Assignment one

Topic: Store management and c & f

By Sooraj P FM 623 MBA 8 B

STORE MANAGEMENT AND C &F

INTRODUCTION: Stores Management:

Introduction: The aim of any business activity is to increase the value of the original resound which are risked by the owners in the venture. The aim of the manufacturing operation, which is an important facet of the business activity, is the timely manufacturing of the desired products of specified quality, in proper quantities at least possible cost resulting in the increase in the value of the resources. The efficiency of the manufacturing operations largely depends on the efficient functioning of the receiving and stores operations. Receiving and storing are the service functioning and involve much of the paper work. The benefits out of an efficient receiving and storing a r e b o u n d to outpace the cost of administering them. Moreover, there is an ample scope for simplifying and standardizing the paper work involved in these functions. Receiving and storing are the keen considerations in the materials management because: The quality of the end product largely dependon quality of materials received, The smooth and uninterrupted production flow is dependent on the efficient stores function. The stores organization acts as custodian of stock item. Above all these functions directly as well as indirectly affect the production cost. The Production cost is reduced by strategic location of stores ensuring quick issue and eliminination of production stoppages caused by waiting for materials. It indirectly reduces the production in terms of reduced investments in materials, storage space and insurance, elimination of theft, obsolation, reduced handling cost etc. STORE KEEPING: Why store keeping is essential Receiving, handling and speedy issue of material. Custodian of goods I store against damage and pilferage. To ensure regular supply of materials. Effective utilization of store space. To provide service to the organization in most economical way. To keep the details of the items available in store up to date. Proper identification and easy location of items. Physical checking of stocks

Storekeeping: Need for storing: in stores room, the inventories like raw materials, work in progress, finished goods, bought-out components, consumable stores, spares and scraps-cost heavily to the organisation. More over the, inventories, which are stored in the stores room, represent the idle investment of the capital resources The store keeping is a service department, so the principal objective of the stores function is to provide that service more economically. The fundamental considerations of providing this service economically is to maintain the value of the stores in the stock at the lowest possible level and to make the required inventory available at all times. These two aspects are mutually exclusive in nature. If more inventories are stocked they will be available at all times. However such action will fail to keep the value of the stocked item at the lowest possible level. Conversely, if fewer inventories are stocked, such action will keep the value of the stocked items of inventories and lower levels of inventories are as under: As maintenance of high level r low level inventories is mutually exclusive, the efficiency of the stores function lies in the skill that strikes the balance between the two. FUNCTIONS OF STORE--KEEPING Balance function: If the procurement quantity is larger than the output, then by the balance function the material redundant for production is stored. Assortment function With the supply or assortment function the storekeeping contributes to a continuity in the assortment. To that extent the supply function supplements the balance function, since thereby the parts of the assortment, where discrepancy between Procurement and paragraph exists, are bridged. Security function This can be the case, if products, which are coined/shaped by delivery bottlenecks and/or seasonal fluctuations, must be procured. Improving function The improving function is called also production function of the camp, which makes possible only a following processing. An improving function develops, if the storage causes a change of the product and part of the production process. Speculation function Reasons for the speculation function of the storage can be foreseeable extreme price fluctuations on the procurement market or particularly low cost prices. In addition can be speculated to the discounts received thereby by the order of large quantities and in Camp commodity.

Store systems: Broadly the systems in stores can be studied under three areas, namely, receipt, stocking and issue. Well designed store systems and procedures ensure timely information for decision making, particularly because stores is the starting point of all activities for control.

Receiving of materials: Receiving is an important control point in the material control system. It is sometimes considered that receiving is a routine clerical work where the material shipped by the supplier are received, unpacked, checked and compared with the packing slip. In fact receiving in something more than this. Lee and Dobler in their purchasing and material management stated that any problem or error in a specific purchase transaction should come to light during the receiving operation. If the problem is not detected and corrected during the receiving operation, the cost to correct the mistake later is much higher. Many hours are frequently spent in determining what really happened and rectifying the situation. Hours are required to correct the error that could have been corrected at the receiving station in minutes. Receiving procedure: the receiving involves much of paper work and it varies from firm to firm. However the key issues involved in the receiving function are commonly described in the following standard procedure: The receiving division unloads the goods at the delivery bay and verifies the condition of the consignment to satisfy that it is not received in a damaged condition. The receiving clerk opens the consignment and verifies the contents with the packing slip and the purchase order .the details are recorded in a separate report which is popularly known as the good received note or GR note it is an important document because it is the only document with the firm which signifies the details of the materials it has received. This document is used in the basis of invoice payment, for continued purchase negotiation and for closing the order. Generally the receiving clerk counts or weights the physical volume and the apparent condition of the goods. If there is discrepancy between the physical volumes and packing slipor purchase order particulars, it is recorded on the goods received note. The condition of the consignment is also recorded. The copy of the goods received note is sent to the purchase department and other needy departments. The next step is receiving process is the inspection of the materials. The inspector compares the quality of the incoming materials with their specification with the help of gauges, visual tests, chemical, electrical or mechanical tests, laboratory tests and such other tests. He reports his findings on the receiving report. The inspection report may be a separate for or it can be a part of goods received note. The inspection report is sent to the purchase department and such other departments. If the materials are rejected, the purchase department immediately informs the supplier and seeks his instructions about the mode of their disposal. The supplier may ask for the return of materials for reworking or he may scrap them. If the returning of the rejected materials involves high transport cost, the supplier may

prefer to have the buyer either network or scrap them at buyers plant at suppliers cost. The supplier is not given any credit for the rejected materials or it is adjusted to the terms agreeable to the parties. Rejection should be considered in the light of the accounting adjustments only. In the fact, it poses a distinct problem of non availability of materials. Prompt action should be taken to replenish the rejected items with a view to eliminating any chances of production stoppages caused by stock outs. When the materials are accepted, they are sent to the stores section for their proper recording and storing. All relevant departments are informed about the receipt of the materials. The receipt system maintains proper document about items which are received at the stores. The details on pending orders must be arranged in chronological order of dates which would help in scheduling labour force for unloading the items when they are received at the stores. Based on the details in the invoice submitted by the supplier, the stores can organize its work force and transportation facilities to clear the items at the stores can organise its work force and transportation facilities to clear the items from specific transport agency, railways, harbour, etc. At the time of receiving the items at the stores, necessary arrangement should be made to check the quality, quantity and weight of the item before they are accepted for stocking in the stores. There should be a proper system for maintaining accounts of issue made to internal divisions or external divisions. This would help timely reordering to replenish stock. When items are issued to external divisions, controls should be formal and adequate enough to take care of payments and claims. Issue of materials: The materials stored in the stock room are issued to various jobs or production departments against the authorised materials requisitions. The various methods are use for pricing the materials issues which are based on different principles. The following are the important method of pricing the materials issues: First In First out (FIFO): As the name suggest, is governed by the principle that the materials which are received first are issued first. The assumption is that old stock is depleted first. Central storekeeping Means the spatial summary of all storekeeping functions and all stored materials Under uniform line. Advantages-an easement of the goods received, care, preservation, inventory determination and-examination

DECENTRALIZED STOREKEEPING During the decentralized storekeeping the materials Issued at the place of the user are stored in the form of temporary storage facilities (buffer camp). Advantages are the higher flexibility, the more exact arrangement of the individual materials in the production areas and the shorter routes of transportation.

VARIOUS SECTIONS IN STOREKEEPING Receiving section Stores section Issue section Accounting section Stock taking checking

STORES SECTION This is a place where all materials received by stores department are kept with protection against deterioration. Various stores operation are:- Location, Procedure Layout Equipment and Identification of stores section. Location of stores To provide space to the materials till these are issued to the, respective departments of the enterprise. Stores Bin Card. The bin card contains up to date information about the receipt, issue and balance of the respective item in the stock. Stores equipment A good store is equipped for handling, measuring and Weighing the materials. The equipment should be such that stores investment and operating expenses are reduced. Materials handling Facilities There should be proper weighing and measuring instruments at the time of receiving and issuing the materials. Bins: Bins are expensive & as many item as possible should be put into them, refilling being done on a regular basis. Racks: Racks can be used either as the picking face for items which are too big or heavy fir bin accommodation, or else for keeping reserve stocks for replenishing bins. Pallets: pallets are specially designed platforms for the stacking of goods, with view to the whole load being moved, wherever it is required, by a fork-lift. Identification of materials in stores Tagging some piece of paper or cloth with the items. Labels may be fixed on the items. The coded number or any other identification mark may be embossed on the items.

Painting or color coding of items.

METHODS OF CODING 1. Mnemonic Method:- Here alphabets closely associated with name of the item are used e.g. MT can be used for some metallic item. This is useful when few type of items are to be stored. 2. Random Method: - Here both alphabets and numerals can be used randomly. But the method is rather arbitrary. 3. Scientific Method:-The items are divided into number of groups and each group is given some code. Then further sub-grouping is done on the basis of classification of item in any group, its shape, function etc. ISSUE SECTION It handles the issue of materials when required by some department of the enterprise. Materials carry some money value and in order to avoid malpractices and to curb the tendency of waste, the items should be issued against proper requisition. The material requisition is a request to the stockroom to issue materials ACCOUNTING SECTION The accounts section exercises financial control over stores. The goods receipt book is maintained for all arrivals, making the receipt in triplicate, a copy of which is sent to accounts section and other to the store section STOCK TAKING CHECKING This implies physical checking of items in store to see that these are in accordance with the entries of stores ledger. METHODS OF STOCK CHECKING ARE FIXED ANNUAL INVENTORY:-A special team is deputed to check and count the material inside the stores at the end of each financial year. PERPETUAL INVENTORY:- In this system the stock control department maintain up to date and systematic records of each and every transaction. There is a system of continuous verification of stock. The entries on bin card and stores ledger should tally with each other. In case of discrepancies thorough investment is made. CLEARING AND FORWADING: When a business firm wants to import goods from another country or export goods to another country a lot of legal formalities are to be completed before sending goods or receiving goods. It is here that the businessman takes the help of clearing and forwarding agents. They act on behalf of the importer and exporters to complete all formalities required for clearing and dispatch of the goods. In case of imports, they take delivery of the goods from the ports and the customs authority and send it by

rail/road to the place of importer. In case of exports, they complete all the formalities of loading the goods on the ship and those relating to custom clearance, if any. Their assistance helps the exporters and importers all over the country to successfully deal with international trade.

FUNCTIONS OF CLEARING AND FORWARDING AGENTS Relating to Imports: Managing delivery from the ports. Preparation and submission of Bill of Entry. Payment of dock dues. Managing custom clearance. Despatching goods by rail or road. Sending advice documents to the importer. Obtaining Bill of Loading. Sending advice and other document to the exporter. Relating to Exports: Obtaining the custom permit. Obtaining shipping order. Submission of shipping bill and payment of export dues. Payment of dock dues. Receiving mates receipt. Formalities to be completed by the clearing agent Endorsement for delivery: When the ship arrives at the port, the clearing agent approaches the concerned shipping company and gets the bill of lading endorsed in his own name from the shipping company. If the freight has not been paid by the exporter, it will have to be paid before endorsement of the bill of landing. Bill of entry: The agent has to fill in and submit three copies of the bill of entry to the custom authority. The custom authority will calculate the duty and receive the same from the clearing agent. Payment of dock charges: The agent has to complete and file two copies of Port Trust receipt and three copies of Bill of entry to the landing and shipping dues office. After receiving the dock charges, the dock authority will return one copy of Port Trust receipt and two copies of the Bill of entry to the agent. Then the agent has to submit this copy along with two copies of Bill of entry to the custom office. If customs duty is to be paid, he will make the payment and take delivery of the goods. Despatch of goods by Rail/Road: The clearing agent has to arrange carriage of the goods to the railway station or the transport authority after taking the delivery from the dock authority. He will despatch the goods by rail/road to his principal and get the railway receipt/carrier receipt.

 Advice to the importer: The clearing agent has to write a letter of advice to the importer after despatch of goods. In this letter of advice, information regarding arrival of goods and their despatch by rail/road are specified. He has to enclose with it the railway receipt/carrier receipt and a statement of his expenses and charges. Delivery of goods from Railway/Transport Authority: The importer can take delivery of the goods from the railway or transport authority and carry them to his godown. Appointment of forwarding agent: Packed goods may be despatched to the port directly by the exporter or through a forwarding agent. If the goods are stored in any location, the exporter may appoint a forwarding agent who will perform all the formalities on behalf of the exporter before shipping the goods. The forwarding agent will charge commission for this work. 11. Formalities to be completed by Forwarding agent: Obtaining the custom permit: The agent has to apply to the custom office giving full details of the goods and also their destination in order to receive the custom permit. If goods are duty free then custom permit is given immediately, otherwise it will be necessary to complete other formalities. Obtaining shipping order: The agent has to secure adequate space in the ship for loading of goods. For this purpose he has to sign an agreement with the shipping company for issue of the shipping order which will enable him to put the goods in the ship. Completion of shipping bill and payment of export duty: The Agent has to fill in three copies of shipping bill and submit them to the custom-house. On the basis of the bill, duty is calculated by the custom authority. The agent has to make payment of the duty and get the original and third copy of the Shipping Bill from the custom authority. Payment of dock dues: The agent has to make arrangement for carrying the goods to the dock. For this purpose, two copies of properly completed Dock Challan are submitted to the dock authorities along with one copy each of shipping bill and shipping order. After dock charges are received, the dock authorities retain one copy of dock challan and return the duly signed second copy to the agent. Customs verification before loading of goods: As soon as the ship touches the port, the dock authorities start loading the goods on it. Before the goods are actually loaded, custom officials verify them to know if there is anything on which duty remains to be paid or which is not mentioned in the shipping bill. The captain or his assistant (mate) will receive goods only when shipping order has been produced before him. Mates receipt: The captain or mate will issue a receipt known as mates receipt after the goods have been loaded. This receipt contains particulars like quantity of goods, number of packets, condition of packing, etc. Bill of lading: The forwarding agent has to present the mates receipt at the office of the shipping company and in exchange will get a document known as Bill of Lading. He has to fill in three blank forms of bills of lading giving details regarding the goods, destination, name of the ship, date and place of

loading and name and address of the person to whom delivery is to be made. If the freight is paid in advance the bill of lading is marked freight paid. Otherwise it is marked freight forward which means freight will be paid at the port of destination. Insurance of cargo: As a safeguard against marine risks, it is necessary to insure the goods. Insurance must be done strictly according to the instructions, if any, of the importer as given in the indent. If there is no instruction, the exporter himself should insure the goods. The insurance policy is sent to the importer along with the bill of lading and other documents. Advice to the exporter: The agent then informs the exporter about the shipment of goods and other related matters. He will send the bill of lading, insurance policy, shipping bill etc. to the exporter along with a statement showing his expenses and remuneration. Preparation of export invoice and consular invoice: Having received the advice from the forwarding agent, the exporter prepares an export invoice known as foreign invoice. This invoice states the quantity of goods sent and amount due from the importer. Custom regulations of many countries require consular invoice for the purpose of easy clearance of goods at the port of destination in the importing country. If it is required by the importer then the exporter has to arrange for such a document also. Securing Payment: There are two alternative methods by which payment can be received by the exporter. Letter of credit: The exporter can get immediate payment on the strength of the letter of credit which is issued by the importers bank in favour of the exporter. The exporter has to draw the bill in order to get the payment from the local branch of the bank (in home country), which has issued the letter of credit on behalf of the importer. Letter of hypothecation: If the exporter wants to receive payment immediately, he can get the bill (accepted by the importer) discounted with his bank. But for this purpose, he has to give a letter of hypothecation to his bank.