Stores management
Introduction
After efficient purchasing, receipt and inspection of materials, the next important step in materials control system is the storage of materials. The purchased materials are to be stored in stores/warehouse and issued for production as and when they are required. Store keeping aims at safeguarding the materials from all kinds of loss and damage and ensuring smooth and continuous flow of materials into the production activity.
Meaning of stores management
Dictionary defines stores as a building where goods are kept. Stores are defined as supply of goods and storage is defined as the act of storing the goods. Some people use the term storekeeping which has the same meaning as storage. Storekeeping is the process of storing raw materials or goods under the supervision of a person called storekeeper or store controller. The raw materials are called “stores” and the finished goods are called “stock”. The place where these materials are stored is called “store room”.
Definitions
According to Maynard “Responsibilities of stores management are to receive materials, to protect them while in storage from damage or unauthorized removal, to issue materials in the right quantity, at the right time, to the right place, and to provide these services at the least cost”.
Importance of stores
1. Records keeping of receipts and issues.
2. Facilitate/help in inventory control by providing information on stock in hand.
3. Calculation of consumption figures for accounting department.
4. Facilitate material planning thereby providing information to purchase department.
5. Preservation of materials and control over their flow.
6. Provide information for production scheduling.
7. Help in disposal of non-moving, surplus and obsolescence items.
8. Efficient space utilization and flexibility of arrangement.
9. A reduced need for materials handling equipment.
10. A minimization of materials deterioration.
Functions of store department
1. Receiving and inspection
(a) Receiving: - Provisional goods inward note on the basis of actual quantity received, material it with purchase order.
(b) Inspection:- arranging quality test of incoming materials by using acceptance sampling, checking for shortages.
(c) Conversion of provisional goods inward note into final inward note.
2. Stores codification and classification
(a) Codification: - deciding about unique code for each item in consultation with purchase department, technical department and maintenance department for ease in identification and monitoring.
(b) Classification: - Classification of different items as;
1. Fast moving, slow moving and non-moving items.
2. Perishable and non- perishable items.
3. Volatile or non- volatile items.
3. Stores arrangement
Proper layout.
Maximum space usage.
Space for proper movement of items.
Proper lighting.
Adequate safety measures.
4. Issue management
On the requisition of authorized person.
Posting into stores ledger accounts.
5. stores accounting
Maintenance of stores records like inward register, outward register, stores ledger.
Issues may be accounted on the basis of LIFO, FIFO, Standard cost, average cost, market price.
Coding and classification
Coding is the method of specifying a unique identification to the materials in the stores or in inventory. Coding is essential for requisitioning materials for the operational departments, placing orders, receiving materials from the suppliers and having unique record for each material in the stores. It also helps in having a good control over the inventories and pilferage kept in the stores.
Unique identification of materials such as raw materials, work in process materials or finished good is a good practice. Coding is important for those plants that have varieties of raw materials with similar nomenclature. A good coding system has the following characteristics:
1. Flexibility: - a coding system should be long lasting so that maximum benefits could be achieved. It should not be like an organization is changing the coding system every year or so. Therefore, long term requirement of an organization should be kept in mind while applying any coding methods.
2. Precision: - the codification method should imply that a unique code is given for every material. A proper and logical coding should be given to every material so that no confusion or mismanagement occurs in future.
3. Brevity: - while coding a material. The length of the code should not be very long or very short. The code should be such that the material is easily identifiable by just looking at the code.
4. Comprehensiveness: - while classifying a material for coding, the nature of the material, name of the supplier and end users should be taken into account. The code should be such that all these are implemented in the code. This helps tracking information about the material.
While coding a material, answers to the following questions should always be kept in mind;
Who is the user?
What is the use of coding the material?
Which method is the most appropriate for coding?
Methods of coding
1. The group coding method
Group coding is the grouping of inventories and assigning a unique code to each group. In this method, numbers are reserved for each group. Then the numbers are sequentially arranged in the group. For example 001 might be one of the codes for inventory. In this code, 00 might be a particular group such as raw materials and 1 might represent a type of material such as fabric. As for another instance, we can group the inventories, then the type of inventories and then the sub – types and so on, as shown
(a) Grouping based on inventories
Raw materials
Purchased goods
Spare parts
Tools
Finished goods
Other supplies
Fixtures and patterns
Capital equipments
(b) Groping based on the shapes of materials
Wire
Tube
Bar
Strip
Sheet
(c) Grouping based on the materials for construction
Stainless steel
Brass
Aluminum
PVC
Bronze
Mild steel
Copper
2. The mnemonic coding method
It includes alphabets and numerals. In this method, each group is assigned unique alphabets and numbers. For example, FSKR!))M might be code for fabric. In this code F represents silk, R for red color and 100M for 100 meters of cloth received.
The only disadvantage of mnemonic coding is that two different names or sizes can represent the same code. When the number of items gets larger, it becomes difficult to assign code. Therefore, this method is used in those plants where materials are of distinct sizes and of less variety.
3. The hybrid system
Is the combination of both the group classification and mnemonic method. For example 001SK115 might represent fabric of silk material in red color. In this coding 001 represents fabric group, SK for silk and 115 for red color.
Advantages
1. Systematic grouping of similar items for correct identification of each and every item.
2. The usage of long descriptions is simplified and possible confusion avoided.
3. Avoid duplicate stocks of the same item being held under different names, descriptions, brand names, part number and different stores.
4. Enables reduction in size and varieties.
5. Helps in standardization of materials and helps in finding substitutes.
6. It can be used as a basic for setting up different stores.
7. To arrange bin cards and records in stores, account and inventory control sections in the uniform manner.
Introduction
After efficient purchasing, receipt and inspection of materials, the next important step in materials control system is the storage of materials. The purchased materials are to be stored in stores/warehouse and issued for production as and when they are required. Store keeping aims at safeguarding the materials from all kinds of loss and damage and ensuring smooth and continuous flow of materials into the production activity.
Meaning of stores management
Dictionary defines stores as a building where goods are kept. Stores are defined as supply of goods and storage is defined as the act of storing the goods. Some people use the term storekeeping which has the same meaning as storage. Storekeeping is the process of storing raw materials or goods under the supervision of a person called storekeeper or store controller. The raw materials are called “stores” and the finished goods are called “stock”. The place where these materials are stored is called “store room”.
Definitions
According to Maynard “Responsibilities of stores management are to receive materials, to protect them while in storage from damage or unauthorized removal, to issue materials in the right quantity, at the right time, to the right place, and to provide these services at the least cost”.
Importance of stores
1. Records keeping of receipts and issues.
2. Facilitate/help in inventory control by providing information on stock in hand.
3. Calculation of consumption figures for accounting department.
4. Facilitate material planning thereby providing information to purchase department.
5. Preservation of materials and control over their flow.
6. Provide information for production scheduling.
7. Help in disposal of non-moving, surplus and obsolescence items.
8. Efficient space utilization and flexibility of arrangement.
9. A reduced need for materials handling equipment.
10. A minimization of materials deterioration.
Functions of store department
1. Receiving and inspection
(a) Receiving: - Provisional goods inward note on the basis of actual quantity received, material it with purchase order.
(b) Inspection:- arranging quality test of incoming materials by using acceptance sampling, checking for shortages.
(c) Conversion of provisional goods inward note into final inward note.
2. Stores codification and classification
(a) Codification: - deciding about unique code for each item in consultation with purchase department, technical department and maintenance department for ease in identification and monitoring.
(b) Classification: - Classification of different items as;
1. Fast moving, slow moving and non-moving items.
2. Perishable and non- perishable items.
3. Volatile or non- volatile items.
3. Stores arrangement
Proper layout.
Maximum space usage.
Space for proper movement of items.
Proper lighting.
Adequate safety measures.
4. Issue management
On the requisition of authorized person.
Posting into stores ledger accounts.
5. stores accounting
Maintenance of stores records like inward register, outward register, stores ledger.
Issues may be accounted on the basis of LIFO, FIFO, Standard cost, average cost, market price.
Coding and classification
Coding is the method of specifying a unique identification to the materials in the stores or in inventory. Coding is essential for requisitioning materials for the operational departments, placing orders, receiving materials from the suppliers and having unique record for each material in the stores. It also helps in having a good control over the inventories and pilferage kept in the stores.
Unique identification of materials such as raw materials, work in process materials or finished good is a good practice. Coding is important for those plants that have varieties of raw materials with similar nomenclature. A good coding system has the following characteristics:
1. Flexibility: - a coding system should be long lasting so that maximum benefits could be achieved. It should not be like an organization is changing the coding system every year or so. Therefore, long term requirement of an organization should be kept in mind while applying any coding methods.
2. Precision: - the codification method should imply that a unique code is given for every material. A proper and logical coding should be given to every material so that no confusion or mismanagement occurs in future.
3. Brevity: - while coding a material. The length of the code should not be very long or very short. The code should be such that the material is easily identifiable by just looking at the code.
4. Comprehensiveness: - while classifying a material for coding, the nature of the material, name of the supplier and end users should be taken into account. The code should be such that all these are implemented in the code. This helps tracking information about the material.
While coding a material, answers to the following questions should always be kept in mind;
Who is the user?
What is the use of coding the material?
Which method is the most appropriate for coding?
Methods of coding
1. The group coding method
Group coding is the grouping of inventories and assigning a unique code to each group. In this method, numbers are reserved for each group. Then the numbers are sequentially arranged in the group. For example 001 might be one of the codes for inventory. In this code, 00 might be a particular group such as raw materials and 1 might represent a type of material such as fabric. As for another instance, we can group the inventories, then the type of inventories and then the sub – types and so on, as shown
(a) Grouping based on inventories
Raw materials
Purchased goods
Spare parts
Tools
Finished goods
Other supplies
Fixtures and patterns
Capital equipments
(b) Groping based on the shapes of materials
Wire
Tube
Bar
Strip
Sheet
(c) Grouping based on the materials for construction
Stainless steel
Brass
Aluminum
PVC
Bronze
Mild steel
Copper
2. The mnemonic coding method
It includes alphabets and numerals. In this method, each group is assigned unique alphabets and numbers. For example, FSKR!))M might be code for fabric. In this code F represents silk, R for red color and 100M for 100 meters of cloth received.
The only disadvantage of mnemonic coding is that two different names or sizes can represent the same code. When the number of items gets larger, it becomes difficult to assign code. Therefore, this method is used in those plants where materials are of distinct sizes and of less variety.
3. The hybrid system
Is the combination of both the group classification and mnemonic method. For example 001SK115 might represent fabric of silk material in red color. In this coding 001 represents fabric group, SK for silk and 115 for red color.
Advantages
1. Systematic grouping of similar items for correct identification of each and every item.
2. The usage of long descriptions is simplified and possible confusion avoided.
3. Avoid duplicate stocks of the same item being held under different names, descriptions, brand names, part number and different stores.
4. Enables reduction in size and varieties.
5. Helps in standardization of materials and helps in finding substitutes.
6. It can be used as a basic for setting up different stores.
7. To arrange bin cards and records in stores, account and inventory control sections in the uniform manner.
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