Warehouse acts as a store of surplus goods which are not needed immediately. Goods are often produced in anticipation of demand and need to be preserved properly until they are demanded by the customers. Goods which are not required immediately can be stored in a warehouse to meet the demand in future.
Minimization of risk:
Warehouses provide for the safe custody of goods. By keeping their goods in warehouses, businessmen can minimize the loss from damage, fire, theft etc. The goods kept in the warehouse are generally insured.
A warehouse creates time utility by bringing the time gap between the production and consumption of goods. It helps in making available the goods whenever required or demanded by the customers. Some goods are produced throughout the year but demanded only during particular seasons like agricultural products which are consumed or required throughout the year. Warehouses ensure adequate supply of such seasonal products throughout the year without any break.
Warehouses reduce violent fluctuations in prices by storing goods when their supply exceeds demand and by releasing them when the demand is more than immediate productions. Warehouses ensure a regular supply of goods in the market. This matching of supply with demand helps to stabilize prices.