Stores Organisation

Dr. Kshitija GandhiPhd. M.Phil, M.Com, MBA ,Net

Meaning of Stores

Raw Material used in

Production

Consumable stores such

as oil, grease, etc.

Tools , patterns,

maintenance materials etc.

Stock of work in

ProgressStock of Finished

Goods

Store Includes

Store Organisation

Centralised stores

Decentral ised stores

Central stores with sub- stores.

Stores Organisation

All the items are stored at one place.

Materials are received by & issued from one store.

It is ideal from control point of view.

Most of the business concerns have a practice to follow this system

Centralised Stores

Advantages of Centralised Stores

Better supervision & control is ensured

Specialised & expert staff can be concentrated in one department

Bulk buying is facilitated.

Economy in clerical & administrative cost.

Advantages of Centralised Stores

Investment in stock can be minimised.

Better safety measures are possible

It results in fewer obsolete articles.

Stocks may be checked with greater care.

Disadvantages of Centralised Stores

It increases transportation costs as

central store may

not be near to all

Inconvenience & delay

may be caused in delivering goods to

departments

Production stoppage is

possible because in

break- downs in

transport or hold –ups in

central stores

Greater risk of loss in case of

fire ,flood etc.

When independent stores are established for

each department

Depart

ments keep their stores in their own Depart

ment

Decentralised

Stores

Decentralised stores

It enables to reduce the transportation cost

Speedy supply of materials

Minimizes the risk.

Urgent requirements & shortages can be met more quickly.

Possible to keep related materials together.

Does not need a large space

Advantages of Decentralised Stores

Disadvantages of Decentralised Stores

Centralised Stores with Sub – Stores

In large manufacturing separate store departments are maintained for specialized items.

It is the mean between two extremes . Centralised stores & Decentralised stores

One central store is situated near to receiving department & sub- stores are situated near to production departments

In short, this type of stores operates in a

similar way to a petty cash system. It is,

therefore known as the ‘Imprest system of

store control’.

Centralised Stores with Sub – Stores

AdvantagesThe mean of two extremes. i.e. centralised

stores and the department stores

Reduction in Transportation Cost

Simplified Administration

Creates closer liaison between storekeeper & the department

Facilitates easier detection of discrepancies in stores & physical stocks

Spot Checking possible to Internal Audit

Permits stocking of specialized materials for particular department

Avoids delay in drawing stores.

Disadvantages

This system asks for more expenditure for maintaining &

running the sub- stores.

Centralised control may be lost.

Delay in supply of material may occur, when requisition is not met

by central store in time

Centralised Stores with Sub – Stores

Classification & Codification

Classification

• Classification of materials means grouping of materials under similar characteristics .

• Materials can be classified either on the basis of nature or on the basis of their usage

• For example: Chemicals, consumables, Spare parts, Lubricating, Electrical, Electronic etc.

Codification

• After classification of materials, codification is done

• Codification is ‘a process of assignment of symbols, numbers or letters according to a systematic plan for distinguishing each type of group of materials.

Principles of codification/ Essentials of Good Codification system

Easy & simple to

comprehend or

understand.

Economical.

No duplication

& each code

number one type of

material. Elastic to add new materials easily & logically.

Easy to identify

Brief code numbers to

avoid errors

Facilitate mechanism

of accounts.

The following are the principles to be kept in mind while assigning code numbers

Advantages of Codification:

Clerical efforts are reduced as length in description is minimized.

Each item of materials can be easily identified more than particularly where the same material is known by one name.

Numeric Method

Under this method whole numbers are used to denote the main group & decimals to indicate sub- groups

Consumables

Chemicals• Consumables• Chemicals• 01 Sulphuric Acid• 02Petroleum Ether.• 03Phenol • 03.1Phenol- First

Grade

1.1Cotton waste1.11Cotton waste-Fine

Quality1.12Cotton waste- Super Quality etc.

Alphabetic ( Mnemonic ) Method

Alphabetic

(Mnemonic )

Method

Group & sub-

group/s are denoted by

combination of alphabets

or letters.

IR-InK RedIB-Ink BIue

IG-InK Green

Alpha- numeric Method (Combination of alphabets and numerals)

Many time combination of alphabets and

numerals may be used to denote main and sub-group/s of

materials

Alphabets may be used to denote main group and numerals for sub-group/s or

vice

IR1-Ink Red of Grade 1,IR2- Ink Red of Grade 2, IR2- Ink Red of Grade 2.

Stores ledger

Meaning Stores ledger is a subsidiary ledger in which a separate account is opened for each item of materials in the store to record both the quantity & cost of the materials received, issued, returned & in hand.

Objective The basic objective of stores ledger is to provide a continuous record of both the quantity & cost of the materials received, issued, retuned & in hand.

Stores ledger

Stores ledger

Source Documents

The entries in stores ledger account are made on the basis of –1. Materials Received Notes2. Material Requisition Slips3. Material Returned Notes

Who maintains

Stores ledger is maintained by cost accounting department & not be stores department.

It facilitates the ascertainment of cost of materials received

It facilitates the ascertainment of cost of materials issued

It facilitates the ascertainment of cost of materials consumed

It facilitates the ascertainment of cost of materials in hand

It facilitates the internal check system-Bin card & stores ledger act as a cross check on each other.

Advantages of Stores Ledger

Advantages of Stores Ledger

It facilitates the physical verification of stock. Actual physical stock can be compared with balance of stock as per stores ledger.

It enables stock records to be centralized in case of an organization having a number of depots.

The accuracy of posting can be mechanically tested more conveniently.

The records are neat & clean.

The recurring cost of maintaining records is much less than those kept manually.

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