt can be
a) negotiable
b) not negotiable
c) either of the above as marked.

4.9 WAREHOUSING CORPORATIONS IN INDIA

The concept of public warehousing in India is of recent origin. The Agricultural Finance
Committee set up in 1945 had gone into the details of rural indebtedness and the high rate of
interest. It suggested some measures aimed at creating a negotiable paper on the strength of
which advances could be secured for the agriculture sector from the credit institutions. For
creation of such a paper, a storage agency which could ensure safe storage and return of
produce on demand was considered essential.
The Rural Credit Survey Committee set up by the Reserve Bank of India in early 1950 gave its
report in 1954. The Committee deeply studied the system of farming, pattern of crop
production and credit as well as other allied agricultural problems and recommended various
measures. One of these measures was to establish a warehousing system in the public sector.
The main reason outlined by the Rural Credit Survey Committee for investment in godown
construction was that the private capital was shy of investment in godown construction as this
was not considered remunerative enough. The Committee, therefore, recommended that the
Government should set up an organisationwhich could construct godowns for scientific
storage and promote warehousing activity on country wide scale and on commercial lines.

4.9.1 Objectives And Functions Of Warehousing Corporations

The recommendations of the Rural Credit Survey Committee paved the way for enactment of
Agriculturalproduce (Development and Warehousing) Corporations Act, 1956 (since repealed
and replaced by the Warehousing CorporationsAct, 1962) and setting up of Central and the
State Warehousing Corporations.The public warehousing in India envisages a three-tier
system. Under this scheme, centres of All India importance could be served by the Central
Warehousing Corporation, centres of secondary markets and at district levels could be served
by the State Warehousing Corporations, while the village and the community levels are to be
looked akter by the cooperatives.
The broad objectives of the warehousing corporations are as follows:
1 Creation of negotiable-paperto provide an instrument for expansion of credit through
commercial banks for the benefit of producers, dealers and others;
2 Adding to thc nation's real income by reducing wastage and losses in storage and by
promoting and developing warehousing and scientific storage facilities;
3 Providing assistance in orderly marketing by introduction of standard grade
specifications and the warehouse receipt;
4 Training ofpersonnel to manage and run modern warehouses; and
5 Providing assistance to Govt. and Govt. sponsored organisations in their scheme of
price support and price control.

4.9.2 Functions of Central Warehousing Corporation

The nlain functions of the Central Warehousiilg Corporation (CWC), as envisaged in the
Warehousing Corporations Act, 1962 are:
1. To acquire and build godowns and warehouses at such suitable places in India as it
deems fit.
2. To run warehouses for the storage of agricultural produce, seeds, manures, fertilizers,
agricultural'impIementsand notified commodities offered by individuals, cooperative
societies and other institutions.
3. To arrange facilities for the transport of agriculture produce, seeds, manures, fertilizers,
agricultural implements and notified commoditiesto and froin warehouses,
To subscribe to the share capital of State Warehousing Corporations.
To act as an agent of the Government for the purpose of purchase ,sale, storage and
distribution of agricultural produce, seeds, manures, fertilizers, agricultural implements
and notified commodities.
The Corporation may.,at the request of parties concerned, undertake disinfestation
service outside its warehouses in respect of agricultural produce or notified
commodities.
The Corporation may, at its own discretion, act as agent for the purpose of p~irchasc,
sale, storage anddistribution of agricultural prodilcc, seeds, manures, fertilizers,
agricultural implements and notified commodities on behalf of a conlpaiiy as defined in
the Companies Act, 1956, or a body corporate established by an Act of Parliament or a
State Legislature or a co-operative society.
To cany out such other functions as may be prescribed by the Government from time to
time.
I~ter~8ti0~8l 4.9.3 Warehousing Network In India
Marketing Logbticm
Symtem
Public Warehousing facilities in India are mainly provided by the Central Warehousing
Corporation(CWC) and its sixteensubsidiaiies, the State Warehousing Corporation(SWCs).
As at the beginning of 1998, public warehouses at 1,835 locations were being operated by the
CentralWarehousing Corporation and the State Warehousing Corporations. Of these 459
belonged to CWC and 1,376 to SWCs.
The CWC which started functio~ngin 1957 with 7 warehouses in hired godownswith 7,000
MT capacity had a phenomenal growth over the years. By the beginning of 1998, the CWC
is operating 459 warehouses throughout India with a capacity of over 7.22 million tomes.
The growth of warehousing capacity established by the CWC can be seen from the following
Table 4.1.
Table 4.1 : Growth Of Warehousing Capacity Of
Central Warehousing Corporation
Yesv No. of Warehouses Capacity (in lakh M'I9
4.10 DIVERSIFIED WAREHOUSING ACTIVITIES OF
CENTRAL WAREHOUSING CORPORATION
Although initially establishedfor storage of foodgrains, fertilizers and other notified
commodities, the Corporation lus diversified its activities in view of the developing
warel~ousingneeds in the country and has expanded its activities to the industrial warehousing
as well. To keep pace with the fast industrial growth and for facilitating export trade, the
Corporation has established suitablewarehousing facilities at port towns and other industrial
cities in the hinterland. These can be summarized as follows.

4.10. 1 Custom Bonded Warehouses

The Corporation has been operating custom bonded warehouses since 1975 under a licence
from the Custonls Deparlment wherein imported capital goods, componentsand raw materials
are stored on deferred payment of duty basis. The custom bonded warehouses are licenced
under Section 57 of the Custoins Act, 1962. The Corporation issues a 'Warrant for Goods when
goods are deposited in the bonded warehouses. The goods are released when duty is paid by
the depositor to the Customs Department and release instructions are issued by the Custom
Authorities. The Corporation has a network of 115 bonded warehouses with a capacity of 4.26
lakh toniles.

4.10.2 Excise Bonded Warehouses

The excise bonded warel~ousesare run by the Corporation by licence under the Central Excise
Rules, 1944. Esciseable commodities are allowed to be stored in excise bonded warehouses
without payment of excise duty which is paid as and when dutiable goods are removed from the
warehouses

4.10.3 Leased Warehouses

At places where storage accomniodation is not available in the warehouses of the Corporation,
suitable storageworthy godowns on reasonable rent, to meet the specific requirement of the
depositor, are hired on behalf of the depositor. The godown is then taken on lease by the
Corporation for running warehouse on management basis on mutually agreed terms and
conditions. In such cases, management charges are levied on area basis or as lumpsum amount.

4.10.4 Operation Of CFSs

The Corporation, with its network of warehouses spread over the length and breadth of the
country and with its long and varied experience in handling land storage of cargo, quickly
adapted to the situation and established the first CFS for stuffing and destuffing of IS0
Containers in June, 1982 by converting its bonded warehouse at Bhandup (Mumbai) as a CFS.
It obtained licence from Custom Authorities under Section 49 of the Customs Act, 1962 and,
thus, became the first licenced CFS operator outride the port area in'the country.
With the growth of containerisation over the decades, the Corporation has been coordinating its
efforts with the Indian Railways, Shipping interests, ShippersAssociations, Customs and
Finance Ministry, etc. and providing infrastructural support for the expodimport trade.
Presently, the Corporalion is operating CFSs at the following locations:
i) Blmndup (Bombay)
ii) Patparganj@elhi)
iii) Royapuram (Madras)
iv) Wrugambakkain (Madras)
V) Whavaram (Madras)
vi) J.N. Port (New Bombay)
 vii) Kalai~~boli
(New Bombay)
viii) Dronagiri Node (New Bombay)
ix) Kolkata
x) Pune
xi) Adalaj (ahmedabad)
xii) Sanathnagar(Hyderabad)
xiii) Ludhiana
At the CFSs of CWC, both LCL and FCL exportlimport cargoes are handled. They assist in
decongestion of the ports by facilitating quick transfer of import containers from the CTICY as
well as transfer of export containers to CTICY in time for shipment. At the CFSs, the custom
officials are housed and the banking and users convenience facilities are also provided. Thus,
the CFSs act as custom documentation centers as well as trade cenli:rs for the benefit of the
export/import agencies.

4.10.5 Tkansit Warehouses

The Corporation is also actively involved in the development and operation of transit
warel~ousesof appropriate capacity and of international standard in the Satellite Freight City
(SFC) being developed by the Government of India in the vicinity of Indira Gandhi
International Airpoft, New Delhi. The transit warehouse in the SFC will thus decongest the air
cargo tern~inal.Similarly, it is also contemplatingto establish transit warehouses at border
towns, viz., Petropol in W.B. (at Indo Bangladesh border) Moreh in Manipur (at Indo
Mynamar border) and at Raxaul in Bihar (at Indo Nepal border).

4.10.6 Air Cargo Complexes

In order to further meet the requirement of the trade and industry in handling of air freighted
cargo, the CWC has established air cargo complexes at Amritsar, Coinlbatore and Goa. The
air cargo complex at Amritsar mainly promotes exports from Punjab, Haryana, Jammu &
Kashmir and Himachal Pradesh for Afghanistan and Middle East countries.

4.10.7 Specialised Storage Arrangements

Certain con~moditiesl i ~ fruits
e and vegetables, dairy products, pharmaceuticals, seeds, etc.
require temperature cmuolled storage arrangements. If stored under normal atmospheric
conditions, these commoditiesdeteriorate and loose their commercial value. The Corporation
has, therefore, set up air conditioned warehouses as well as cold storages for storage of such
delicate/sensitive and perishable commodities. The Corporation's multi storeyed air
conditioned warehouse at Kolkata is mainly utilised for storage of drugs and pharmaceuticals,
dairy products, seeds, vegetables and flower seeds, shellac ( a forest produce), while in the air
conditioned warehouse at Chennai delicate commodities like, photofilm imported liquor, etc.
are stored. The Corporation is running cold storage at Hyderabad, Agartala and Mumbai for
storage of fruits like and other commodities such as marine products etc. are stored under
temperature controlled storage conditions. Establishment of a chain of cold storages at
important producinglprocessing centres such as Nasik, Pune, Bangalore and at some locations
in the east coast for marine products is under consideration.

Check Your Progress C

1 Outline the three-tier system of public warehousing in India.
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b ..............................................................................
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60
2 How does a custom bonded warehouse operate? ~vuehoah~

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3 Fill in the blanks.

i) The Agricultural Finance Committee pointed out the need for creation of a
negotiable paper on the strength of which advances can be secured from the
................................institutions.
ii) As at the beginning of 1998, the CWC was operating warehouses at
.......................locations and the State Warehousing Corporationsat
......................locations.
iii) Excisable commodities are allowed to be stored in excise bonded warehouses
......................payment of excise duty.
iv) CWC converted its bonded warehouse at ................as a CFS in June 1982.
V) The transit warehouse in the SFC ..................... the air cargo terminal.

4.11 WAREHOUSING IN GLOBALISATION ERA

Not long ago, most public warehouse keepers operated their business in one city, Gradually, the
larger ones became regional operators managing a number of facilities in several locations in
one state or a group of neighbouring states. A truly national third party warehousing supplier in
the private sector in India is yet to emerge.
With the rapid industrialisation and libenlisation of economy, most national barriers to trade
have been witlldrawn. More and more multinational companies are setting up their production
facility in India. Simultaneously, as Indian goods become increasingly competitive and of better
quality. export of Indian goods is catching up. While Indian companies/institutionslike Central
Warehousing Corporation and, Federation of Indian Export Organisationhave been called upon
to set up warehouses abroad, we may see the multinationalwarehousing organisationssetting up
high tech warehousing facilities in India. Japanese third party warehouse companies are already
operating in United States as well as the other countries in the western hemisphere.
As warehousing goes international, the Govt. of India has schemes wherein foreign direct
investment in building and operating warehousing infrastructuresis allowed. A modem
warehouse will emphasise first movement rather than efficient storage. Order pick lines will be
designed with an ergonomic layout, one that places the first moving items in those locations
where they can be picked up with the minimum effort or risk of personal injuty.

4.12 LET US SUM UP

Warehousing constitutes an integral part of the marketing chain and an important component of
the logistics of distribution. It has a 'Hams and Eggs' relationshipwith transport. The major
components of warehousing are : (i) space, (ii) equipment, and (iii) people. A judicious
employment of these three elements can affect the performance and the overall cost of the
warehousing facility. Efficiency in warehousing, however, starts with proper planning for the
requirement anci matching resources against the actual need.
International (ii) roduct mixing, (iii) consolidation, and (iv) distribution. A warehouse acts as a reservoir to
Mmrketlng ~ o g i s t l c s handle production overflows, provides the facility for product mixing to combine the items in
System
the entire line, and effect improvement in service by positioning merchandise at convenient
locations.
Based upon the extent of control, the warehouses can be divided into three categories:
(i) private warehouse, (ii) public warehouse, and (iii) contract warehouse. Of these, public
warehouse, which is independent of the firms owning inventory, is of special importance as it
serves a number of customers with better facilities and helps balancing the variations of
inventory over space and time and obtaining advances from the bank. It can also be used for
grading, standardization and packing of products.
Public warehousing is a capital intensive industry with low rate of return and long gestation
period. Hence, it needs government support. As a result of the recommendation of the Rural
Credit Survey Committee and with the passage of Warehousing Corporations Act of 1962,
Central Warehousing Corporation (CWC) and many State WarehousingCorporations have
been set up in India. The CWC has warehouses at 459 locations and the SWCs at 1376
locations. The Central Warehousing Corporation which was initially established for storage of
foodgrains, fertilizers and other notified commodities,has now diversified its activities in order
to keep pace with the rate of industrial growth and for facilitating the export trade. This
includes establishment of suitable warehousing facilities at port towns and other industrial cities
in the hinterland in the form of custom bonded warehouses, excise bonded warehouses, leased
warehouses, transit warehouses, air cargo complexes, and operating CFSs for handling expon-
import cargoes. In times to come, warehousing is likely to enter the globalisation era. While
CWC and Indian Export Organisations have been called upon to set up warehouses abroad, the
multinational warehousing organizations are planning to set up high-tech warehousing facilities
in India. The Government of India also has schemes wherein foreign direct investment in
building and operating warehousing infrastructure is duly allowed.

4.13 KEY WORDS

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CFS : Contain Freight Station an international trade receiving point which serves as a
satellite to inland container depot.
Custom Bonded Warehouse : A warehouse with a licence from Customs Department wherein
imported goods are stored on deferred payment of duty basis.
Dedicated Wi~rehousing:A combination ofprivate and public warehousing with a long term
arrangenlent.
Depositor : A person who deposits goods with warehouseman for storing in his warehouse.
Excise Bonded Warehouse : A warehouse run by the Corporation with a licence under the
Central Excise Rules, 1944 wherein excisable commodities are allowed to be stored till excise
duly is paid.
FCL : Full Container Load
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ICD : Inland Container Depot A dry port where containerized cargo is aggregated and
consolidated by st~flingand destufting of containers.
LCL : Less than Container Load
Leased Warehouse : A godown taken on rent to meet specific requirement of the depositor on
management basis.
Public Warehouseman :An independent contractor who offers warehousing services to more
than one user.
Transit Wi~~x!house : A warehouse of appropriate capacity and of international standard in the
satellite Freight City (SFC) near International airport to decongest the air cargo terminal.
Warehouse : A building structure or other protected enclosure which is used for the purpose of
storing goods on behalf of the depositors.