FINANCIAL MANAGEMENT & COST ACCOUNTING

Module 7. Inventory Management

Lesson 42
STORES MANAGEMENT

42.1 Stores Management

Stores, storage or stores management generally refers to the function of receiving, storing and issuing of material. It covers all aspects of preservation of goods i.e. stores-building, supplies and act of storing. It insures that materials are maintained in good condition, ready to use when required, and the records of incoming and outgoing materials is maintain

Benefits of good stores management

1. Materials are easily located and easily accessible.

2. Optimum space utilization and flexibility in arrangement

3. Minimize unnecessary movement and hence reduced cost of material holding and transportation.

4. Minimization of deterioration and spoilage of material by proper monitoring.

5. Provides for ease of physical counting (physical verification)

42.2 Stores Location and Layout

In order to keep minimum material handling cost and easy accessibility, the following points should be kept in mind while deciding about the stores location and its layout

Stores Location:

Centralized vs. decentralized store.

It should be decided whether to have a centralized or decentralized store. Both have their own advantages as well as disadvantages in centralized stores the advantages are

1. Better supervision and better control

2. Gives benefit of bulk quantity such as price discounts and favourable delivery conditions.

3. Lower stock levels due to avoidance of duplication of stock

While in case of a decentralized stores system there is a greater flexibility and convenience in carrying out stores.

Stores Layout

The following points should be considered while designing the stores layout

· It should provide your easy supervision, cess and physical verification.

· Heavy and bulky materials should be placed such that they are near to its user department

· Availability of space should be used to its maximum extent

· All bins, racks, containers etc should be properly numbered/coded for easy identification

42.3 Responsibilities and Functions of a Storekeeper

Broadly the storekeeper is responsible for all functions carried out in the stores i.e. Receipt, storage and issue and record of material His main duties can be as listed below:

1. To receive materials, arrange for inspection, verify quality and quantity with purchase order, and accept the materials after complete verification of relevant documents.

2. Promptly prepare “stores received note “and circulate a copy to concerned departments.

3. To provide for adequate and proper storage facilities as per the requirement of various items.

4. ISSUE the correct materials in right quantity and quality to various user departments. Materials can be issued only if the material request note is duly authorized by competent personnel/officer

5. To keep updated records of all stores transactions such as material received, stored, issued, returned, transferred etc. Entries may be made in the bin card of each item

6. To keep a track of inventory levels and place purchase requisitions when re-order levels of various items are reached.

7. To use proper codification and standardization methods.

8. To try and minimize and report about various surplus stock, obsolete stock, on- moving items, abnormal consumption etc,

9. To ensure good housekeeping of stores department and to restrict the entries of unauthorized persons.

Various records/documents used in stores department are

a. Stores Received Note (SRN)

b. Material Requisition Note (MRN)

c. Material Transfer Note (MTN)

d. Material Return Note

Stores Received Note

It is prepared when materials are received from the supplier. Materials received are compared with the original purchase order which was placed to supplier.

Material Requisition Note

It is sent by a user department which requires some materials from the stores department. It should indicate the name of user department, name and item code of material, specification, expected delivery period etc. And it should be authorized by a competent officer.

Materials Transfer Note

It is prepared when the material is being transferred from one job to another OR from one department to another department.

Materials Returns Note

It is by a user department which intends to return the excess material to stores department.

Stores Records

Whenever material is received issued and transferred two sets of records are maintained.

(1) By store keeper: Store keeper keeps record for issued, received or transferred.

(2) By cost department: They keep record for value and quantity of material issued received and transfer.

The first one is called Bin card second is called Store’s Ledger. These two sets of records are compared time to time and adjustment is done.

1. Bin card: It is used to keep quantitative record in chronological order for all items and materials in the store by storekeeper. A Bin card is used for each material, every receipt, issue or return. It is hang up in a convenient place outside the bin and given a particular number. It is helpful to making entries as and when goods are placed, into bin or taken out. Numbering helps in identifying the bin.

2. Stores ledger: Stores ledger is kept and maintained by costing department in form of loose leaf card for ease of removing and inserting.

Stores ledger account may be designed without columns for “ordered””reserved” and stock verified. But they contain useful information which helps in future production without unnecessary reference of books and documents.

It provides continuous record of materials, stores received, issued, returned or transferred. It discloses the balance in hand both in quantity and value at point of time. It also helps in decision making.

Goods received note, material requisition, material return notes from basis of making entries in stores ledger account. Stores ledgers are same as bin card except that money values are shown only in stores ledger.

Bin card	Stores ledger
1. It is maintained by store keeper in the store. 2. Entries are made when transaction take place. 3. Each transaction is individually posted. 4. It contains only quantitative details of material received, issued, and returned to store. 5. Inter department transfer do not appear in bin card.	1. It is maintained by cost department. 2. It is always posted after the transaction. 3. Transaction may be summarised and then posted. 4. It contains information both in value and quantity. 5. Material transfers from one job to another job are recorded for costing purpose.