Chapter 37

You should be able to:

identify the main features of bonded, cold storage, cash-and-carry, manufacturers' and retailers' warehouses and large-scale retailers' regional distribution centres

evaluate the importance of each type of warehouse in either home or international trade

1. What is a bonded warehouse?

It is a warehouse where dutiable goods are stored. The goods cannot be taken out unless the duties have been paid.

Bonded warehouses are normally owned by the government (called customs warehouse) or sometimes owned by private owners (called licensed warehouse).

2. Where do bonded warehouses usually situated?

They may be situated anywhere, but they are found mainly at ports, airports and border crossings.

Bonded warehouses located in cities and towns are important to producers of dutiable goods, such as beer which is brewed for sale in home market.

While in the bonded warehouse, the brewer will not have to pay any duty.

Only when the beer is to be used will the duty be payable.

3. State the importance of bonded warehouse to the trader.

Traders can postpone the payment of duties while he performs the necessary operations, like blending, grading, packaging and labelling, to prepare the dutiable goods stored in the bonded warehouse for sale.

For entrepot trade, trader imports the goods, may make them more saleable in the bonded warehouse and then export them to other countries. For example, teas may be imported from Sri Lanka and India, blended in London before being packaged and exported to Canada.

Trader need not remove all his goods at once until it is convenient for him to do so. He can make delivery of small quantities of the goods as he sells them by paying the duty and warehouse rent to date. This helps the trader to spread the payment of duty.

Trader may be looking for buyers and sell the goods in bond, leaving the payment of duty to the buyer.

By doing so, the trader economises on working capital because he does not have money tied up in import duty paid on unsold goods. This enables him to make use of his working capital for other purposes.

4. State the importance of bonded warehouse to the manufacturer/producer.

Manufacturer is assured of regular orders from overseas buyers who make use of the bonded warehouse.

In this way, the manufacturer's turnover will increase and he can also benefit from large-scale production.

He only withdraws and pays duty for those goods he requires.

As he does not need to pay all the import duties at once, he is able to put his financial resources to other uses to expand his business.

Manufacturer/producer who makes use of imported raw materials can perform some of the processing functions or leave their goods to mature, like Scotch whisky or cheese, in the warehouse without any payment of duty and then sold for export.

5. State the importance of bonded warehouse to the government.

It ensures the payment of customs duties.

It provides information on the goods imported and exported.

Government can control the amount and quantity of imports and exports.

Customs officials prevent importers from evading customs duties and disobeying import regulations.

6. What is a cold storage warehouse?

It is a temperature-controlled warehouse used to preserve perishable goods.

7. State the importance of cold storage warehouse.

Produce that is produced at particular times of the year (seasonal production) can be stored so that it is available in good condition to meet the demand throughout the year.

It helps with foreign trade. For example, imported and exported flowers and some fresh foodstuffs require temporary cold storage.

General wholesalers and cash-and-carry warehouse are able to extend the range of products they offer for sale by having a freezer section and refrigerated units. They can store ice-cream, meat, fish, cakes and ready-made meals.

Cash-and-carry is a form of home trade in which goods are sold by the wholesaler to retailers from a wholesale warehouse.

8.  What is a cash-and-carry warehouse?

It is a warehouse that offers self-service wholesaling with no credit and no delivery services.

Cash-and-carry warehouse is considered a wholesale supermarket.

The retailers are required to pay for their purchases at the time of purchase (cash) and delivery is not provided by the warehouse (carry).

9. State the advantages of cash-and-carry warehouse to the wholesaler.

More trade from more small-scale retailers.

Can attract other businesses as customers such as restaurants, canteens and caterers.

May also sell to other consumers who qualify for membership cards.

No bad debts from buyers as they pay cash.

10. State the disadvantages of cash-and-carry warehouse to the wholesaler.

Long working hours.

Capital cost of checkouts and other equipment.

Often large amount of cash on the premises - danger of theft.

11. Why are cash-and-carry warehouses important?

Cash-and-carry warehouses are important because they serve mainly small-scale retailers, within their local areas, helping them to survive the competition from supermarkets, hypermarkets and multiple chain stores.

12. Where are cash-and-carry warehouses generally sited?

They are generally sited within convenient reach of their retailer customers.

Cash-and-carry warehouses have large parking areas so that their customers can visit, make purchases and take the goods away in their own vehicles.

13. State the advantages of cash-and-carry warehouse to the small-scale retailer.

Prices are cheaper than buying from a general wholesaler because the cash-and-carry warehouse's expenses are lower.

The retailer has immediate access to the warehouse at his convenience and does not have to wait for deliveries.

The retailer can obtain goods to meet sudden demand.

The retailer saves on storage space on the shop premises.

The retailer does not waste time on administrative work relating to placing order, checking deliveries and settling monthly accounts.

The warehouse is open at times convenient to the retailer.

14. State the disadvantages of cash-and-carry warehouse to the small-scale retailer.

No delivery available. The retailer needs transport for collecting the goods, so adding to the retailer's expenses.

No credit available. Retailers must have enough money to pay immediately for the goods purchased.

Most of the products are ranges that sell quickly.

There is minimal display with goods stacked in small boxes or packs on pallets, on the floor or on shelves.

15. How can cash-and-carry warehouse offer goods as low prices?

It is because they purchase in bulk from the manufacturers or producers.

It is because they save on banking services as they do not provide credit facilities.

It is because they save on labour and transport expenses as they do not provide delivery facilities.

16. What is a manufacturers' warehouse?

It is a warehouse used to store raw materials, components and finished goods awaiting sale or transport.

17. Where is a manufacturers' warehouse usually built?

It is likely to be on the same site as the factory with facilities for handling large quantities of goods.

18. Why is the manufacturers' warehouse built near the factory?

It is to provide quick and easy transport of raw materials to enable production to go on without interruption and to store the finished products easily.

19. State the importance of manufacturers' warehouse.

It enables the manufacturer to produce ahead of demand.

It enables the manufacturer to store goods for his factory shop.

If the manufacturer produces goods that are required only seasonally, like Christmas decorations, these can be stored and production can continue.

Some manufacturers, particularly car makers, import components from other parts of the world. They need to store these components until they are ready to use them.

20. What is a retailers' warehouse?

It is a warehouse used to store goods bought for the purpose of resale.

Retailers are more likely to have storerooms, either attached to or at the back of the shop premises.

21. Why do retailers not want to have large storage areas?

It is because they are likely to be situated in areas where land prices are high and rents are expensive.

22. Why do retailers not want to store too many goods?

It is because they will have too much working capital tied up in stock, making for possible cash flow problems.

23. What are regional distribution centres (RDCs)?

They are warehouses used by large-scale retailers, e.g. supermarkets, hypermarkets and multiple chain stores.

24. Where should regional distribution centres be located?

They are usually situated at busy road junctions often where major highways meet.

25. State the importance of RDCs.

They provide easy access for the manufacturers who supply them.

They are close to the branches they supply so ensuring constant supplies.

They help to reduce the retailer's costs. The business usually owns its own transport so saving transport costs. It saves renting someone else's warehouse.