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;
- Safe keeping of goods so that:
- 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).