STORE AND PURCHASE MANAGEMENT

TYPES OF STORE

v  Generally unworked material is known as store and the place where it is housed called “Store Room”.

v  Stores are generally of the following categories:

(a)    Raw materials.

(b)   Consumable stores.

(c)    Inflammable stores like petrol, kerosene oil etc.

(d)   Chemicals like carbide, sulphuric acid etc.

(e)    Machinery and Equipment.

(f)    Hand Tools.

(g)   Furniture.

(h)   Finished Products.

(i)     Scrap.

(j)     Unserviceable stores.

(k)   Empties and Packages etc.

v  Finished product ready for sale are called stock and the place where they are kept called “Stock Room”.

 

ORGANISATION OF STORE AND PURCHASE DEPARTMENT

v  In small factories or concerns, the store room and stock room may be one and under the control of one officer but in big organisation both are separate and are separately controlled.

v  The organisation of the store department is as follows: 

v  The store-keeper is very important figure in any organisation and he is as much responsible for the articles in his charge as cashier for the cash.

v  He should, therefore, take steps to reduce thefts and wastage of materials to a minimum.

 

PURPOSE OF STORE KEEPING

v  To see that the stock of no item at any time falls below the prescribed minimum or goes in excess of fixed maximum quantity.

v  To examine carefully all goods and materials on receipt.

v  To arrange for a systematic and efficient storing of materials.

v  To maintain accurate and prompt distribution of items to departments as and when required under Issue Requisition Notes.

v  To maintain efficient quantity records of movement of stock and to account for all goods that has come under their charge.

v  To prevent any theft, wastage or deterioration of stock.

 DUTIES OF STORE KEEPER

v  The first most important duty is to plan the stores. He has some space at his disposal and has to put that space to the maximum use.

v  To keep record of materials and their costs.

v  Whenever requisition are received from shops, they are checked and if found correct, material is issued and entries are made in the required register.

v  He has to check the balance of items from time to time and see that desired quantities are available.

v  Whenever the existing stock at any time is likely to be exhausted he should send its information to store officer, who in turn will inform to purchase section.

v  He has to prevent leakage, theft, wastage and deterioration.

v  He has to see that material is issued only against written requisition.

v  He should not permit everybody to go inside and issued materials must be handed over outside the store, so as to prevent theft and disturbances.

IMPORTANCE OF RECORDS AND REGISTERS IN STORE

v  Mostly stores accounts are referred to the details pertaining to the material which is not for resale.

v  A better stores procedure is a safeguard against waste of material and theft etc.

v  In order to maintain an efficient record of stores, the following books and records will be required and these are maintained separately for different types of materials:

(a) Inward and Outward Registers:- When the material is despatched by the supplier through rail, he will send its receipt issued by the railway authority, called ‘RR’.

ð  On the production of that receipt to railways, material can be received by the customer.

ð  A separate register is maintained by the store-keeper in which daily entries of RR received are made and known as “Inward Register”.

ð  In the same way, when some material goes out of the store to other place, its entries of RR are made by store-keeper in “Outward Register”.

(b)  Stock Register:- These are:

(1)   Dead stock or Non consumable Register:- This is maintained by store-keeper, in which entries of non-consumable articles such as machinery, furniture etc. are made. The different items are entered in different pages. All transactions about a particular item are entered in one page.

(2)   Consumable Register:- In this, store-keeper maintains record of consumable stores received, such as coke, diesel oil, lubricants, cotton waste, paints etc. The different items are entered in different pages. All transactions about a particular item are entered in one page. 

(c)    Daily Receipt Register:- This may be in a register or loose leaf from.

ð  Whenever any material comes in the store, it is entered date wise in daily receipt register.

ð  Material is then inspected ad if found suitable is entered in Stock Register.

ð  If the material is found defective, it will be rejected and either the material or its reports will be sent to the supplier.

ð  The incidental charges that are incurred will also be noted in daily receipt register.

(d)   Issue Register:- This may be in register or loos leaf form. All stores issued are entered date wise in it by store-keeper. From the receipt and issue register, store ledger is prepared by accounts section.

(e)    Surplus Stock Register:- Sometimes such purchases are made, which do not come in use for long time, say (3 years).

ð  Such materials are then declared surplus and are recorded in a separate register called Surplus stock Register.

ð  Thus unnecessary material is removed from the stock register to facilitate easy handling.

(f)    Suspense Register:- The defective items received in excess should not be placed in the bins but in “Suspense cell”. A separate register is maintained by store-keeper for all such items placed in suspense and is known as Suspense Register.

(g)  Condemned Article Register:- Unserviceable material after use or obsolete material which is authorised to be condemned by authorised persons is entered in this register and will be shown as stock until disposed off some way.

ð  The balance of condemned article will be taken out from store ledger and will be shown condemned.

(h)  Loan Register:- Sometimes non-consumable material is issued from store on loan for temporary period by the production of slip of authority.

ð  Before issuing, material is entered in this register and signature of the bearer is taken in this register and slip of authority is kept safe.

ð  When the material comes back, slip is returned and entry of material received back is made in loan register.

(i)    Empty containers and Packages Register:- The record of empty containers and packages is kept in this register by store keeper.

ð  These should be disposed of at convenient intervals by auction or otherwise the best of advantage.

ð  The above are the various records which must be kept by any store-keeper for easy and smooth handling of stores.

ADVANTAGES OF GOOD STORE RECORDING SYSTEM

v  Ready record of all materials and stores purchases may be obtained.

v  As the materials are arranged in a systematic way in racks and bins, handling of stores become very easy.

v  Unnecessary confusion and delay in issue of material avoided.

v  It helps to operate shops efficiently.

v  Overstocking is a avoided and delays due to lack of material prevented.

v  Wastage of time and labour, leakage, thefts and pilfering of stores are reduced to their minimum.

v  Classification of receipts and issues are made easy.

v  Each item issued can be traced to its respective department, so as to ensure correct costing.

v  To safeguard the materials which are lying in store.

IMPORTANCE OF ECONOMIC ORDERING QUANTITY (EOQ) ANALYSIS

v  The evaluation of the most economic quantity to be purchased involves calculation of the following two costs:

(1)   Procurement cost:- This cost includes the expenditure made on:

ð  Calling quotations.

ð  Processing quotations.

ð  Placing purchase orders.

ð  Receiving and inspecting.

ð  Verifying and payment of bills.

ð  Other incidental charges etc.

This cost nearly comes to Rs. 100 to Rs. 200 per order.

(2)   Inventory Carrying Cost:- This consists of expenditure made for:

ð  Insurance.

ð  Storage and handling.

ð  Obsolescence and depreciation.

ð  Deterioration.

ð  Taxes etc.

This cost varies nearly 10 to 20% of the product cost.

v   The economic ordering quantity is obtained by the quantity whose procurement cost is equal to inventory carrying cost.

PRINCIPLES OF SKILLFUL PURCHSING

Following are the main purchasing principle:

1.       Right time: this parameter is most critical one due to the consequences of stock out in the event of part failures.to determine the right time, information about all the element of total lead time should be available, i.e. internal administrative lead time of converting indent into an order, manufacturing and transportation time and inspection lead time.

2.      Right source: following are the main sources for the procurement of spare parts:

a.      Authorised dealers or original manufactures.

b.      Local dealers (Holding genuine spares only).

c.       By getting them manufactured.

While selecting a source of supply for spares; timely supply, reliability, price and service facilities offered should be considered.

3.  Right price: lowest acceptable price consistent with quality, timely supply etc. should be considered.

4.     Right quality: while inviting the tenders or placing the enquiries, quality specifications mentions tolerances should be clearly spelled out.

5.     Right quantity:  the problem of determining the right quantity is interlinked with the right time. The quantity will be different for each category of space such as maintenance, overhaul, and insurance of storable spares.

6.   Right place of delivery/ Transportation: in most of the cases, spare parts has to be supplied directly to the consuming projects, which may be located at far distance places from headquarter. The place of delivery should be clearly mentioned in the supply order.

7.  Right procedure: right procedure to be adopted has to be formally developed for the pre-purchase, ordering, and post purchase systems. Pre-purchase system means initiating the purchase through indents requirement, planning, selection of suppliers, obtaining quotations and evaluating them. With purchase order generally an acknowledgment copy  is also sent to the supplier, who then return it as a written acceptance of supply order and to abide by the terms and conditions mentioned in the order. Post purchase system include follow up with the supplies.

8.   Right contract: purchase order is a legal document that binds selling company with the buying company various terms and condition about insurances, sales tax, octrai, customs, breach of contract, settlement of dispute, F.B.O., C.I.F., etc. should be clearly mentioned

DUTIES OF PURCHASE OFFICERS

v  The most important and essential duties of purchasing officer are:

ð  To maintain the standard of quality of product by selecting right quality of materials during purchases.

ð  To organise and direct the purchasing department for efficient working.

ð  To represent his concern with other concerns during purchasing contacts.

ð  He should maintain the reputation of the concern for integrity and fair dealing with others while negotiating.

ð  Shops should not wait for materials.

ð  To make a final check on all the requisitioned goods from different shops in the interest of economy, as regards quality, quantity and specifications.

ð  To act as an executive of the firm and a partner, especially in the preparation of purchasing budget.

ð  To spend money on purchases very carefully and wisely.

ð  To suggest if the materials can economically be produced in the concern instead of purchasing and vice-versa.