Identification of the need is the prime requisite. Then materials required are being procured or produced. It takes considerable time. The time between identification of the need and converted into available materials ready for use is called lead time.
Materials are required to be held in stock to meet consumption requirements of this period.
In addition to the lead time there can be delays in procurement or unexpected increases in the rate of consumption.
The materials stocked in store is to provide for this contingency.
Also materials stocked for speculative purposes, expecting price rise due to increased demand or shortages in supply.
The storage of raw material and finished goods is regarded as a key element of marketing strategy.
Functionally goods held in stock enable a smooth adjustment of demand and supply.
Warehousing is not the simple act of storing goods, but rather a package of services that enables the smooth running of wheels of industry - Supplying raw materials to the operation executives and finished goods to the customers.
The warehouse should supply goods of the right quality at the right time in the right quantities to meet the pace of consumption.
It has to forecast the demand to enable procurement, receive, handle, store and transport material with out breakages or losses. Reduced wastage and obsolescence result in increased returns.
Thus the prime purpose of warehousing is strategic deployment of marketable goods in such a way as to minimise the total distribution costs and maximise customer service.