STORES MANAGEMENT

PURPOSE OF STORES
Stores play a vital role in the operations of a company. Important purpose served by the stores is To provide uninterrupted service to the manufacturing divisions.

Stores is often equated directly with money,

FUNCTIONS OF STORES
(i) To provide adequate and proper storage and presentation to the various items. (ii) To receive raw materials, components, tools, equipments, and other items and account for them. (iii) To meet the demands of consuming departments by proper issues and account for the consumption. (iv) To minimize obsolescence, surplus and scrap through proper codification, preservation and handling.

PURPOSE OF STORES
(v) To highlight stock accumulation, discrepancies and abnormal consumption and effect control measures. (vi) To ensure good housekeeping so that material handling, preservation, stocking, receipt and issues an be done adequately. (vii) To assist in verification and provide supporting information for effective purchase action

LOCATION AND LAYOUT

Locating the stores near the consuming departments minimizes handling and ensures timely dispatch. In stores layout: Easy movement of materials Good housekeeping Sufficient space for men & material handling equipments Optimum utilization of storage space, Judicious use of storage equipments (Shelves, racks & pallets) Proper preservation from rain, light, etc

 Location factors are :

(i) The number of end user and their location (ii) The volume and the variety of goods to be handled

(iii) The location of the central receiving section

(iv) Accessibility to modes of transportation such as rail or road Warehouse stocking finished goods, factors such as (i) Proximity to porters, (ii) Railway lines,

(iii) Quality of roads,

(iv) Availability of power, etc. Stores should be constructed with a futuristic orientation

Stores building must have adequate facilities for preservation of stores.

Facilities such as (i) Cold storage (ii) Heating equipments (iii) Air-conditioning and similar facilities may be required.

Comfortable working conditions must be provided to the stores personnel

to get maximum efficiency and morale. The important factors in the design of stores building is, Lighting, Safety.

LIGHTING - SAFETY
LIGHTING : clear and adequate lighting is a must for proper work environment.
Lighting effects can be made by choice of colors for the walls

SAFETY- In stores a large volume of goods are handled everyday. Accidents considerably reduce the morale and effectiveness of the system.

Safety Measures to be checked

a) Safety consciousness should be instilled in the minds of stores personnel through training programmes, visual aids and literature. b) Safety appliances, such as goggles, hand gloves, etc., must be provided and their use be encouraged. c) Good house-keeping is essential, gangways must be clean, adequately wide so that movement of forklifts, trolleys and industrial tractors is smooth. d) Adequate maintenance practices with regard to forklifts, overhead cranes, conveyors trolleys etc.

(e) Safety awards and cash prizes which bring recognition to the concerned stores personnel for safety practices. (f) Provision of fire fighting facilities is necessary especially where inflammable materials are stored and handled. Fire extinguishers, fire escapes alarms & sprinklers must be available and personnel should be familiar in handling them (g) Provision of toilets, routine maintenance equipments, safe electrical wirings, etc.

COST ASPECTS
Costs involved in stores can be analyzed under two ways, FIXED COSTS: (incurred irrespective of the utilisation of space) Money spent on land and buildings Rent, interest, repairs, maintenance, insurance, etc. VARIABLE COSTS: (vary with volume of throughput) Handling cost Damages Deterioration Obsolescence, etc.,

PROBLEMS
Decisions in stores management ie (i) Selection of skills, (ii) Racks bins handling equipments, (iii) Safety practices, (iv) Codification, (v) Training personnel and accounting, Requires considerable skill and an ability to coordinate with others departments as well as with outside agencies,

 Maintenance of scrap yard. Contact with outsider suppliers, transport carriers, bankers,etc. Qualified engineers should be posted as chief stores officers reporting to the materials manager.

DEVELOPMENTS IN STORING [DRY STORING]

IN FOUR SIZES, that is 250, 500, 750 and 1000 tons; the stores are suitable for storing any type of material , as well as grain and other types of dry foodstuffs and materials. Made from thick rot proof butyl rubber laminate and heavy mesh they are completely portable, allowing their use to be either temporary or permanent and they movement from one site to another The stores are circular in shape. With an outer support wall with 710 high 5 gauge weld mesh. Secured a thick lining go butyl rubber laminate, which consists fog 0.040 layer of black butyl rubber faced with a 0.010 thick skin of white EPDM bonded to it. Top of side wall, to which it is secured by continuous clip/rim and a0.050 thick butyl rubber of floor is bonded to the side walls A giant bin that of diameter according to the specific model varying between 380 and 680. (EPDM- ethylene propylene diene monomer)

Tool stores
Tools stores items are very costly and usage points are scattered all over the plant. There is a central stores where the tools are required from outside suppliers and tool room. Accounting is done with regarded to quantity received and quantity accepted after inspections and tests.

STORES SYSTEMS AND PROCEDURES

1. RECEIPT SYSTEM

Divided into receipts from outside suppliers and receipts from internal divisions. When a purchase order is placed, a copy is sent to the stores, indicating quantity and delivery date. These should be arranged with a chronological sequence so that the stores manager can at any time estimate the volume of receipt. Helps in planning labor contracts when unloading activity exceed a particular limit.

Secondly, suppliers, once they dispatch the goods normally send an advice note the stores. Provides information on (i) Date of dispatch, (ii) Carrier details, (iii) Description of the consignment and value. This is sent in advance so that quick and easy clearance can be done.

Third stage is document prepared by the transport carrier. Very often different suppliers employ different transport organization of their materials. These transport organizations usually send consignment notes to the stores concerned. Railways and private transport organization are examples in this respect. Three documents namely, Copy of purchase order , suppliers advice document, and the consignment note Three documents requires clearance of materials and minimize costly demurrages.

2. PHYSICAL SYSTEMS
Documents are tallied for identity of figures with respect to quantity and value.

The consignment arrives it is defined with the help of documents.

It is physically verified using weighing bridges, measuring devices, tapes etc. If shortage is observed then it calls for additional procedures. The time element is very important as shortage claims will not be honored when they are time barred. Therefore, the documents are prepared and indexed date wise detailing the quantum of shortage and value.

3.INSPECTION STAGE
The materials manager needs to know the amount of materials existing at the inspection stage. A Provisional Goods Inward [PGI] note is prepared as soon as the materials are cleared from the receiving section and sent for inspection. Information on materials code, quantity received, rate, date of receipt, carrier details supplier details, location code description of materials. Once inspection is completed then the inspection department either endorses the PGI indicating quantity accepted and quantity rejected or sends as inspection report to the stores. This forms the the basis of for the preparation for Final Goods Inward Note.

FINAL GOODS INWARD NOTE

FGI indicates quantity accepted and quantity received in addition to the information provided by the PGI. Helps in estimating the goods volume under inspection is effected by serial control. Helps in estimating the fund requirement for goods received but not paid for. FGIs also helps in preparing shortage reports and claims documents which are sent to suppliers.

STORING PRACTICES
Stocking involves routine activities like sorting out materials coming at the end of inspection process and storing them in their locations. It is very important for easy location, proper identification and speedy issues to the consuming dept.

ISSUE CONTROL
ISSUES can be further divided into (i) Issues to consume departments (ii) Issues to outside suppliers for processing or conversion. Control of issues, are based on production programs. Based on this and the bill of materials, work orders are printed, listing for each material, quantity to be issued against each component requiring that material. It controls consumption

 Delegation of authority Direct Materials, such as fuel oil, electrodes, oxygen and tools, it is obvious that control should be based on the past experience and suitable delegation. Serial number controls are to be maintained and issues, as also receipts, must be posted in kardex so that stock balances are up-to-date. A stores manual incorporating all the features has been prepared in many organizations.

STORES ACCOUNTING
Materials Costing under classifications of
the receipt of materials, issue of materials,

and of the stocks held at the end of the

accounting period

COSTING OF THE RECEIPT OF MATERIALS

THE factors that are to be included up of the cost of the materials received are material price, freight charges, insurances and taxes. Price usually refers to the price quoted and accepted in the purchase orders. Prices may as net prices, prices with discount terms, free on board, cost insurance and freight, etc.

 The freight costs in transporting the goods are usually collated under a separate head. Goods in transit are mostly covered by insurance. All such expenses must be calculated and added to the base cost and transportation cost. Under the miscellaneous head, classifying costs incurred by way of customs duties, taxes and packages. Cost of materials received is equal to the price quoted less discounts, plus freight, insurance, duties, taxes and package charge

COSTING OF THE ISSUES TO PRODUCTION

Methods used in costing the issues to production First in first out (FIFO), LAST in first out (LIFO), average cost, standard cost, base stock method, market price at the time of issue, latest purchase price. Replacement or current cost are some of the methods used in the issues to production.

FIFO FIFO- assumptions made here is that the oldest stock is depleted first. at the time of issue, the rate pertaining to that will be applied. In FIFO process, the value of the stock held on hand is the money that has been paid for that amount of stock at least price levels

LIFO
The basic assumption here is that the most recent receipts are issued first. In a period of rising prices, latest prices are changed to the issues, thereby leading to lower reported profits and hence savings in taxes.

AVERAGE COST
Split into equal batches from each shipment at stock. It is realistic method reflecting the price levels and stabilizing the cost figures. Here the rate is arrived at by dividing the total cost by the number of items. Then this rate is applied to the issues to production. A new average is computed and this average is applied to the subsequent issues.

MARKET VALUE
THIS METHOD is also known as replacement rate costing. Materials issued are cost at the market rate prevailing at the time of issue. Prices increase the stock on hand is continuously under estimated, because the receipts are cost at actual and issues at higher rates. Prices are falling, the stock on hand is grossly overestimated. This may in turn to writing off huge amounts to make it realistic.

STANDARD COSTS
Based on the detailed analysis of market prices and trends. This standard rate is kept fixed for a definite period of six months or more. During this period costing is done on the basis of this standard rate, irrespective of the actual rates. A review is done and fresh standards are set for further period of six months. At the time of rising prices, the stock on hand is under-estimated, and at the time of falling prices, the stock on hand is over-estimated.

STOCK VERIFICATION
Process of physically counting, measuring or weighing the entire range of items in the stores and recording the results in systematic manner. Purpose served by stock verification are, To reconcile the stock records and documents for their accuracy and usefulness. To identify areas which require more disciplined document control. To backup the balance sheet stock figures To minimizes pilferage and fraudulent practices Carried out by the materials audit department, Reporting to either the materials manager or the internal audit. One person is usually given the exclusive responsibility with adequate facilities and authority. Physical verification can be carried out periodically or on continuous basis.

PERIODIC VERIFICATION
The entire cross-section is verified at the end of one period, which is usually the accounting period. Physical verification requires careful planning and execution. Steps involved: The detailed program should be chalked out giving complete break down of the process store wise and item wise. Necessary stock verification cards and check sheets must be prepared in adequate amounts. All material audit personnel must have clear-cut instructions on their jobs and schedule for proper accountability.

 During the verification process all transactions must be stopped (no receipts or issues). All stock verification should be serially numbered. Separate provisions must be available for items which are damaged or deteriorated. Selected areas and items must be allocated to each stocktaking person so that orderly completion of the job with out duplication of omission is ensured. Verify items which are under inspections, items sent out to suppliers for processing and stocks at various stock yards. The total of such values gives the value of the stock on hand as verified. Then this is tallied against the book figures of stock records.

CONTIUOUS VERFIVCATION
DONE throughout the year as per a pre-determined plan of action. A-items may be verified thrice a year, B-items twice a year and C-items once a year. It therefore, presupposes that a perpetual inventory record for each item is maintained showing all transactions so that reconciliation can be done Work can be independently carried out by materials audit department staff. Investigation with regard to discrepancies are spread over the year and hence detailed analysis is possible. Final accounts can be prepared expeditiously if continuous verification is done as per plan.

PROCESS OF VERIFICATION
Items are verified by counting the case of bearings, by weight in the case of sheets, by measuring in the case of lubricants and so on. When large stocks of items such as sand, scrap and ore fuel need to be verified, its only based only on estimates as the question of exact measurement is ruled out. The stores personnel should be involved, intimately know the locations of various items which results in quicker identification of items.

 Only stores personnel will be able to locate them. So the material audit people will have to work in close coordination with them. Discrepancies must be discussed with stores so that any omissions may be rectified and then only should they be reported to top management. Discrepancies require a re-verification. Such may be due to pilferage on large scale, wrong position of records and loose documents control. They require careful analysis and immediate corrective measures.