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Lecture 18

Stores Management

Course Leader
R Arun

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Faculty of Engineering & Technology Ramaiah University of Applied Sciences
Lecture Objectives
At the end of this lecture, the students would be able to

Define stores management and purchase management

Explain the functions of stores and the purchase manager

Describe the types of store records and their significance

Discuss the various methods of purchasing and the


standard procedure for purchasing

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Stores

Generally an unworked material is known as store

Storeroom is the place where stores are housed

Storage is meant for holding in custody all kinds of stores

Store keeping is that aspect of materials control that deals


with physical storage of goods

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Stores Management
Deals with planning, coordination and control of various
activities pertaining to effective, efficient, and economic
storage and store keeping

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Functions of Stores
Receive raw materials, semi-finished, or purchased items
from vendors and check them for identification

Receive parts and components which have been processed


by the factory

Make a record of material receipt and current status of


material in the store

Maintain positioning of materials in the store

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Functions of Stores Contd
Maintain stock safety and in good condition to ensure that
they do not suffer from damage

Issuing materials to operating personnel

Make a record of receipt and issue slips

Plan for optimum space utilization

Cooperate effectively with planning, purchasing and


manufacturing functions
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Stores Records
Material requisition note
When materials are required by a department, this form is filled
Provides information about job number, description of item required
and their quantities
Head of the department requesting the material should authorize it
Whenever materials are issued, the receiving person should sign the
note

Purchase order
Purchase officer releases the purchase order
The record contains details such as the material required and their
quantities, delivery and payment conditions and mode of logistics
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Stores Records Contd
Invoice
A statement sent by the seller to the buyer
Provides details about the goods supplied, net amount payable for
goods and terms and conditions governing the sale

Goods receipt note


Furnishes details of suppliers, purchase order number, purchase
requisition number, and the job for which the goods are received
The details are to be certified by a competent authority
On this basis, the accounts department initiates the process of
payment for the goods received

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Stores Records Contd
Goods returned note
Sometimes a part of a lot or the whole lot received may not be of
acceptable quality
These goods have to be returned to the supplier
In this context, the goods returned note is prepared
Also called as a debit note and the suppliers account has to be debited
by the amount for the goods returned

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Stores Records Contd
Stores ledger account
Maintained to provide details of the quantity, price, and amounts of
receipts, issues and balance of stocks on a day-to-day basis
At any given time, the physical quantity of stocks should match with
the balance as per the stores ledger account
A separate account is maintained for each type of material in the
stores
It should necessarily mention the method such as FIFO or LIFO,
followed to value the issues of stocks
It is a valuable tool for the costing department in exercising stores
control
Facilitates valuation of stock from time to time

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Stores Records Contd
Bin card
Slip or tag attached to the bin where goods are stocked
Whenever materials are received or issued, an entry is made on the
bin card
Bin card reveals the particulars of the quantities of material received,
issued, and available as on a given date at a glance
Wherever separate bins are maintained for each component of the
store, each bin will have a tag hung on it

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Purchasing
Deals with procurement of raw materials, machinery, service
etc. needed for production and maintenance of the concern

It helps in continuous inflow of materials and efficient


processing of goods

It includes investment on buying goods as well as overheads


related to transactions

Includes aspects like cost reduction, inventory turnover,


continuous supply, reduced lead time etc.
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Objectives of Purchasing
To procure the right material

To procure materials in desired quantities

To procure materials of the desired quality

Purchasing from reliable source

Purchase materials at reduced costs

Receive and deliver materials at right place and right time


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Principles of Purchasing

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Functions of Purchasing
Requisitioning purchases

Exploring sources of supply

Issuing of tenders and obtaining quotations

Opening of tenders and quotations and preparation of


comparative statement

Negotiating over the purchase price and terms of supply

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Functions of Purchasing Contd
Placing Purchase order

Receiving materials along with invoice

Checking inward invoice

Inspecting and testing materials

Forwarding materials to store

Checking invoices and passing of bills for payment


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Methods of Purchasing
Purchasing according to requirements
Used for components which are not of regular and common use in the
production process
These are generally not stored in inventory

Purchasing for some defined future period


Used for those components which are regularly consumed, but the
consumption is comparatively low and price changes are not much

Market Purchasing
Purchase of goods usually in small quantities or in an emergency
without contract or negotiations

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Faculty of Engineering & Technology Ramaiah University of Applied Sciences
Methods of Purchasing Contd
Speculative Purchasing
Purchasing is done purely from the point of view of taking advantage
of a speculated rise in price of the commodity
Intent is not to buy for internal consumption, but to resell the
commodity at a later date when the prices have gone up and to make
a profit by selling
Goods may be those needed for internal consumption, but the
quantity shall be much more than the requirement so as to take
advantage of the upcoming price rise

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Methods of Purchasing Contd
Contract Purchasing
The purchase department enters into an agreement with various
suppliers to supply goods at some future period periodically

The purchaser agrees to buy goods to be paid for in a series of


installments, each comprising of a proportion of the capital and an
interest element

After final payment, legal ownership passes to the user

Scheduled Purchasing
Purchasing is scheduled according to the requirements of organization

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Procedure for Purchasing
Various departments send their requirements on a
requisition form

Purchasing department consolidates the requirements from


various departments to know the total requirement for each
item

Market exploration is made to locate the goods and services


of desired quality and quantity at a reasonable price

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Procedure for Purchasing Contd
Potential suppliers are identified from catalogues,
quotations and past records

Purchase order in specified form is prepared and sent to the


approved suppliers

Purchase order is the commitment of the buyer to the supplier


establishing a contractual relationship between the buyer and
the seller

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Faculty of Engineering & Technology Ramaiah University of Applied Sciences
Summary
Stores management involves planning, coordination and
control of various activities for effective, efficient, and
economic storage and store keeping

A store manager should maintain all the records of a store


systematically and the records should be up-to-date at any
given point of time

Purchasing is the process of procurement of raw materials,


machinery, service etc. needed for production and
maintenance of the concern
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