Store Keeping

STORE KEEPING

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STORE KEEPING  Receiv Receive, e, store, store, and and issue issue materi materials als,, part parts, s, fact factory ory supplies at minimum cost  It is serving serving facil facility ity,, inside inside an org., org., responsi responsibl blee for   proper storage of the material and then issuing it to respective departments on proper pro per requisition  Prote rotect ct the the goo goods ds stor stored ed  Store tore room room,, sto store reke keep epeer 

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STORE KEEPING  Receiv Receive, e, store, store, and and issue issue materi materials als,, part parts, s, fact factory ory supplies at minimum cost  It is serving serving facil facility ity,, inside inside an org., org., responsi responsibl blee for   proper storage of the material and then issuing it to respective departments on proper pro per requisition  Prote rotect ct the the goo goods ds stor stored ed  Store tore room room,, sto store reke keep epeer 

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OBJECTIVES OF STORESTORE-KEEPING -KEEPING

 Easy Easy loca locati tion on of the the ite items ms in store.  Prope roperr iden identi tifficat icatio ion n of ite items ms..  Speed peedy y iss issue ue of mat mater eriial. al.  Eff Efficie icient nt uti utili liza zati tion on of spac space. e.  Redu Reduct ctio ion n in need need of mate materi rial al handling equipment.

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DUTIES OF STOREKEEPING ³As

per Maynard´ ³The duty of store keeping are  To receive materials 

To

protect them while in storage from damage and unauthorized removal



To



To

issue the materials in the right qualities, at right time, to the right place and provide these services promptly and at least cost. 5/27 Page 4

TYPES OF STOREKEEPING

Storekeeping

Centralized

storekeeping

Decentralized storekeeping

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CENTRALIZED STOREKEEPING  Central storekeeping means the spatial summary of all storekeeping functions and all stored materials under uniform line. 

Advantages- an easement of  the goods received, care,  preservation, inventory determination and examination. 7/27 Page 6

DECENTRALIZED STOREKEEPING 

During the decentralized storekeeping the materials used at the place of the user  are stored in the form of  temporary storage facilities (buffer camp).



Advantages are the higher  flexibility, the more exact arrangement of the individual materials in the production areas and the shorter routes of  transportation.

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FUNCTIONS OF STOREKEEPING Balance function

Assortment function

Improving function Functions of storekeeping

Security function

speculation function

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FUNCTIONS OF STORESTORE-KEEPING  Balance function: If the procurement quantity is larger than the output, then by the balance function the material redundant for production is stored.  Assortment function With the supply or assortment function the storekeeping contributes to a continuity in the assortment. To that extent the supply function supplements the balance function, since thereby the  parts of the assortment, where discrepancy between  procurement and paragraph exists, are bridged. 10/27 Page 9

 Security function This

can be the case, if products, which are coined /shaped by delivery bottlenecks and /or seasonal fluctuations, must be procured. 

Improving function The

improving function is called also production function of the camp, which makes possible only a following processing. An improving function develops, if the storage causes a change of the  product and part of the production process.  Speculation function Reasons for the speculation function of the storage can be foreseeable extreme price fluctuations on the procurement market or   particularly low cost prices. In addition can be speculated to the discounts received thereby by the order of large quantities and in camp commodity.

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Why storekeeping? 

Receiving, handling and speedy issue of material.



Custodian



To



Effective utilization of store space.



To

provide service to the organization in most economical way.



To

keep the details of the items available in store up to date.



Proper identification and easy location of items.



Physical checking of stocks.

of goods I store against damage and pilferage.

ensure regular supply of materials .

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STORES SYSTEM CLOSED

1.

OPEN

All

materials are stored in a 1. There is no specific area. closed/controlled area. Stores are maintained in the form of suitable/ convenient 2. No other person than the locations. stores personnel is  permitted in the area. 2. Every individual has access to any storage facility. 3. Materials can leave or enter  the storage area only by 3. After the receipt of the authorized documents. material it is delivered to respective department to 4. Maximum physical expedite the production security. activity. 4. Chances of pilferage high. 5. Tight accounting control of  5. Less emphasis on inventory material accounting control of the material. 12/27 Page 12

VARIOUS SECTIONS IN STOREKEEPING

 Receiving section

 Stores

 Issue

section

section

 Accounting

 Stock

Location Working procedures Layout of stores Stores equipment Material handling facility Identification of materials

section

taking checking 13/27 Page 13

1. RECEIVING SECTION

Receiving

OUTSIDE SUPPLIERS

INTERNAL SUPPLIERS

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OUTSIDE

SUPPLIERS

 Dispatching items- date of dispatch, carrier details, description of the consignment and the value of items.  Ensures quick and easy clearance of bills etc.  Purchase copy, suppliers note and transporter  information/ consignment note- enables to organize and plan for expeditious clearance of materials and minimize cost

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1. RECEIVING SECTION

INTERNAL SUPPLIERS  Whenever materials are received from internal divisions or returned from user departments transfer  notes and returns to stores documents are usually used for this purpose.

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2. STORES SECTION



This

is a place where all materials received by stores department are kept with protection against deterioration.

 Vari Variou ouss stor stores es oper operat atio ion n are: are:- Location, Procedure Layout Equipment and Identification of stores section.

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Location of stores



to pro provi vide de spac spacee to to the the mater ateriials als til tilll the these se are are iss issue ued d to to the, respective departments of the enterprise.

Working Procedure



rece receiv ivees the the mater ateria ialls from rom rec recei eivi ving ng sect sectio ions ns..



mater ateria iall is cl classi assiffied and and code coded d acco accord rdiing to the their nat nature ure and use.



bin card is tagged.

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Stores Bin Card 

Card

No.

 Description

Part No. Location

 Date The

bin card contains up to date d ate information about the receipt, issue and balance of the respective item in the stock.

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Layout of stores section 1.

Flexible in arrangement

2.

Convenience

3.

Efficient use of floor space and height.

4.

Minimum handling and transportation of materials .

5.

Items used sparingly shed. Be easy to locate.

in physical counting of materials.

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Stores equipment  A good store is equipped for handling, measuring and weighing the materials.  The equipment should be such that stores investment and operating expenses are reduced. Materials handling Facilities There should be proper weighing and measuring instruments at the time of receiving and issuing the materials

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 Bins: Bins are expensive & as Many item as possible should be put into them, refilling being done on a regular basis.

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 Racks: Racks can be used either as the picking face for items which are too big or heavy fir bin accommodation, or else for keeping reserve stocks for replenishing bins.

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Static racking

Live

racking

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Drive through racking

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Pallets: pallets are specially designed platforms for the stacking of goods, with view to the whole load being moved, wherever it is required, by a fork -lift.

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Identification of materials in stores



Tagging



Labels



The

some piece of paper or cloth with the items.

may be fixed on the items.

coded number or any other identification mark  may be embossed on the items.

 Painting or color coding of items.

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METHODS OF CODING 1. Mnemonic Method:- Here alphabets closely associated with name of the item are used e.g. M T can be used for some metallic item. This is useful when few type of items are to be stored. 2. Random Method:- Here both alphabets or numerals can be used randomly. But the method is rather  arbitrary. 3. Scientific Method:- The items are divided into number of groups and each group is given some code. Then further sub-grouping is done on the basis of classification of item in any group, its shape, function etc. 23/27 Page 28

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LOCATION CODING 

The

location can be identified in terms of the number of the warehouse , row number, column number, rack number, shelf  or bin number etc. Location of any item inside the stock can also be decided in three ways: Fixed Location:- Here some fixed place is designated to each class of item. The basis can be like Supplier wise, item wise, utility of the item etc.  Random Location :- Items are placed according to the availability space in store at the time of receiving the items.  Zonal Location:- like Bulk Zone, Reserve stock, indirect material like spares and consumable items .

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3. ISSUE SECTION

 It handles the issue of materials when required by some department of the enterprise.  Materials carry some money value and in order to avoid malpractices and to curb the tendency of waste, the items should be issued against proper requisition. 

The

material requisition is a request to the stockroom to issue materials.

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4. ACCOUNTING SECTION 

The

accounts section exercises financial control over stores. The goods receipt book is maintained for all arrivals, making the receipt in triplicate, a copy of which is sent to accounts section and other to the store section.

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5. STOCK TAKING CHECKING 

This

implies physical checking of items in store to see that these are in accordance with the entries of stores ledger. METHODS OF STOCK CHECKING ARE  FIXED A NNUAL INVENTORY:- A special team is deputed to check and count the material inside the stores at the end of  each financial year.  PERPETUAL INVENTORY:- In this system the stock control department maintain up to date and systematic records of each and every transaction. There is a system of continuous verification of stock. The entries on bin card and stores ledger  should tally with each other. In case of discrepancies thorough investment is made.

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³Cost Control & Cost Reduction´

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Cost Control keeping the expenditure within acceptable limits. 

costs are in control unless costs exceed budget or  standard 

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Cost Control

Process

Steps involved in designing process of cost control system:

  Establishing norms   Appraisal   Corrective measures

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Cost Control

in Individual Cost Elements

 Raw material  Wages  Power & fuel  Stores & spare parts 

Overheads

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Advantages 

Achieving

of Cost Control

the expected return of capital

 Increase in productivity of the available resources  Economic use of limited resources of production

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Tools

of cost control

 Standard cost and budgets.  Ratio analysis.  Value analysis.

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Page 39

Cost

Reduction

Definition: Cost

reduction has been defined as: ³The achievement of real and permanent reductions in the unit cost of  goods manufacturing or services rendered without impairing their suitability for the use intended .´

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Cost

reduction can be effected by either of the following ways:

 By

reduction in unit cost of production

 By

increasing productivity

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Areas

of reduction

 Design  Factory organization and method  Production planning 

Layout



Utility

and equipment services

 Marketing  Finance

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Techniques

in cost reduction

 Economic batch quantity(EBQ) It is that point where carrying costs equals set up cost approximately. At this point the total cost will also be minimum.  Economic order quantity(EOQ) It is the quantity fixed at a point where total cost of  ordering and the cost of carrying the inventory will be minimum.

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Illustration of problem 

purchasing house purchase 2000 units of a particular item per year  at a unit cost of Rs 20/-. The ordering cost per order is Rs 50/- and the inventory carrying cost is rs 25/-. Find the EOQ and minimum total cost including purchase cost. A

 If 3% discount is offered by the suppliers for purchase in lots of 1000 or more should the publishing house accept the offer?

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Solution  EOQ= = = 200 units

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Calculating TC

(no discount)

 No. of orders to be placed by getting 200 units

=

10

=

100

Purchase price of 200 units @ Rs 20/unit

=

40000

Ordering

cost (10 orders @ Rs 50 /order)

=

500

Carrying

cost (Rs20 * 0.25)

=

500

=

41000

Average

inventory

Total Cost

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Calculating TC

Unit

(3% discount) =

19.40

=

1000

=

2

=

500

Purchase price of 2000 units @ Rs 1 9.40/unit

=

38800

Ordering

cost (2 orders @ Rs 50/order)

=

100

Carrying

cost (Rs500*1 9.40*0.25)

=

2425

=

41325

Lot

cost after 3% discount

size

 No. of orders for 2000 units Average

inventory

Total Cost

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 Non conventional approach :  Material cost  Man power cost 

Cost

management inititates-selling /distribution

 Funding cost

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Material cost :

 e-sourcing discovery of new sources competitive pressures Rationalization of suppliers 

Thrust

on value engineering

 Re-visiting designs 

A pplication

oriented engineering

 Product life cycle management

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Manpower cost

 Right sizing of employees-VRS,CRS 

O ptimum

utilization of manpower 



Transition

from machine engagement time to man engagement time.

 Productivity linked wage settlement 

Adopting

new concepts

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Importance of Cost control and cost reduction Reduction for corporate turnaround



2

drivers:



To



Offering

stay profitable

quality product at cheaper price - eliminate unproduction expenditure

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Cost + margin = selling price Margin = selling price ± cost

 Margin is a function of how efficient the company is in controlling costs.

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Changing perspective of profits:



Cost

+ profit = sales In a sellers market cost and profit are reimbursed by customers.

 Sales ± cost = profit With more player in the market place, selling price is determined  by the market forces; having locked to a level of cost, focus is on cost control and cost reduction. Cost information is for tactical decision making  sales - profit = cost selling price is determined by market forces. Profit is determined  by the risk or return profit of business with a focus on cost management to achieve the targeted results.. Page 53

Sequence of Steps in Cost Reduction Process 1.Analysis 2. Examination -

a) Vital activities  b) Secondary activities 3. Developing solutions 4. Selecting a Solution 5. Obtaining Agreement

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Precautions in Implementing Reduction Programs

Cost

 appropriate to the organization.  introduction and implementation - planned  Resistance by employees to reduce costs  No overlap - cost reduction / double counting of  reductions / savings.  Effect of success in one area not affect the other   should not have any undesirable effects on external  parties

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Planning for Cost Reduction

1. Crash programmes 2.

Planned programmes

3. Short range programmes 4. Long range programmes

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Page 57

Importance of Cost Control& Cost Reduction  Better utilization of resources 

To

prepare for meeting a future competitive position.

 Reasonable price for the customers  Firm standing in domestic and export markets.  Improved methods of production and use of latest manufacturing techniques  By a continuous search for improvement creates proper  climate for the increase efficiency.  Improves the image of company for long-term benefits.  Improve the rate of return on investment.

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Cost Control

v/s Cost Reduction

Cost Control

Cost Reduction

1. It is the competitive analysis of actual results with established norms.

This

2. The

The

variances are appraised and reported and necessary course of action will be taken to revise norms, standards etc.

process finds out the substitute by finding new ways or methods. necessary steps are taken for further  modification in the method.

3. It starts from established cost standards It challenges the standards forth-with and and attempts to keep the cost of operations attempts to reduce cost on continuous of a process in line with those standards.  basis. 4. The emphasis is on the present and past  behavior of costs. 5. It attempts to achieve the best possible results at the least cost under given conditions. 6. Cost control is a preventive function.

The

emphasis is partly on the present costs and largely on future costs. Under

this no conditions are considered to  be permanent where a change will secure a lowest cost figure. Cost

reduction is a corrective function. 12/2159 Page