STORE KEEPING

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 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

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 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.

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 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.

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TYPES OF STOREKEEPING

Storekeeping

Centralized Decentralized
storekeeping 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.

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 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. 8/27
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 FUNCTIONS OF STOREKEEPING

Balance
function

Assortment Improving
function function

Functions
of storekeeping
Security speculation
function function

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 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.
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 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 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.

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 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.
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VARIOUS SECTIONS IN STOREKEEPING

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

Accounting section

Stock taking checking

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1. RECEIVING SECTION

Receiving

OUTSIDE INTERNAL
SUPPLIERS 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.

Various stores operation are:- Location, Procedure

Layout Equipment and Identification of stores
section.

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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.

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 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.

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 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.

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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 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.

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 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.

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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 .

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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 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.

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Cost 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 of Cost Control

Achieving 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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 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 .

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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 and equipment
Utility 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

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?

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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

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

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 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

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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
Application oriented engineering
Product life cycle management

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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

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 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

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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..
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 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 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

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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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 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 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.
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