production management-storing and placing

1. Storing & Placing

2. Introduction
Store is a place where excess material is kept which will be
used as and when required. Loss of items, deterioration,
obsolescence and inadequacy [of what is stored to what is
needed] are treated as ‘part of life’.

3. Introduction
Stores play a vital role in the operations of a company.
Storing or storekeeping is a service to the production
department. It is responsible for proper storage of material
and then issuing it respective department on proper
requisition. The various items such as raw materials, tools,
work-in-process, spare parts, supplies, finished goods,
scrape, etc. are stored in the store room. The custodian of
stores is generally known as storekeeper. The place where
these items are kept is known as storeroom.

4. Introduction
Store management is “ to receive materials, to protect them
while in storage from damage & unauthorized removal, to
issue the material in the right quantities, at the right time to
the right place and to provide these service promptly and at
least cost”.

5. Introduction
Storekeeping may be defined as function of receiving,
identifying, proper placing and issuing of raw materials,
tools, spares, consumables, etc. to the respective
department.

6. Objectives of store
In the chain of internal customers and suppliers, stores
has several internal customers. As a matter of fact all
functions of management are internal customers to
stores. Customers as usual expect Quality Cost and
Delivery from every supplier. Stores also have to deliver
these customer expectations. In the process of
discharging this obligation Stores perform some activities
that are functions of Stores.

7. Objectives of store
Minimizing cost of production through minimizing cost on
materials
Maintaining the value of materials
Service to user departments
Establishing Co-ordination with other departments
Advising materials Manager

8. Functions of Stores
1. Receipt
2. Storage
3. Retrieval
4. Issue
5. Records
6. Housekeeping
7. Control
8. Surplus management
9. Verification
10. Interaction & coordination

9. Receipt
Any item of goods or material that enters the organization
always enters through the stores. Similarly, every item unless
specifically excluded, has to leave through the store. Stores is
the final account keeper of all materials.
Material sent by any supplier after the security clearance comes
to the stores. Stores check the document carried by the carrier,
known as Delivery Challan, against the copy of the Purchase
Order placed on the supplier by the organization.

10. Receipt
Once the adequacy is established and quantity is verified the
material is sent for testing for quality parameters.
Some times quality control tests are elaborate and time
consuming. If the policy of receipt is to unload the material
subject to quality control acceptance, it is cleared for unloading.
Unloaded material is kept on the hold if it not yet cleared by
quality control department. If the material is rejected it is sent
back to the supplier after clear documentation.

11. Storage
Once the unloaded material is approved by the quality
control department, as per the quality plan in the quality
system, it is moved to a specific place in the stores
layout.
The material is so stored that it becomes easy to retrieve
and issue subsequently.
Storage should also ensure protection against
deterioration, damage and pilferage.

12. Storage
 Detailed system is adopted for location and labeling of
items while in storage. Storage plan is made keeping in
mind,
1. nature of the product- physical state, toxicity, inflammability
and other hazards
2. volume and weight- heavy or light
3. movement frequency- fast moving or slow moving
4. point of use

13. Retrieval
Easy and quick retrievability of items that are demanded by
the internal customers.
Easy identification, maximum space utilization and
minimum handling are key factors to retrieval functions.
It is common knowledge in many of the companies that
after hours of searching for the item is declared to be out of
stock. This causes hold up of production process and
avoidable urgent purchase of out of stock material. This
function takes place as per established retrieval system.

14. Issue
Fulfilling customer demand for the item in minimum time,
keeping quality high and cost minimum is issue.
An internal customer doesn’t pay the price but he has to
fulfill requirement of authorization for the demand.
A duly authorized indent or requisition for the item is the
key

15. Records
Maintaining records of receipt and issue.
Updating the stock levels as per movement of materials.
Basic records of store are bin card and stock register.
Bin card is placed on the bin in which items are stored. This gives
information about receipt, issue and balance.
stock register gives all the information in the bin card and also the
value.

16. Housekeeping
Maintenance of spic and span cleanliness in the store and
ensuring principle of Place for Everything and Everything in
its place is fully implemented.
Good housekeeping ensures satisfactory work practices

17. Control
Taking measures to ensure material plan is being
adhered to.
Any changes in consumption pattern or replenishment
pattern are closely monitored for corrective action.
Material movement is watched to identify nonmoving
material for disposal. Effective control puts into effect
management objective of ‘no shortage and no excess’.

18. Surplus management
Effective disposal system for unneeded material to reduce
inventory cost and proactive measures to eliminate
deterioration and obsolescence.
Obsolete items are good in all respect but have no useful role
in the company due to changes that have occurred in the
course of time.

19. Surplus management
Surplus items are those that have accumulated due to
faulty planning, forecasting and purchasing. Hence a
usage value is associated with these items.
Scrap is wastage generated due to processes like turning,
boring drilling etc. and also due to bad manufacturing. it
is said that in India nearly Rs. 2500 crores are tied up as
obsolete, surplus and scrap items.

20. Verification
Stock verification to eliminate gap between information
and physical stock. In stores some items are maintained
as stock items. The stores triggers the procurement
cycle for such items when a predetermined reorder level
is reached. Hence correct stock position through
verification is critical to ensure ‘no shortage and no
excess’ for the item.

21. Interaction & coordination
Very close interaction between Purchasing, production,
quality control and engineering functions is obviously
needed in the discharge of the functions discussed so far.
It also becomes necessary to coordinate the flow of
material samples and information through a network of
departments for performance of stores functions.
Besides, every management function being an internal
customer interaction is very important.

22. Principles of Storing
1) All the materials must be identified, labeled and coded
properly. When material codification is accompanied by
location codes, it facilitates exact location of materials inside
the store room.
2) All the bins, racks, shelves etc., must have signs and tags
attached to them.
3) Materials should be stored at proper safe place to prevent these
from damage or mishaps.
4) Floor plan must be provided at convenient places in store
room. It eliminates waste and helps in easy location of
material.
5) The store room should be divided into sections and materials
belonging to particular class should be stored in it.

23. Types of Stores
Centralized store
Decentralized store

24. Centralized or decentralized stores
organization
Centralized stores concept is to store all items at a central place
and control materials movement from this central place.
Whereas
Decentralization concept is moving the material to the respective
consumer function or directly to the points of use.

25. Main or centralized Stores
A central store is generally a ‘wholesale’ supplier to other
units, departments or sub-stores which operate on a retail
basis issuing goods directly to user. All material is received
and issued by one central store. Different department do
not purchase their requirements themselves. They ask for
their material requirements to the central store and the
material flows out of the store. The main function of central
store are:-
To receive all the material, tools and equipment
To issue the material to branch stores and various
departments.
To take steps for replenishment of stock.

26. Centralized Store Figure

27. Features of centralized stores
organization
1. Effective supervision and control.
2. Issue at single point reduces cost of issue
3. Reduced personnel requirement
4. Efficient layout for stores
5. Better handling technology
6. Better inventory checks
7. Maintenance of optimum stores
8. Elaborate documentation

28. Advantages of centralized store
The variety of goods can be supplied to all users from one
small location.
Less manpower will be required.
Better control of materials is possible.
Material handling will be easy.
Wastage and deterioration of materials will be less.
Large inventories are not there.
Receipts and inspection of materials can be efficiently
organized.
Materials located in small available space ensure economy in
storage.

29. Disadvantages of centralized store
It may not be suitable for large manufacturing concern.
More staff will be required for shifting & transportation of
the materials to various production units.
Record keeping is difficult.
Wastage and shortage of materials may be there.
Safety and maintenance of large amount of materials is
difficult in large stores.

30. Branch or Decentralized Stores
Decentralized or branch stores are provided in the plants
which are considerably in large in size and where one
main store cannot meet the requirements of the plant
without waste of time and inconvenience. Different
departments have their own stores from which they can
meet their material requirements. The limitations of the
centralized storage are removed with the help of
decentralized storage; but because of high cost, these are
not popular.

31. Decentralized Stores Figure

32. Features of decentralized stores
organization
1. Reduced handling
2. Customer friendly
3. Fewer production stoppages
4. Visual management is easier

33. Advantages of decentralized stores
Reduced material handling and associated cost.
Less chances of bottlenecks and delays.
Convenient for every department to draw materials.
Less transportation time.

34. Disadvantages of decentralized stores
Coordination and control of all decentralized store is a challenge
to management.
Labor utilization may suffer due to low store activity level.
Duplication in storage of common parts results in higher overall
inventory cost.
Duplication of clerical and accounting functions and computer
equipments.

35. Some other types of storage
As per types of the materials stored
1. Raw Materials store
2. Components store
3. Work in process store
4. Semi finished goods store
5. Tools store
6. Consumable materials store

36. Cont…
As per nature of the materials stored
1. LPG store
2. Chemicals store
3. Hazardous materials store
4. Refrigerated materials store

37. Cont…
 As per function of the storage
1. receiving store
2. central store
3. general stores
4. sub stores

38. Storing Procedure

39. 1) Material Planning: All the materials required in the
process of production must be identified and well-defined
by codification, classification, specifications, and
standardization. All the materials must have records in the
stores department. The direct materials are also classified
according to their cost, annual usage, imported materials
and scarce materials. This analysis is very important for
storing and inventory control.

40. 2) Receipt of materials: The purchase department places
the orders to purchase the materials and sends directly to
stores department to receive it. All the materials purchased
from vendors received by the storekeeper. All the material
received are physically counted and measured for its
quantity accurately and verified as per purchase order. This
verification is done quickly and efficiently without any
delay. After ascertaining the correct quantity of materials
received, it is sent for inspection. Any delay or carelessness
in he receipt section will make delays for inspection and
inventory control section for further supply of materials to
production facility and payment to supplier. Therefore, the
receipt section must be very efficient and co-operative.

41. 3) Receipt Procedure: All the items received in the store which
are delivered by the supplier or received from port, railways, or
road transport will have to be cleared and forwarded after
checking the quantity as per supplier invoice, challan, packing
list and purchase order. The procedure followed for receipt of
materials is as follows:
The materials delivered by a person bringing in the department
delivers the challan and other documents as supplier’s dispatch
note, consignment note, materials transport advise note and
packing list given the details of materials supplied. After
checking the materials supplied, the delivery note is signed and
checked in receipt section, stamped, its one copy is retained by
receipt section and entered in Goods receipt Register, also
called Goods Inward Register.

42. 4) Storage of Materials: The most important function of the
store department is to store and preserve the materials, tools,
supplies etc. till they are issued to the production and other
departments. These materials should be stored in suitable
containers. Different types of containers such as drums, pallets,
boxes, flexible racks, shelves, bins etc. are used for storing
different types of materials. Some materials are also stored on
floor in the form of heaps, e.g., moulding sand, coal, iron ore,
etc.

43. 5) Record-Keeping of Stock: Purchasing records should be
kept for many years. This is essential for legal protection
and is also required by state tax regulations. Retention of
requisition forms is primarily for internal auditing
purposes. Purchase order and all supporting and related
correspondence should be kept together in one file.
Even sales brochures should be included if they describe
the purchase product or the warranty, terms and
conditions of sale, or any disclaimers. Handwritten notes
about conversations or meetings should be kept with the
file. Copies of certification of product or test results may
also be included. All of this information will prove
invaluable if there is ever any dispute about the product.

44. Cont.
Inventory records include information about:
i) On Hand: How many are currently in inventory and available for
use?
ii) On Order: How many parts have already been ordered from the
supplier( either internal or external) and when are they due to
arrive?
iii)Time: How long replenishment expected to take from the time of
order?
iv)Planning Data: These factors define the order sizes and timing.
The purpose of record-keeping is to facilitate materials control
by bringing information on actual stocks position, consumption
rates, and order and supply position up-to-date along with the
proper pricing and evaluation of the usage and of the balance of

45. 6) Valuation of Stock and Materials : The stock and materials
stored as inventories in the store are having money value. They
are the assets and working capital of the organization. The
materials and parts are purchased at different cost in the books
of accounts. They are valued according to some method so that
all the items have same price. The valuation would show the
loss or profit to the company depending upon what cost is
assigned to the inventories in the store. The material's and
stock once entered in the store and kept, its value always
increases because of various other costs which will be incurred
in carrying them in the stores.

46. 7) Stock Verification: It is the process of physically counting,
measuring or weighing the entire range of items in the stores
and recording the results in a systematic manner. The purpose
served by stock verification are as follows:
i) To reconcile the stock records and documents for their accuracy
and usefulness.
ii) To identify areas, which require more disciplined document
control
iii)To back up the balance sheet stock figures, and
iv)To minimize pilferage and farces.
Stock verification is usually carried out by the materials audit
department, reporting to either the materials manager or the
internal audit. One person is usually given the exclusive
responsibility with adequate facilities and authority.

47. 8) Stores Preservation and Arrangement: Proper arrangement
and documentation of the storage spaces and storage facilities is
helpful in getting materials for production on time as
requisitioned from the stores. The arrangement of the racks,
shelves, bins, and spaces for movement of material-handling
equipment should facilitate quick location, draw and
transporting of the desired materials.

48. Importance of Storing
1. Minimum Investment
2. Continuous Flow of Materials
3. Protection and Preservation
4. Good Quality at Minimum Cost
5. Proper Storage for Improved Output
6. Minimum Wastage

49. Stores Layout
Physical arrangement of storage facilities
for efficient receipt, storage and issue of
materials is called as layout of stores. In a
properly arranged store, the material are
properly maintained. It involves minimum
of handling and optimum utilization of
space.

50. Factors affecting stores layout
Type of Stock
Volume of stock
Availability of space
Physical factors

51. Store System
Closed door system: the stored material is held under
lock and key. Entry into the store is restricted
authorized persons only. Physical movement of the
material is only with authorized documents only.
Maximum security and tight control on movement are
features of this system
Open stores system: In this system material is stored
near point of use and there is restriction on
consumption. Control passes on to the operations
department

52. Importance of Storing
Minimum Investment
Continuous Flow of Material
Protection and Preservation
Good Quality at Minimum Cost
Fewer Accidents
Proper Storage for Improved Output
Minimum Wastage
Co-ordination and Co-operation