STORE KEEPING

Page 1 2/27
 STORE KEEPING
• Receive, store, and issue materials, parts, factory
supplies at minimum cost
• It is serving facility, inside an org., responsible for
proper storage of the material and then issuing it to
respective departments on proper requisition
• Protect the goods stored
• Store room, storekeeper

Page 2 3/27
 OBJECTIVES OF STORE-KEEPING

• Easy location of the items in

store.
• Proper identification of items.
• Speedy issue of material.
• Efficient utilization of space.
• Reduction in need of material
handling equipment.

Page 3 4/27
 DUTIES OF STOREKEEPING
“As per Maynard”
“The duty of store keeping are
• To receive materials

• To protect them while in storage from damage and

unauthorized removal

• To issue the materials in the right qualities, at right

time, to the right place and

• To provide these services promptly and at least cost.

Page 4 5/27
TYPES OF STOREKEEPING

Storekeeping

Centralized Decentralized
storekeeping storekeeping

Page 5 6/27
 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.

Page 6 7/27
 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.

Page 7 8/27
 FUNCTIONS OF STOREKEEPING
Balance
function

Assortment Improving
function function

Functions
of storekeeping
Security speculation
function function

Page 8 9/27
 FUNCTIONS OF STORE-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.

Page 910/27
• 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.

Page 10
 Why storekeeping?
 Receiving, handling and speedy issue of material.

 Custodian of goods I store against damage and pilferage.

 To ensure regular supply of materials .

 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. 11/27

Page 11
 STORES SYSTEM
CLOSED
1. All materials are stored in a
closed/controlled area.
2. No other person than the
stores personnel is
permitted in the area.
3. Materials can leave or enter
the storage area only by
authorized documents.
4. Maximum physical
security.
5. Tight accounting control of
inventory material
OPEN
1. There is no specific area.
Stores are maintained in the
form of suitable/ convenient
locations.
2. Every individual has access
to any storage facility.
3. After the receipt of the
material it is delivered to
respective department to
expedite the production
activity.
4. Chances of pilferage high.
5. Less emphasis on
accounting control of the
material.
12/27
Page 12
VARIOUS SECTIONS IN STOREKEEPING

 Receiving section
Location
Working procedures
 Stores section Layout of stores
Stores equipment
Material handling facility
Identification of materials
 Issue section

 Accounting section

 Stock taking checking

13/27
Page 13
1. RECEIVING SECTION

Receiving

OUTSIDE INTERNAL
SUPPLIERS SUPPLIERS

14/27
Page 14
 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

15/27
Page 15
 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.

16/27
Page 16
 2. STORES SECTION

• This is a place where all materials received by stores

department are kept with protection against
deterioration.

• Various stores operation are:- Location, Procedure

Layout Equipment and Identification of stores
section.

17/27
Page 17
Location of stores
• to provide space to the materials till these are issued to
the, respective departments of the enterprise.

Working Procedure
• receives the materials from receiving sections.
• material is classified and coded according to their nature
and use.
• bin card is tagged.

18/27
Page 18
 Stores Bin Card
• Card No. Part No.
• Description Location
• Date
The bin card contains up to date information about the receipt,
issue and balance of the respective item in the stock.

19/27
Page 19
 Layout of stores section

1. Flexible in arrangement
2. Convenience in physical
counting of materials.
3. Efficient use of floor space
and height.
4. Minimum handling and
transportation of materials .
5. Items used sparingly shed.
Be easy to locate.

20/27
Page 20
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

21/27
Page 21
• Bins: Bins are expensive & as Many item as possible should be put
into them, refilling being done on a regular basis.

Page 22
• 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.

Page 23
Static racking Live racking

Page 24
Drive through racking

Page 25
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.

Page 26
 Identification of materials in stores

• Tagging some piece of paper or cloth with the items.

• Labels may be fixed on the items.
• The coded number or any other identification mark
may be embossed on the items.
• Painting or color coding of items.

22/27
Page 27
 METHODS OF CODING

1. Mnemonic Method:- Here alphabets closely

associated with name of the item are used e.g. MT
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
Page 29
 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 .

24/27
Page 30
 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.

25/27
Page 31
 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.

26/27
Page 32
 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 ANNUAL 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.

27/27
Page 33
“Cost Control &

Cost Reduction”

Page1/21
34
 Cost Control
•keeping the expenditure
within acceptable limits.

•costs are in control unless

costs exceed budget or
standard

Page3/21
35
 Cost Control Process

Steps involved in designing process of cost control

system:

• Establishing norms
• Appraisal
• Corrective measures

13/21
Page 36
 Cost Control in Individual Cost
Elements
• Raw material
• Wages
• Power & fuel
• Stores & spare parts
• Overheads

15/21
Page 37
 Advantages of Cost Control

• Achieving the expected return of capital

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

Page6/21
38
 Tools of cost control

• Standard cost and budgets.

• Ratio analysis.

• Value analysis.

Page7/21
39
 Cost Reduction

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

Page8/21
40
Cost reduction can be effected by either of the
following ways:

 By reduction in unit cost of production

 By increasing productivity

Page 41
 Areas of reduction
• Design
• Factory organization and method
• Production planning
• Layout and equipment
• Utility services
• Marketing
• Finance
 

Page 42
 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.

Page 43
 Illustration of problem

• A 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.

• If 3% discount is offered by the suppliers for purchase in lots of 1000

or more should the publishing house accept the offer?

Page 44
 Solution

• EOQ=

= 200 units

Page 45
 Calculating TC (no discount)

No. of orders to be placed by getting 200 units = 10

Average inventory = 100
Purchase price of 200 units @ Rs 20/unit = 40000
Ordering cost (10 orders @ Rs 50/order) = 500
Carrying cost (Rs20 * 0.25) = 500

Total Cost = 41000

Page 46
 Calculating TC (3% discount)

Unit cost after 3% discount = 19.40

Lot size = 1000
No. of orders for 2000 units = 2
Average inventory = 500
Purchase price of 2000 units @ Rs 19.40/unit = 38800
Ordering cost (2 orders @ Rs 50/order) = 100
Carrying cost (Rs500*19.40*0.25) = 2425

Total Cost = 41325

Page 47
Non conventional approach :

• Material cost

• Man power cost

• Cost management inititates-selling /distribution

• Funding cost

Page 48
 Material cost :

• e-sourcing
  discovery of new sources
competitive pressures
Rationalization of suppliers
• Thrust on value engineering
• Re-visiting designs
• Application oriented engineering
• Product life cycle management
 

Page 49
 
Manpower cost
 
• Right sizing of employees-VRS,CRS
• Optimum utilization of manpower
• Transition from machine engagement time to man engagement time.
• Productivity linked wage settlement
• Adopting new concepts

Page 50
 Importance of Cost control and cost reduction
 
Reduction for corporate turnaround
 
• 2 drivers:
• To stay profitable
• Offering quality product at cheaper price- eliminate unproduction
expenditure

Page 51
 Cost + margin = selling price
 
Margin = selling price – cost
 
• Margin is a function of how efficient the company is in controlling
costs.

Page 52
 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

17/21
Page 54
Page 55
 Precautions in Implementing Cost
Reduction Programs
• 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

18/21
Page 56
 Planning for Cost Reduction

1. Crash programmes
2. Planned programmes
3. Short range programmes
4. Long range programmes

20/21
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.

10/21
Page 58
 Cost Control v/s Cost Reduction
Cost Control Cost Reduction
1. It is the competitive analysis of actual This process finds out the substitute by
results with established norms. finding new ways or methods.
2. The variances are appraised and The necessary steps are taken for further
reported and necessary course of action modification in the method.
will be taken to revise norms, standards
etc.
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.
Page12/21
59
Page 60