CHAPTER ONE

INTRODUCTION
1.1 Background of the Study
Every organization stores a large number of items which are generally kept in the stores. If
proper arrangements are not made for their identification confusion is bound to arise in locating
them. The confusion will delay the delivery of materials and consume time and the entire
operation of the store and consequently the organization productivity will be adversely
affected. Without proper identification, it will not be possible for a material controller to place
an order to the purchase department with all accurate details. The manager in charge of
material is also responsible for classifying the material before they are sent for inspection,
entered into ledger of the store and binned.

Therefore wide classification of materials

according to their nature, use and service becomes a vital issue in ensuring store efficiency
(A.K Chitale, R.C Gupta, 2014).

Store coding is one of the functions of store management. A process represented by each item
either by a number or letters, a digit or letter of which it indicates a group, sub- group, the type
and the dimension of the item. It describes an item in short, thus avoiding statement every time
the need to describe an item arises. Classification and codification of materials are steps in
maintaining stores in a systematic way As mention materials are classified in such way that
storing, issuing and identifying of materials become easy. Generally, materials are classified
on the basis of quality and utility. For example, material may be classified as raw materials,
consumable stores, components, spares and tools. Thus classifying materials on different bases
such as nature, quality and utility is called classification of materials (Barros, 2003)

For the purpose of identification and convenience in storage and issue of materials, each item
of materials is given a distinct name; the a process is called codification of materials. Good
store keeping requires classification and codification of various items of stores on stock. The
former method of classification by nature of materials is most commonly used, under this
method of classification the various items of stores are divided into specific groups like
construction materials, belting materials, consumable stores, and spare parts. All the items are
grouped, so that each item of stores will be conveniently codified on alphabetical, numerical or
alpha-numerical basis and given a distinctive store code numbers (Brian, 1990).

Inventory is the stock item or resources used in an organization. An inventory system is the set
of policies and controls that monitor levels of stock and determine what level should be
maintained, when stock should be ordered and how large should be. The major purpose of
inventory analysis whether in manufacturing, distribution, retail, or services, is to; specify
when items should be ordered and how large the order should be. For better management of
inventory one must classify the inventory so that the control of the inventory becomes much
easier and effective. The basic principle of the classification of inventory is based on Paretos
Law. Good system of classification and codification of inventory is essential to prevent mixing
of one type of stock with the other. Inventory is to be classified a per their nature in
appropriate categories (Marty S. 2004)

Efficiency refers to relationship between the resources used, i.e. input, and the transformation
results obtained, i.e. output, from different decision making organizations. The efficiency of
store is measured in terms of ratio of different combinations of outputs per unit of inputs. For
this purpose output may be measured in units like value or quantity of material received, issued
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or stocked. The quality might be the quality of materials measured in terms of values,
numbers, weight or volume. Efficiency addresses the real world demand of managing costs,
reducing complexity and limiting risk (Maithyaban, 2010).

In common with industry, hospitals must hold stock of supplies in order to much separate
stages of activity. Whereas in industry supplies it will be converted or assembled to form an
identifiable product, health care institution supplies are required for the treatment and
rehabilitation of the patient. Food, pharmaceuticals, laundry and cleaning materials, surgical
and medical supplies are all input by which the goal of improved health care is attained.
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1.2 Statement of the problem

Retail industry has been increasingly competitive, which has led to development efforts to
improve efficiency (Ellram et al, Anon. 2001). However, a lot of work still remains and
currently, some of the biggest problems and improvement potential seem to be at store
level. Organizations face problem with regard to the identification and labeling of stock
while in the store, due to which certain problems like overstocking leading to increased
cost on holding and cost on tied up stock, under stocking leading to stock out cost, delays
to customers and suppliers leading to overcrowding in the stores hence the efficiency of
the store is compromised. This need to be reconciled to maintain good relationship
between the organization, the suppliers and customers so as to ensure store efficiency is
achieved which minimizes costs associated with store inefficiency.
1.3 Objectives of the study
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1.3.1

General research objective

The main research objective is to establish how store coding and material identification
influences store efficiency.
1.3.2 Specific Objectives of the study
To investigate the influence of bar coding on store efficiency
To determine how labeling affects store efficiency
To establish the influence of material classification on store efficiency

i.
ii.
iii.

1.4 Research Questions

i.
How do bar coding affects store efficiency?
ii.
What are the effects of labeling on store efficiency?
iii.
What is the influence of material classification on store efficiency?
1.5 Significance of the study
The research study was of importance to various hospitals and firms that experience stores
inefficiency. The information will be of great importance to store personnel since it
addresses the factors that are more critical and require most consideration when managing
stores for effective follow of materials without ay delay. This contributes towards
equipping the personnel with knowledge on how to apply different coding and material
identification that impact positively on the organization. The procurement manager and
stores personnel in retail outlets finds the information essential when making major
procurement decisions thus enables the manager to apply effective strategic inventory
management methods. Unnecessary inventory management costs are significantly reduced
and thus contribute towards maximization of the firms profits.
The study is of significance to various scholars, since the documented report will be made
available in the public libraries. This will be of great importance to the students and other
researchers since they will be able to access much information concerning the factors that
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are affecting store efficiency. It will also act a guideline towards identification of other
challenges that have negative impact on inventory management practices and development
of suppliers.