Warehousing – definition and meaning
Warehousing has two meanings:
1. All the physical and administrative functions related to storing products and materials, i.e. everything to do with keeping things in a warehouse. A warehouse is a building where goods and materials are stored.
2. A procedure in which a business gradually accumulates a holding of shares in another company that it plans to acquire one day. In this illegal securities trading practice, the perpetrator purchases more shares in a company than stock exchange regulations permit.
People do this by disguising the purchases under a number of nominee names – buying in the names of other entities.
According to Collings English Dictionary, warehousing is:
“The act or process of storing large quantities of goods so that they can be sold or used at a later date.”
“An attempt to maintain the price of a company’s shares or to gain a significant stake in a company without revealing the true identity of the purchaser. Shares are purchased through an insurance company, a unit trust, or nominees.”
In this sense, the word relates to the storing of goods and materials that will be distributed or sold later. Functions include inspection, identification, receipt, verification, shelving (putting away), retrieval for delivery, etc.
The warehouse may be very small, perhaps a spare room, garage or basement, or a large building that has been purpose-built for storing things.
Important warehousing elements
In warehousing, there are specific elements that help retailers, distributors, manufacturers, government agencies, and other entities monitor inventory and store it securely. These elements include:
- Shelving and Rack systems that offer easy and quick product or material access and maximum storage capacity.
- Climate Control systems so that we can store goods and materials properly and for as long as possible. We must not expose certain pharmaceutical drugs to heat. We must keep other materials in a low-humidity environment.
- Software specifically related to inventory control. It tells you exactly where your products or materials are.
- Storage and Moving equipment, such as forklift trucks, cranes, bins, conveyor belts, pallet jacks,etc. We need to acquire, maintain, and use/operate this equipment.
- Shipping Supplies for the fulfillment of orders.
- Warehousing Personnel including machine, forklift or crane operators, stackers and shelvers, clerks, etc.
- As warehouses become more automated, there is a growing need for IT (information technology) personnel, including roboticists and artificial intelligence engineers.
- Security to protect the goods and materials from theft, fire, floods, vermin, and other hazards.
- Access to Transportation so that goods and materials may reach their destinations as rapidly as possible. Most warehouses are located near major highways, seaports, airports, and/or railway services.
According to Shopify Inc.:
“Warehousing and all that goes along with it is part of a sophisticated industry known as logistics management. Logistics includes procurement, inventory management, and distribution.”
“It falls under the supply chain umbrella, which also includes product development, marketing, sales, and other product-related disciplines.”
The supply chain refers to everything from a products point of origin to its point of consumption.
Warehousing – accumulating shares
The term ‘warehousing’ may refer to the process of purchasing and building up shares in a company that you aim to eventually acquire.
Imagine that fictitious company Fred Blogs Inc. is thinking about taking over a controlling interest in Jane Doe Corp. next year. It decides it will not make a big tender offer for Jane Doe’s shares now, but rather will start purchasing a few thousand shares intermittently over the next 12 months.
If Fred Blogs is purchasing a few thousand shares now and again in the same company over a period of 12 months, it is warehousing those shares.
By purchasing shares over a 12-month period, Fred Blogs can take advantage of moments when Jane Doe’s shares are cheap. Warehousing also prevents spikes in share prices that occur after somebody buys big blocks of stocks one go.
Fred Blogs can move forward in its plan to acquire Jane Doe secretly – under the radar – especially if it does this through a number of nominee names, i.e. buys the shares using other entity’s names.
If you purchase more than 5% of a company’s shares in the US, the SEC (Securities and Exchange Commission) requires that you file a form 13G or 13D. You are breaking the law if you do not file the form. If you do not file the form and they discover that your purchases were through nominee names, you’re in trouble!