Marketing

Importance of Storage in Marketing Management

Storage in its primary sense is an exercise of human foresight by means of which commodities are protected from deterioration and surplus supplies are carried over for future consumption in seasons of scarcity.

The Definitions Committee of the American Marketing Association defines storage as -holding goods between the time of their production and their final sale.”This definition fails to emphasize the need for providing the proper facilities and the correct temperature under which many goods must be stored.

So we may define storage as follows: storage refers to the holding of goods under proper conditions between the time of their production and their final sale. It involves the holding and preserving goods.

Storage includes the activities of manufacturers, transportation agencies, specialists in warehouse (such as public warehouse operators) and such other middlemen as wholesalers and retailers. Storage creates time utility and thus adjusts supply and demand. It assists our marketing system to function effectively by making the goods available at the time when we need them in proper conditions.

Importance of Storage in Marketing :

Creation of Time Utility: Storage gives dimension to the market for a Commodity. If transportation and communication define the length and breadth of the market area then storage and its accompanying function of finance give depth to the market.

Thus, a storage is said to invest goods with ” time utility.” Storage creates time utility because the goods which are not produced evenly throughout the year must be stored until they are demanded by the consumers. Otherwise insta-bility may creep up in the prices of the products which may shatter the whole economic system. If consumption lags behind the production of goods, the excess produce is stored until needed. This procedure narrows the gap between consumption and production.

(2) Regularity in Supply : Seasonally produced goods should be stored at the time of production to supply the consumers at the time of scarcity. Grains, cotton, tobacco etc. can be stored for several months. Cold storage plays an important part in this respect. Cold storage permits many perishables such as potato, eggs, fruits, fish to be stored, so that the market is supplied regularly.

In case of products having irregular demand, storage plays a vital role to keep the production regular. Cold baverige such as Fanta, 7-up or Cocacola, ice cream, electric fans, woollen dresses are produced seasonally. If the factories producing such goods are to be operated throughout the year, the goods produced in the off months must be stored until the consumers want them.

Storage is also necessary because of the prevalence or natural calamities as fire, flood or storm which may interrupt production and transportation.

(3) Reduction of Business Fluctuations : Storage may also assist in accommodating operations to variations in business activity. Producing for storage supplements activity during declining business and withdrawals from storage add to supply during periods of high demand. To some extent this smoothes business fluctuations and reduces risk.

(4) Expedition of Financing: The warehouseman with whom goods are stored may offer a financing service to the owners of the merchandise. If he does not offer such a service, he will give the owners a negotiable warehouse receipts which will make it possible for them to obtain outside financing.

(5) Stabilization of Pricing: Through the adjustment of supply and demand prices tend to be stabilized. One of the principal advantages of storage is the part it plays in helping to stabilize prices.

(6) Cutting of Transportation Costs: Through the use of storage, transportation costs are reduced. This is because storage enables to accumulate greater quantities of a commodity. Since shipments of merchandise in quantities less than carload’ lots are subject to higher transportation rates than carload shipments, the opportunity storage provides for increasing the size of a shipment helps to decrease transportation costs.

(7) Reduction of Risking: The owner of goods can reduce certain risks associated with ownership by storing goods with a reputable warehousing firm. The warehouseman absorbs part of the risk.

(8) Reduction of Prices: In the long-run, storage helps to reduce the prices of commodities by encouraging the producers to store their excess produce. The opportunity to store goods makes increased production possible and thus reduces unit costs and prices.

In carlot (also called carload), shipments, the railroad places the cars on its own or shipper’s siding for loading ; the shipper loads the goods into the car ; railroad switches the car into a train and at destination the car is switched to a siding for unloading by consignee. As a rule, the shippers load and unload the car.

Less than carlot : When goods are shipped in less than carlots the railroad loads and unloads the goods from the car, picks them up and delivers them to the receiver’s place of business.

(9) Modern mass production is carried on in expectation of future demand, and thus the finished goods must be held in stock unitil they are demanded.

(10) Some goods require conditioning, curing or like other treatments. Storage provides the facility for undertaking these operations.

(11) Continuous production on the part of large producer is impossible unless requisite raw materials are held in store to ensure their ready availability. We may summarise the reasons for storage as follows’ :—

(1) Many goods are produced seasonally and are consumed the year round.

(2) Some goods such as christmas toys and woolen blankets are consumed seasonally and are produced regularly. The manufacturers of such products find it economical to produce on a year-round basis to prepare for the high seasonal volume.

(3) Sometimes goods are stored as a hedge against expected price advances and as a protection against later scarcities.

(4) Storage is often made necessary to obtain quantity discount on large purchases and lower transportation rates.

(5) Some goods, like fresh fruits, eggs and butter, require special storage facilities while being transported to market.

(6) Certain commodities such as meats, cheese and tobacco require ‘conditioning’ between the time of their production and consumption.

(7) Finally, many goods are ( such as raw materials and farm products.) stored by their producers to obtain more favourable market prices.

Storage should be done in accordance with health and hygiene and safety codes. People do use the storage facility to hoard goods for future use. Temperature and other related conditions are to be considered while doing storage of your favorite and important goods.

Storage provides time utility to the marketing teams. They can reserve the goods elsewhere and can market the goods and services from nearest stores. This results on-time delivery of goods and increases customer satisfaction.

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