Stores Management
Stores Management
Stores Management
STORES MANAGEMENT
INTRODUCTION
THE TERM STORES, STOREHOUSE, WAREHOUSE ETC REFER TO THE PHYSICAL PLACE BE IT A BUILDING OR A ROOM ETC. WHERE MATERIALS OF ALL VARIETY ARE KEPT. THE FUNCTION OF STORES IS TO RECEIVE, STORE AND ISSUE MATERIALS. STORES ARE NORMALLY DIVIDED INTO VARIOUS SECTIONS SUCH AS RECEIVING SECTION TOOL STORES GENERAL STORES RAW MATERIALS STORES FINISHED PARTS STORES ETC. STORES PLAYS A VITAL ROLE IN THE OPERATIONS OF A COMPANY STORES NETWORKS ARE INCREDIBLY COMPLEX AND THEREIN LIES THE OPPORTUNITY OF IMPROVEMENT.
STORES MANAGEMENT
STORES FUNCTION AS AN ELEMENT OF MATERIALS DEPARTMENT, HAS AN INTERFACE WITH MANY USER DEPARTMENTS IN ITS DAILY OPERATIONS.
THE BASIC PURPOSE SERVED BY STORES IS THE PROVISION OF UNINTERRUPTED SERVICE TO MANUFACTURING DIVISIONS. STORES ACT AS A CUSHION BETWEEN PURCHASE AND MANUFACTURING ON ONE HAND AND MANUFACTURING AND MARKETING ON THE OTHER. THE INHERENT LIMITATIONS OF FORECASTS MAKE THE STORES FUNCTION A NECESSITY. STORES FUNCTION IS AN INSEPARABLE PART OF ALL BUSINESS AND NON BUSINESS CONCERNS, WHETHER THEY ARE INDUSTRIAL OR SERVICE ORIENTED, PUBLIC OR PRIVATE, SMALL OR LARGE. THE TASK OF STORE KEEPING RELATES TO SAFE CUSTODY AND STOCKING OF MATERIALS, THEIR RECEIPTS, ISSUES, AND ACCOUNTING WITH THE OBJECTIVE OF EFFICIENTLY AND ECONOMICALLY PROVIDING THE RIGHT MATERIAL AT THE RIGHT TIME WHENEVER REQUIRED IN THE RIGHT CONDITION TO ALL USER DEPARTMENTS.
ONE MUST ALWAYS REMEMBER THAT EFFICIENCY IN STORES OPERATIONS CANNOT BE BUILT OVERNIGHT BUT HAS TO BE THOUGHT OF RIGHT FROM THE INITIAL PLANNING STAGE. STORES MUST BE VISUALIZED AS AN INTEGRAL PART OF THE PURCHASING MANUFACTURING MARKETING LINK. UNFORTUNATELY, STORES MANAGEMENT IS LOOKED DOWN UPON BY MANY AS AN OPERATIONAL CLERICAL FUNCTION AND FAILS TO ATTRACT APPROPRIATE TALENT BECAUSE OF ITS UNDERDOG NATURE. ONE HAS TO BEAR IN MIND THAT THE STORES MANAGER HEADS THE SINGLE LARGEST GROUP OF CURRENT ASSETS AND HIS PERFORMANCE IS THE KEY TO SMOOTH PRODUCTION AND SUBSEQUENT MARKETING. MANY DECISIONS RELATED TO STORES HAVE A DRAMATIC IMPACT ON THE OPERATIONAL EFFICIENCY OF THE PRODUCTION DEPARTMENT AND PROFITABILITY OF THE ENTIRE ORGANIZATION. EVEN SEEMINGLY ROUTINE DECISIONS SUCH AS SELECTION OF RACKS, SHELLS, BINS, MATERIAL HANDLING EQUIPMENT, SAFETY PRACTICES, INSPECTION PROCEDURES ETC. ARE REFLECTED IN THE OPERATIONAL EFFICIENCY. ONE MUST APPRICIATE THE ROLE OF STORES IN MAINTAINING OPTIMUM INVENTORY AND HIGHLIGHTING EXCEPTION CASES THROUGH BUILDING UP OF PROPER MIS BY MAINTAINING ACCURATE RECORDS.
4. 5. 6. 7.
14.
STORES ORGANIZATION
ORGANIZATION IS A VEHICLE TO ACHIEVE THE PREDETERMINED OBJECTIVES. IT IS A FRAMEWORK OF TASKS, RESPONSIBILITIES, AUTHORITIES, AND ASSCIATED PERSONNEL. THE TYPE OF ORGANIZATION MUST BE GEARED TO ACHIEVE THE DESIRED OBJECTIVES EFFICIENTLY AND ECONOMICALLY. ORGANIZATION IS BASED ON COMMONALITY OF CERTAIN TASKS AND SPECIALIZATION OF WORK. IT IS AN INDISPENSIBLE MEANS TO GOOD MANAGEMENT. A FAULTY ORGANIZATION STRUCTURE CAN SERIOULY HAMPER ITS PERFORMANCE.
STORES ORGANIZATION
1. 2. 3. 4.
STEPS IN ORGANIZATION;
IDENTIFY THE ENTIRE GAMUT(extent) OF TASKS TO BE PERFORMED GROUP AND RE GROUP THE TASKS ACCORDING TO CERTAIN WELL DEFINED COMMON CHARACTERISTICS. DEFINE AND DELEGATE RESPONSIBILITY AND COMMENSURATE AUTHORITY. ESTABLISH REPORTING AND STRUCTURAL RELATIONSHIPS BETWEEN ALL POSITIONS.
1. 2. 3. 4. 5.
STORES ORGANIZATION
TRADITIONALLY STORES FUNCTION HAS BEEN VISUALISED AS A PART OF PRODUCTION DEPARTMENT AND WAS NEVER GIVEN THE ATTENTION AND IMPORTANCE IT RIGHTFULLY DESERVED. THE CONVENTIONAL PRACTICE IS TO LOCATE THE STORES NEAR USER DEPARTMENTS SO AS TO MINIMIZE MATERIAL HANDLING COST AND ENSURE TIMELY SUPPLIES SO AS TO ALLOW SMOOTH PRODUCTION. THE MATERIALS DEPARTMENT IS SELDOM CONSULTED IN ASPECTS SUCH AS STORES LOCATION AND LAYOUT.
STORES MANAGEMENT
CENTRALISED & DECENTRALISED STORES
THERE ARE BOTH ADVANTAGES AND DISADVANTAGES ASSOCIATED WITH A CENTRALIZED OR DECENTRALIZED STORES. A VERY BIG ORGANIZATION HAVING A PORTFOLIO OF NUMEROUS PRODUCTS MAY HAVE A HUGE MAIN STORE ALONG WITH NUMBER OF SMALLER DECENTRALIZED STORE SECTIONS. THIS ARRANGEMENT DOES AWAY WITH DUPLICATION OF EFFORTS IN COMMON ACTIVITIES. ALL ITEMS OF COMMON USAGE MAY BE STOCKED IN A CENTRAL STORE TO KEEP THE INVENTORY AT OPTIMUM LEVELS. ALSO RECEIVING CAN BE DONE CENTRALLY SO AS TO HAVE EFFECTIVE COMMUNICATION LINKS WITH THE PURCHASE DEPARTMENT AND VARIOUS SUPPLIERS. THE PROBLEM OF CENTRALIZATION OR DECENTRALIZATION IS A VEXED(annoying,irritate) ISSUE AND ONE CANNOT LOOK FOR THUMB RULES TO DEAL WITH THE SAME. IT IS MORE A MATTER OF CONVENIENCE AND SUITABILITY TO THE OPERATING ENVIRONMENT THAN A QUESTION OF CHOICE OF ONE STRUCTURE OVER ANOTHER. HOWEVER THE GUIDING PRINCIPLE HAS TO BE THAT THE OVERALL STORES CONTROL HAS TO BE UNIFIED IN THE HANDS OF A CHIEF STORES OFFICER FOR EFFECTIVE COORDINATION WITH OTHER INTERFACING DEPARTMENTS AND PROPER INTERNAL CONTROL OF STORES.
STORES MANAGEMENT
CENTRALISED & DECENTRALISED STORES
1. 2. 3. 4. 5. 6. 7. 8. 9.
STORES MANAGEMENT
CENTRALISED & DECENTRALISED STORES
1. 2. 3.
4.
1. 2.
1. 2. 3. 4. 5.
1. 2. 3. 4. 5. 6. 7.
1. 2. 3.
GIVEN BELOW ARE SOME THUMB RULES FOR PROPER STORES LAYOUT.
MAXIMUM STORE SPACE UTILIZATION SUBJECT TO MINIMUM MATERIAL HANDLING AND MAXIMUM SPEED OF MOVEMENT, A STRAIGHT FLOW IS THE SIMPLEST AND MUST BE USED IN VARIOUS COMBINATIONS TO FORM U , E, T ETC FLOW. ARRANGE FOR SEPARATE, DEMARKATED AREAS FOR INCOMING, OUTGOING MATERIAL, MATERIALS RECEIVED BUT YET TO BE INSPECTED, MATERIAL RECEIVED - INSPECTED - AND REJECTED, TOXIC OR HAZARDOUS MATERIAL, SCRAP AND OBSOLETE MATERIALS ETC. AN ITEM MUST BE LOCATABLE WITH MINIMUM EFFORT AND EXPENSE OF TIME, ADEQUATE LIGHTING, VENTILATION, AND PROPER COLOUR SCHEMES MUST BE DEVISED, PROVIDE FOR HEATING, COLD STORAGE, AIRCONDITIONING, AND OTHER ENVIRONMENTAL REQUIREMENTS AS AND WHEN NECESSARY. KEEP SAFETY APPLIANCES SUCH AS GOGGLES, APRONS, HAND GLOVES, ETC, AT ACCESSIBLE PLACES, SCREEN THE STORES DEPARTMENT FROM UNAUTHORIZED ACCESS TO OTHER PARTIES.
4. 5. 6.
7.
8.
1.
2.
3.
WHEN MATERIALS ARE RECEIVED FROM SUPPLIERS AN ENTRY IS MADE IN THE DAILY GOODS RECEIPT REGISTER. THE CONTENTS OF THE DAILY GOODS RECEIPT REGISTER ALSO CALLED GOODS INWARD REGISTER ARE AS FOLLOWS : DATE AND TIME OF RECEIPT NAME OF THE SUPPLIER NAME OF THE CARRIER CHALLAN NUMBER AND DATE ITEM DETAILS AND DESCRIPTION QUANTITY AND VALUE OF ITEMS PURCHASE ORDER REFERENCE CARRIER DETAILS (RR NUMBER, LORRY NUMBER ETC.) GOODS INWARD NOTE REFERENCE REJECTED MEMO REFERENCE RECEIVED BY INSPECTED BY
THE GIN MUST ACCOMPANY ALL THE MATERIALS SENT FOR STORAGE, RECORDS OR DISPATCH TO USERS DEPARTMENTS. PRE PRINTED MULTICOLOURED GINS MAY BE USED FOR SPEEDY IDENTIFICATION AND RECORDS
DISCREPANCIES:
VARIOUS DISCREPANCIES SUCH AS - LOSS OF PACKAGE, DAMAGED PACKAGES, SHORTAGES, DAMAGES TO GOODS, WRONG ITEMS SUPPLIED, EXCESS SUPPLIES ETC. MAY OCCUR. THESE ARE NOTIFIED TO THE SUPPLIERS IN A DISCREPANCY REPORT ALONG WITH A COVERING LETTER. COPIES OF THE REPORT ARE SENT TO PURCHASE SECTION AND ACCOUNTS DEPARTMENT FOR APPROPRIATE ACTION. LOSS OF PACKAGES : A SHORT LANDING CERTIFICATE MUST BE OBTAINED FROM THE DOCK AUTHORITIES IN CASE OF CONSIGNMENT SHIPPED BY SEA AND AT THE SAME TIME A CLAIM BILL MUST BE SUBMITTED TO THE STEAMER AGENT WITH ADVICE TO THE INSURANCE COMPANY. IN CASE THE PACKAGE WAS SENT BY RAIL, ENDORSEMENT SHOULD BE OBTAINED ON THE RAILWAY RECEIPT AND THE CLAIM SHOULD BE PREFERRED ON THE RAILWAYS. IF A PACKAGE HAS LANDED BUT IS NOT TRACEABLE, A NOT FOUND APPLICATION IS TO BE SUBMITTED TO THE PORT COMMISSIONER WHO WILL INITIATE NECESSARY INVESTIGATIONS.
a)
c)
DISCREPANCIES ;---------------------------------------MINOR SHORTAGES AND DAMAGES; SUCH INCIDENTS CAN ONLY BE NOTICED ON OPENING THE PACKAGES. INCOMING GOODS ARE USUALLY INSURED AND INSURANCE COMPANY OR THE SUPPLIER MEETS THESE CLAIMS. AT TIMES, IF THE CLAIMS ARE NOT MET ONE HAS TO WRITE OFF THE VALUE. THE GIN IN SUCH CASES WILL BE ACCOMPANIED BY A WRITE OFF REQUISITION TO ADJUST THE RECORDS ACCORDINGLY. MAJOR SHORTAGES AND DAMAGES; AS THESE INVOLVE HIGHER VALUES THESE MUST BE DEALT CAREFULLY. ALL ORIGINAL PACKAGES, PACKING SLIPS, DELIVERY CHALLANS, MUST BE PRESERVED AND INSURANCE SURVEY MUST BE IMMEDIATELY ARRANGED. A CLAIM WILL BE PREFERRED ON THE INSURANCE COMPANY AND THE CONSIGNOR WILL BE NOTIFIED OF THE SAME. AT TIMES IT MAY HAPPEN THAT THE PACKAGE IS INTACT BUT THERE IS A SHORTFALL IN THE QUANTITY OF GOODS, CLEARLY IMPLYING THAT THE GOODS WERE SHORT SHIPPED BY THE CONSIGNOR IN THE FIRST PLACE. SUCH CLAIMS MAY OR MAY NOT BE ACCEPTED BY THE CONSIGNOR, IT HAS TO BE ROUTED THROUGH INSURANCE COMPANY TO SETTLE THE CLAIM. ANY CLAIMS FOR DAMAGED MATERIALS EXCEPT THOSE DUE TO DEFECTIVE PACKING , ARE USUALLY MET BY THE INSURANCE COMPANY.
d)
f)
STORES SYSTEMS & PROCEDURES ACCOUNTING / PRICING RULES GOVERNING ISSUE OF MATERIALS
STORES SYSTEMS & PROCEDURES ACCOUNTING / PRICING RULES GOVERNING ISSUE OF MATERIALS
THE MATERIALS STORED IN THE STOCK ROOM ARE ISSUED TO VARIOUS JOBS OR PRODUCTION DEPARTMENTS AGAINST THE AUTHORISED MATERIALS REQUISITIONS. THE ISSUES ARE RECORDED IN THE STORE LEDGER AND THE RESPECTIVE JOBS OR PRODUCTION DEPARTMENTS ARE DEBITED WITH THE PRICE OF THE MATERIAL ISSUED. AS THE TIME OF PURCHASES AND THE TIME OF ISSUES ARE MOSTLY DIFFERENT AND THE MARKET PRICE OF THE MATERIALS TENDS TO VARY, THE PROBLEM OF PRICING THE MATERIALS ISSUED NECESSITATES CERTAIN POLICY FORMULATIONS. IT IS AN IMPORTANT CONSIDERATION NOT ONLY UNDER STORE MANAGEMENT BUT ALSO FOR COSTING AND PRICING POLICIES. THE FUNDAMENTAL CONSIDERATION IS WHETHER TO PRICE THE ISSUES AT HISTORICAL PRICE I.E., THE ORIGINAL PURCHASE PRICE, AT THE REPLACEMENT PRICE I.E. THE PREVAILING MARKET PRICE AT THE TIME OF ISSUE OR AT SOME OTHER PRICE. THE VARIOUS METHODS ARE USED FOR PRICING THE MATERIAL ISSUES WHICH ARE BASED ON DIFFERENT PRINCIPLES.
ACCOUNTING / PRICING RULES GOVERNING ISSUE OF MATERIALS FIRST IN FIRST OUT METHOD (FIFO METHOD)
FIFO METHOD, AS ITS NAME SUGGESTS, IS GOVERNED BY THE PRINCIPLE THAT THE MATERIALS WHICH ARE RECEIVED FIRST ARE ISSUED FIRST. THE ISSUES ARE PRICED AT THE COST PRICE OF THE OLDEST CONSIGNMENTS TILL IT GETS EXHAUSTED. AS SOON AS THE OLDEST LOT IS EXHAUSTED, THE ISSUES ARE PRICED AT THE COST PRICE OF THE NEXT OLDEST LOT IN THE SEQUENCE, E.G. THE FOLLOWING TRANSACTIONS OCURRED DURING THE FIRST WEEK OF APRIL 2011:
APRIL 1, 300 UNITS PURCHASED @ Rs. 10 PER UNIT APRIL 3, 600 UNITS PURCHASED @ Rs. 15 PER UNIT APRIL 5, 500 UNITS ISSUED TO JOB NO. 1001 THE ISSUE OF 500 UNITS WILL BE PRICED AS UNDER; FROM THE FIRST LOT : 300 REMAINING 200 UNITS FROM SECOND LOT = 200 UNITS TOTAL PRICE OF THE ISSUE 500 UNITS
THE VALUE OF THE CLOSING STOCK OF 400 UNITS ( I.E. SECOND LOT 600 UNITS LESS 200 UNITS ISSUED WILL BE COSTED @ Rs. 15 I.E. THE VALUE OF CLOSING STOCK WOULD BE Rs. 6000.
ACCOUNTING / PRICING RULES GOVERNING ISSUE OF MATERIALS LAST IN FIRST OUT METHOD (LIFO METHOD)
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STOCK VERIFICATION
THE STORES MANAGER HOLDS THE PHYSICAL CUSTODY OF THE MATERIALS AND IS RESPONSIBLE FOR SAFE UPKEEP AS WELL AS FOR ANY MAJOR DISCREPANCY. HE MUST CONSTANTLY REVIEW THE STOCKS AND RECONCILE THE PHYSICAL AND BOOK STOCKS, WHICH DIFFER IN ALMOST ALL ORGANISATIONS. THE MAGNITUDE OF THIS PROBLEM WILL INCREASE AS THE NUMBER OF TRANSACTIONS INCREASE, BECAUSE MISTAKES MAY BE COMMITTED IN TRANSACTIONS AND THIS CAN ACCUMULATE TO MAJOR DISCREPANCIES. FOR EXAMPLE, IF THE WEIGHING SCALE INDICATES 1 KG LESS EVERY TIME THEY WEIGH, AND THERE ARE 100 WEIGHING IN A PERIOD, THE STORE KEEPER WOULD HAVE ISSUED 100 KG WITHOUT ANY RECORDS AND WILL FIND HIMSELF SHORT WHEN THE PHYSICAL CHECK IS MADE USING THE SAME WEIGH BRIDGE.
STOCK VERIFICATION
ISSUES WITHOUT INDENTS,IMPROPER CHECK OF RECEIPTS, PILFERAGE, OBSOLESCENCE, DETORIORATION AND DAMAGE DUE TO DIFFERENT CAUSES OF IMPROPER STORAGE, SHRINKAGE, EVAPORATION, SPIILAGE, ETC. ARE OTHER FACTORS THAT HAVE TO BE CONSIDERED IN THIS CONTEXT. IN ORDER TO EXERCISE STRICT CONTROL ON THE ABOVE, THE STORE MANAGER MUST VERIFY THE STOCKS PERIODICALLY. EXPERIENCE INDICATES THAT MANY DISCREPANCIES IN PRACTICE ARE DUE TO IMPROPER DOCUMENTATION, LIKE COMPLYING WITH URGENT ISSUES WITHOUT VOUCHERS, DELAYS IN POSTING THE RECEIPTS AND ISSUES AND ISSUE BY NUMBERS, RECEIPT BY WEIGHT AND ACCOUNTING BY NUMBERS, ETC.
a) b) c)
PROCESS OF VERIFICATION
STOCK VERIFICATION CAN BE DEFINED AS THE PROCESS OF PHYSICAL COUNTING, WEIGHING OR MEASURING THE STOCK OF MATERIALS THAT IS HELD AND MAKING A RECORD OF THESE FIGURES. NORMALLY PERSONNEL FROM THE ACCOUNTS DEPARTMENT ARE GIVEN THIS RESPONSIBILITY. SOMETIMES THE AUDITORS ( OR BANKERS TO WHOM THE STOCK IS HYPOTHETICATED) ALSO UNDERTAKE THE VERIFICATION OF STOCKS ON A SAMPLE BASIS ; IN ORDER TO CHECK THE REALITY OF THE PERFORMANCE STATEMENTS. A WELL DEFINED VERIFICATION PROCESS, CAN ALSO PINPOINT ANY DRAWBACKS OR SHORTCOMINGS IN THE METHODS OF STORAGE, MOVEMENT OF MATERIALS, HANDLING OF MATERIALS, OBSOLESCENCE, ETC. A REGULAR VERIFICATION PROCESS ENSURES THAT THE SYSTEM AND PROCEDURES LAID IN THE MANUAL ARE ADHERED TO.
PROCESS OF VERIFICATION
PHYSICAL VERIFICATION OF STOCKS STARTED OFF AS A PERIODIC EXERCISE, USUALLY COINCIDING WITH THE ANNUAL ACCOUNT CLOSING, UNDER THE DIRECTION OF ACCOUNTS DEPARTMENT. THIS PROCEDURE ACTING AS A POSTMORTEM EXERCISE, CAN STOP THE NORMAL FUNCTION OF THE PLANT TOWARDS THE YEAR END, IF THE NUMBER OF ITEMS ARE LARGE. SINCE THERE IS AN URGENCY FOR QUICK COMPLETION, THIS MAY LEAD TO AN INEFFECTIVE VERIFICATION PROCESS. TO OVERCOME THIS DIFFICULTY, MATERIALS ARE CHECKED THROUGHOUT THE YEAR AND VERIFICATIONS ARE SO STAGGERED, THAT ALL MATERIALS ARE COVERED IN A YEAR. IT WILL BE ADVANTAGEOUS TO COVER THE HIGH CONSUMPTION VALUE A ITEMS MORE THAN THE OTHER ITEMS IN THIS PERPETUAL CONTINUOUS SYSTEM. THE VERIFICATION PROCESS, WHETHER PERIODIC OR PERPETUAL SHOULD BE THOROUGH, OR WELL ORGANISED WEIGHING AND THE UNIT OF MEASUREMENTS MUST BE CONSISTENT AND THE MEASURING INSTRUMENTS MUST BE PROPERLY CALIBRATED, SO THAT MEASURING ERRORS ARE MINIMAL. CARE SHOULD BE TAKEN TO AVOID DOUBLE COUNTING, OVERLOOKING ITEMS KEPT AT OLD PLACES, WITH ANCILLARIES AND IN TRANSIT, ETC.
PROCESS OF VERIFICATION
THE PROCESS OF PHYSICAL VERIFICATION CAN BE COMPLETE ONLY IF NECESSARY FOLLOW UP ACTION IS PLANNED. AFTER TABULATION OF PHYSICAL STOCK, ATTEMPTS SHOULD BE MADE TO RECONCILE WITH BOOK BALANCE, INDICATING OPERATING STOCK PLUS RECEIPT MINUS ISSUES. IT IS VERY COMMON THAT THE TWO SETS OF FIGURES FOR EACH ITEM MAY NOT TALLY AND HENCE THE PROBLEM ARISES IN STORES MANAGEMENT. A DETAILED INVESTIGATION IS CALLED FOR, IF THERE ARE MAJOR DIFFERENCES PARTICULARLY IN HIGH VALUE ITEMS, TO AVOID RECURRENCE OF THE SAME IN FUTURE. USUALLY, ORGANISATIONS FIX UP LIMITS FOR DISCREPANCIES AND DISCREPANCY VOUCHERS ARE SIGNED BY THE APPROPRIATE AUTHORITIES. HOWEVER, STOCK VERIFICATION SHOULD NOT BE PERCEIVED AS A WITCH HUNTING PROCESS AND STORE PERSONNEL MUST BE INVOLVED IN THE EXERCISE. THE ORGANISATIONS WILL GAIN, IF THE STORES PERSONNEL ARE MOTIVATED BY A PROPER DEVELOPMENT OF THE ATMOSPHERE, CULTURE AND VALUE SYSTEMS.