Store

In any organisation, goods are to be stored properly, issued timely and refilled for future issue adequately. This is the function of store department. Inventory could be in many form:

• Raw materials (RM);
• Work-in-progress (WIP);
• Finished goods (FG);
• Maintenance supplies of plant & machineries;
• Printing & stationery goods;
• Electrical & Engineering goods (like tube fittings, motors, electrical wire, etc.);
• Minimum inventories of the above to hold to take care of delivery time by vendors.

Why Store department critical function?

• Production department requires raw material so that it can supply the same to customers timely after processing → unless received timely → delays and defaults;

• Store department decides how much minimum quantity of goods is to be kept in store → if kept more → more carrying cost (interest) and holding cost (space, obsolescence, theft, etc.) → margin reduction;

• Working Capital Management
  • Purpose of holding Inventory is to get converted into receivables → generate profit + cash flow;
  • If stored more → working capital blockage;
  • Storage of junk / surplus / waste / slow moving goods → working capital blockage.

• Maintenance goods of plant & machineries → required for latter’s smooth functioning;

• Goods to be kept in proper condition so that the same are usable when required;

• To keep the minimum quantity in stock according to delivery time and minimum lot size given by  vendors in consideration → else, supply flow would break;

• Printing & Stationery items or ink cartridges or electrical items, etc. required for smooth functioning of office.

Deliverables (i.e. expectations from the Department)

• Production
  • Timely issue of PR (purchase requisitions) on Purchase department so that latter can raise purchase orders timely;
  • Faster issue of goods by keeping the goods in easy reach;
  • Ensuring sufficient goods available for production department during off-office hours for continuity in production;
  • Feedback to Purchase and Accounts departments about quality problems with goods so that the same can be resolved vis-à-vis vendors or debit notes can be raised or ‘vendor verification form’ (as discussed in Purchase department article) can be updated regularly & timely;

• Risk coverage
  • Securing / covering goods’ risks be taking insurance cover OR by investing in safer storing solutions → ensuring sufficient insurance cover (i.e. insurance value => maximum inventory held by the organisation) to avoid under-insurance clause;
  • Regular physical verification of goods and identifying reasons for mismatch, if any;

• Storage
  • Safe keeping of goods so that:
    • less wear & tear due to storage;
    • avoidance of theft & mishandling;
    • goods are in working condition when required;
  • Look-out for better storing solutions which can
    • store more goods;
    • occupy less space;
    • reduce mishandling losses;
    • make goods’ access faster.
  • Identifying slow moving or junk or waste goods and disposing off them if not required and make available or clean the space;

• Records
  • Maintenance of stock registers regularly (manually or electronically);

Important developments in the Store function

• Store department getting vertical
  • Storage of more goods;
  • Availability of automatic storage and retrieval system (ASRS) where computer-guided storing and retrieval brings efficient storing. Pls. check the youtube link.
  • There are numerous companies providing such solutions. One of the oldest companies is SSI SCHAEFER from Germany since the year 1937.

• Usage of bar-codes and RFID tags for
  • Faster issue;
  • Easy identification;
  • Faster physical verification.

• Usage of software for identifying
  • Slow moving stock;
  • Re-order levels;
  • Maintenance of stock registers.

• Linking with vendors’ computers
  • For automatic order placement when re-order level reaches;
  • Tracking the status of order.

• Vendors’ managed inventories (VMI)
  • Vendors supplying filled bins OR vendors managing the organisation’s bins / inventory → supply of bins to production department without the need of store department filling → saving of handling time → reduction in inventory stock.
  • Check the concept of VMI and pre-requisites for better VMI

Traditional / Normal ways of working in Store function

• Manual stock registers;
• High inventory stock;
• Inefficient storing practices resulting in:
  • Slow issue of material;
  • Difficultly in identifying slow moving goods;
  • Wastage due to mishandling;
• Yearly stock verification (difficulty in identifying the differences during the year);
• Inventory under-insured (i.e. insurance cover taken of less value than the normal book stock of stock)

Conflicts (Inter-departmental) / Challenges with Store function

• Delay in processing user departments’ material requests. The delay could be due to:
  • Non-investment in better storing solutions restricting easy access of material for retrieval and issue;
  • Poor and laxity in response of Purchase department in ordering the goods;
  • In-efficient vendors supplying the non-matching goods of poor quality in mis-matching quantity with delay.

• How much inventory to be kept which is optimum and would involve less blockage of working capital? ;

• Controlling on the stock of goods by
  • Conducting periodic physical verification alongwith issue / receipt of material and identifying the reason for variance;
  • How to maintain stock registers with numerous items?

Some of the Process Implementation for better Store function

• Physical verification (Phase-wise program)
  • section-wise (weekly) so that entire store physically verified in a given period;
  • Physical verification reports à section verified; Item number / name; book stock; physical stock; variance; reason for variance.

• List of slow-moving, non-moving, junk goods pending to be reviewed / disposed (Monthly);

• Pending purchase requisitions for which:
  • Request sent to Purchase department but goods to be received; expected date of receipt (Daily);
  • Request not sent to Purchase department (Daily);

• Surprise inspection of the store by senior management and report thereon (Monthly);

• Inventory stock – Book Value; insurance cover taken, expiry date of cover (Monthly);

• Feedback for improvement, suggestions, complaints (Monthly).