STORE MANAGEMENT

STORES MANAGEMENT
• INTRODUCTION
• THE TERM STORES, STOREHOUSE, WAREHOUSE ETC REFER TO THE
PHYSICAL PLACE BE IT A BUILDING OR A ROOM ETC. WHERE
MATERIALS OF ALL VARIETY ARE KEPT.
• THE FUNCTION OF STORES IS TO RECEIVE, STORE AND ISSUE
MATERIALS.
• STORES ARE NORMALLY DIVIDED INTO VARIOUS SECTIONS SUCH AS -
 RECEIVING SECTION
 TOOL STORES
 GENERAL STORES
 RAW MATERIALS STORES
 FINISHED PARTS STORES ETC.
• STORES PLAYS A VITAL ROLE IN THE OPERATIONS OF A COMPANY
• STORES NETWORKS ARE INCREDIBLY COMPLEX AND THEREIN LIES
THE OPPORTUNITY OF IMPROVEMENT.
 STORES MANAGEMENT
• STORES FUNCTION AS AN ELEMENT OF MATERIALS DEPARTMENT, HAS AN
INTERFACE WITH MANY USER DEPARTMENTS IN ITS DAILY OPERATIONS.
• THE BASIC PURPOSE SERVED BY STORES IS THE PROVISION OF
UNINTERRUPTED SERVICE TO MANUFACTURING DIVISIONS.
• STORES ACT AS A CUSHION BETWEEN PURCHASE AND MANUFACTURING
ON ONE HAND AND MANUFACTURING AND MARKETING ON THE OTHER.
• THE INHERENT LIMITATIONS OF FORECASTS MAKE THE STORES FUNCTION
A NECESSITY.
• STORES FUNCTION IS AN INSEPARABLE PART OF ALL BUSINESS AND
NON – BUSINESS CONCERNS, WHETHER THEY ARE INDUSTRIAL OR
SERVICE ORIENTED, PUBLIC OR PRIVATE, SMALL OR LARGE.
• THE TASK OF STORE KEEPING RELATES TO SAFE CUSTODY AND
STOCKING OF MATERIALS, THEIR RECEIPTS, ISSUES, AND ACCOUNTING
WITH THE OBJECTIVE OF EFFICIENTLY AND ECONOMICALLY PROVIDING
THE RIGHT MATERIAL AT THE RIGHT TIME WHENEVER REQUIRED IN THE
RIGHT CONDITION TO ALL USER DEPARTMENTS.
 STORES MANAGEMENT
NECESSITY OF STORES
• ONE MUST ALWAYS REMEMBER THAT EVEN THOUGH
STORE KEEPING DOESN’T ADD ANY VALUE TO THE
PRODUCT IN THE NORMAL SENSE, IT IS AN ESSENTIAL
FUNCTION AND JUST CANNOT BE WISHED AWAY.
• AT TIMES STORES MAY ADD TIME UTILITY OR VALUE BY
PRESERVING SCARCE MATERIAL THAT MAY BE
REQUIRED IN FUTURE.
• BY PROPER PRESERVATION AND STORAGE, THE STORE
DEPARTMENT AVOIDS ANY DEPRICIATION IN THE VALUE
OF INVENTORY.
• THE FINANCIAL VIEW CONSIDERS STORES AS AN
OVERHEAD I.E. A COST WITH NO RETURN.
• THIS ALL THE MORE HIGHLIGHTS THE NEED FOR
ECONOMIC OPERATION AND EFFICIENT STORES
MANAGEMENT.
 STORES MANAGEMENT
NECESSITY OF STORES
• THE COST OF STORES CAN BE CATEGORIZED INTO A CAPITAL
COST COMPONENT AND REVENUE EXPENDITURE COMPONENT.

• THE CAPITAL COST CONSIST OF THE SUNK COST IN LAND

BUILDING, ROADS, YARDS, MATERIAL HANDLING EQUIPMENT
AND RELATED FACILITIES.

• BECAUSE OF THE VERY IRREVERSIBLE NATURE OF THIS

COST, PROPER PLANNING OF STORES CAN GO LONG WAY IN
REDUCING THIS CAPITAL EXPENDITURE THAT MAY ALSO HAVE
A BEARING ON THE REVENUE EXPENDITURE IN THE STORES.

• THE REVENUE COMPONENT OF STORES EXPENDITURE

CONSISTS OF SALARIES AND WAGES OF STORE PERSONNEL,
MAINTENANCE COST, STATIONARY COST, COMMUNICATION
EXPENSES, AND INVENTORY CARRYING COST
 STORES MANAGEMENT
NECESSITY OF STORES
• ONE MUST ALWAYS REMEMBER THAT EFFICIENCY IN STORES OPERATIONS
CANNOT BE BUILT OVERNIGHT BUT HAS TO BE THOUGHT OF RIGHT FROM THE
INITIAL PLANNING STAGE.
• STORES MUST BE VISUALIZED AS AN INTEGRAL PART OF THE PURCHASING –
MANUFACTURING – MARKETING LINK.
• UNFORTUNATELY, STORES MANAGEMENT IS LOOKED DOWN UPON BY MANY AS
AN OPERATIONAL CLERICAL FUNCTION AND FAILS TO ATTRACT APPROPRIATE
TALENT BECAUSE OF ITS UNDERDOG NATURE.
• ONE HAS TO BEAR IN MIND THAT THE STORES MANAGER HEADS THE SINGLE
LARGEST GROUP OF CURRENT ASSETS AND HIS PERFORMANCE IS THE KEY TO
SMOOTH PRODUCTION AND SUBSEQUENT MARKETING.
• MANY DECISIONS RELATED TO STORES HAVE A DRAMATIC IMPACT ON THE
OPERATIONAL EFFICIENCY OF THE PRODUCTION DEPARTMENT AND
PROFITABILITY OF THE ENTIRE ORGANIZATION.
• EVEN SEEMINGLY ROUTINE DECISIONS SUCH AS SELECTION OF RACKS, SHELLS,
BINS, MATERIAL HANDLING EQUIPMENT, SAFETY PRACTICES, INSPECTION
PROCEDURES ETC. ARE REFLECTED IN THE OPERATIONAL EFFICIENCY.
• ONE MUST APPRICIATE THE ROLE OF STORES IN MAINTAINING OPTIMUM
INVENTORY AND HIGHLIGHTING EXCEPTION CASES THROUGH BUILDING UP OF
PROPER MIS BY MAINTAINING ACCURATE RECORDS.
 STORES MANAGEMENT
FUNCTIONS OF STORES
 THE FOLLOWING ARE THE PRINCIPAL FUNCTIONS OF A STORE;
1. TO RECEIVE RAW MATERIALS, COMPONENTS, TOOLS, SPARES,
SUPPLIES, EQUIPMENTS AND OTHER ITEMS AND ACCOUNT FOR
THEM.
2. TO PROVIDE ADEQUATE, PROPER AND EFFICIENT STORAGE AND
PRESERVATION FOR ALL THE ITEMS.
3. PHYSICAL CHECKING OF ALL INCOMING MATERIALS AS PER THE
DELIVERY CHALLAN / INVOICE AND PROPER MAINTENANCE OF DAILY
GOODS RECEIPT REGISTER OR RECORDS.
4. ARRANGE FOR INSPECTION OF INCOMING MATERIALS.
5. ENSURE THAT GOODS INWARD NOTES (GIN) ARE RAISED AND
DISTRIBUTED WITHOUT DELAY
6. ISSUE MATERIALS TO THE CONSUMING DEPARTMENTS AGAINST
AUTHORISED REQUISITIONS AND ACCOUNT FOR THE SAME.
7. MAINTAIN ACCURATE AND UP – TO – DATE RECORDS OF MATERIAL
RECEIVED, ISSUED, REJECTED, DISPOSED, AND QUANTITY ON HAND
OF ALL THE ITEMS.
 STORES MANAGEMENT
FUNCTIONS OF STORES
 THE FOLLOWING ARE THE PRINCIPAL FUNCTIONS OF A STORE;
8. ENSURE THAT ALL DOCUMENTS RELATING TO RECEIPTS AND ISSUE
ARE SENT TO STOCK CONTROL, ACCOUNTS AND OTHER CONCERNED
DEPARTMENTS.
9. UNDERTAKE STOCK VERIFICATION AS PER APPROVED PROCEDURE.
10. TO HIGHLIGHT STOCK ACCUMULATION, DISCREPANCIES AND ABNORMAL
CONSUMPTION AND INITIATE APPROPRIATE CONTROL ACTION,
WHEREVER NECESSARY.
11. TO MINIMISE OBSOLESCENCE, SURPLUS AND SCRAP THROUGH PROPER
CODIFICATION, STANDARDIZATION, PRESERVATION AND HANDLING.
12. TO ENSURE GOOD HOUSEKEEPING SO AS TO MINIMISE THE NEED FOR
MATERIAL HANDLING.
13. TO MAKE AVAILABLE A BALANCED FLOW OF MATERIALS SO AS TO
ECONOMISE ON CAPITAL TIED UP IN INVENTORY.
14. TO ACCEPT AND STORE SCRAP AND OTHER DISCARDED MATERIALS.
 DEPENDING UPON THE NATURE OF BUSINESS (I.E. MANUFACTURING,
TRADING SERVICES, ETC,) ONE OR MORE OF THESE FUNCTIONS MAY
GAIN PRIMACY OVER THE REST.
 STORES ORGANIZATION
• ORGANIZATION IS A VEHICLE TO ACHIEVE THE
PREDETERMINED OBJECTIVES.
• IT IS A FRAMEWORK OF TASKS, RESPONSIBILITIES,
AUTHORITIES, AND ASSCIATED PERSONNEL.
• THE TYPE OF ORGANIZATION MUST BE GEARED TO
ACHIEVE THE DESIRED OBJECTIVES EFFICIENTLY AND
ECONOMICALLY.
• ORGANIZATION IS BASED ON COMMONALITY OF
CERTAIN TASKS AND SPECIALIZATION OF WORK.
• IT IS AN INDISPENSIBLE MEANS TO GOOD
MANAGEMENT.
• A FAULTY ORGANIZATION STRUCTURE CAN SERIOULY
HAMPER ITS PERFORMANCE.
 STORES ORGANIZATION
• STEPS IN ORGANIZATION;
1. IDENTIFY THE ENTIRE GAMUT OF TASKS TO BE PERFORMED
2. GROUP AND RE – GROUP THE TASKS ACCORDING TO CERTAIN WELL –
DEFINED COMMON CHARACTERISTICS.
3. DEFINE AND DELEGATE RESPONSIBILITY AND COMMENSURATE AUTHORITY.
4. ESTABLISH REPORTING AND STRUCTURAL RELATIONSHIPS BETWEEN ALL
POSITIONS.
 STORES ORGANIZATION MUST COMPRISE OF THE FOLLOWING:
1. OUTLINE AND COMMUNICATE TO ALL CONCERNED, THE PRIMARY AND OTHER
OBJECTIVES OF THE STORE FUNCTIONS.
2. DEFINE CLEAR - CUT RESPONSIBILITIES.
3. BESTOW APPROPRIATE AUTHORITY AND PRACTICE DELEGATION OF POWER
TO ENABLE FULFILLING THE GIVEN RESPONSIBILITIES.
4. ESTABLISH PROPER COMMUNICATION CHANNELS
5. ALLOCATE TASKS TO QUALIFIED PERSONNEL.
 IN SHORT, STORES ORGANIZATION CAN BE DEFINED AS THE SYSTEMATIC
COORDINATION AND COMBINATION OF EFFORTS IN A FASHION THAT RESULTS
IN AN OPTIMUM EFFICIENCY AND MINIMUM EXPENDITURE.
 STORES ORGANIZATION
• TRADITIONALLY STORES FUNCTION HAS BEEN
VISUALISED AS A PART OF PRODUCTION
DEPARTMENT AND WAS NEVER GIVEN THE
ATTENTION AND IMPORTANCE IT RIGHTFULLY
DESERVED.
• THE CONVENTIONAL PRACTICE IS TO LOCATE
THE STORES NEAR USER DEPARTMENTS SO
AS TO MINIMIZE MATERIAL HANDLING COST
AND ENSURE TIMELY SUPPLIES SO AS TO
ALLOW SMOOTH PRODUCTION.
• THE MATERIALS DEPARTMENT IS SELDOM
CONSULTED IN ASPECTS SUCH AS STORES
LOCATION AND LAYOUT.
 STORES MANAGEMENT
CENTRALISED & DECENTRALISED STORES
• THERE ARE BOTH ADVANTAGES AND DISADVANTAGES ASSOCIATED WITH A
CENTRALIZED OR DECENTRALIZED STORES.
• A VERY BIG ORGANIZATION HAVING A PORTFOLIO OF NUMEROUS PRODUCTS
MAY HAVE A HUGE MAIN STORE ALONG WITH NUMBER OF SMALLER
DECENTRALIZED STORE SECTIONS.
• THIS ARRANGEMENT DOES AWAY WITH DUPLICATION OF EFFORTS IN COMMON
ACTIVITIES.
• ALL ITEMS OF COMMON USAGE MAY BE STOCKED IN A CENTRAL STORE TO
KEEP THE INVENTORY AT OPTIMUM LEVELS.
• ALSO RECEIVING CAN BE DONE CENTRALLY SO AS TO HAVE EFFECTIVE
COMMUNICATION LINKS WITH THE PURCHASE DEPARTMENT AND VARIOUS
SUPPLIERS.
• THE PROBLEM OF CENTRALIZATION OR DECENTRALIZATION IS A VEXED ISSUE
AND ONE CANNOT LOOK FOR THUMB RULES TO DEAL WITH THE SAME.
• IT IS MORE A MATTER OF CONVENIENCE AND SUITABILITY TO THE OPERATING
ENVIRONMENT THAN A QUESTION OF CHOICE OF ONE STRUCTURE OVER
ANOTHER.
• HOWEVER THE GUIDING PRINCIPLE HAS TO BE THAT THE OVERALL STORES
CONTROL HAS TO BE UNIFIED IN THE HANDS OF A CHIEF STORES OFFICER
FOR EFFECTIVE COORDINATION WITH OTHER INTERFACING DEPARTMENTS AND
PROPER INTERNAL CONTROL OF STORES.
 STORES MANAGEMENT
CENTRALISED & DECENTRALISED STORES
 ADVANTAGES OF CENTRALIZED STORE :
1. OPTIMUM LEVEL OF SERVICE TO USERS DEPARTMENT.
2. BETTER INTERNAL CONTROL,
3. ECONOMY IN STORAGE SPACE AND MATERIAL
HANDLING.
4. SINGLE POINT DELIVERY AND SINGLE POINT
INSPECTION.
5. SPEEDY COMMUNICATION WITH PURCHASE
DEPARTMENT AND VARIOUS SUPPLIERS.
6. PROVIDES OPPORTUNITIES FOR STANDARDIZATION,
7. PROBABILITY OF OBSOLESCENCE IS REDUCED DUE
TO HIGHER INVENTORY TURNOVER,
8. USERS DEPARTMENTS ARE PROVIDED WITH A WIDE
VARIETY OF MATERIALS.
9. AVOIDS DUPLICATION OF EFFORTS.
 STORES MANAGEMENT
CENTRALISED & DECENTRALISED STORES
 DISADVANTAGES OF CENTRALIZED STORE :
1. MAY CREATE BOTTLE NECKS IN MATERIALS RECEIPT,
INCOMING INSPECTION AND ISSUES – THE BASIC FUNCTION
OF ANY STORES,
2. IT MAY NOT BE SENSITIVE TO THE NEEDS OF INDIVIDUAL
USER DEPARTMENTS,
3. MAY NOT BE LOCATED AT THE OPTIMUM LOCATION AND
THUS RESULT IN INCREASED MATERIALS HANDLING AND
TRANSPORTATION COSTS.
4. IMPROPER MIS AND CONTROL PROCEDURES MAY RESULT
INACCURATE SHORTAGES AND UNANTICIPABLE
PERFORMANCE.
1. REQUIRES MORE INTERNAL DOCUMENTATION,
2. RISK IS ACCENTUATED IN CASE OF NATURAL OR MANMADE
CALAMITIES SUCH AS FIRES.
 STORES LOCATION AND LAYOUT
GUIDING PRINCIPLES OF STORES LOCATION
 THE FOLLOWING DECISIONS ARE A PART OF THE LOCATION DECISION –
1. ONE STORE OR MANY STORES?
2. SHOULD IT REPORT TO THE PRODUCTION DEPARTMENT OR TO THE MATARIALS
DEPARTMENT ?
3. WHAT TRANSPORT FACILITIES ARE TO BE USED ?
4. IS THERE A CHANCE OR NEED FOR FUTURE EXPANSION ?
5. WHAT IS THE NUMBER AND VARIETY OF MATERIALS USED IN THE FIRM ?

 GUIDING PRINCIPLES OF STORE LOCATION :

1. BASIC OBJECTIVE OF STORES IS TO MAXIMISE SERVICE TO USER DEPARTMENTS
AT OPTIMUM OVERALL COST.
2. PRIORITY MUST BE GIVEN TO MINIMUM MATERIAL HANDLING AND
TRANSPORTATION EXPENDITURE.
3. INCORPORATE IN – BUILT FLEXIBILITY TO DEAL WITH FUTURISTIC REQUIREMENTS,
4. ADEQUATE COMMUNICATION LINKS MUST BE ARRANGED FOR.
5. ADEQUATE SAFETY MEASURES MUST BE AVAILABLE AT HAND,
6. PREPLAN ABOUT THE NATURE, QUANTITY OF MATERIALS TO BE DEALT WITH.
7. FACTOR IN THE NUMBER OF END USERS AND SUPPLIERS.
 STORES LOCATION AND LAYOUT
GUIDING PRINCIPLES OF STORES LAYOUT
 GUIDING PRINCIPLES OF STORES LAYOUT:
 THE DETERMINING FACTORS OF A PROPER STORES
LAYOUT ARE ECONOMY AND EFFICIENCY.

 AN UNDERUTILIZED WAREHOUSE IS INDICATIVE OF

WASTAGE OF CAPITAL AND ONE THAT HOLDS TOO
MUCH REPRESENT WASTAGE OF TIME AND LABOUR.

 THE OBJECTIVE MUST BE TO ENSURE A CONTINUOUS

UNHINDERED WORKFLOW THROUGH THE STORES SO
THAT IT CAN OPERATE CONTINUOUSLY AND PROVIDE
OPTIMUM SERVICE.
 STORES LOCATION AND LAYOUT
GUIDING PRINCIPLES OF STORES LAYOUT
• GIVEN BELOW ARE SOME THUMB RULES FOR PROPER STORES
LAYOUT.
1. MAXIMUM STORE SPACE UTILIZATION SUBJECT TO MINIMUM MATERIAL
HANDLING AND MAXIMUM SPEED OF MOVEMENT,
2. A STRAIGHT FLOW IS THE SIMPLEST AND MUST BE USED IN VARIOUS
COMBINATIONS TO FORM ‘U’ , ‘E’, ‘T’ ETC FLOW.
3. ARRANGE FOR SEPARATE, DEMARKATED AREAS FOR INCOMING, OUTGOING
MATERIAL, MATERIALS RECEIVED BUT YET TO BE INSPECTED, MATERIAL
RECEIVED - INSPECTED - AND REJECTED, TOXIC OR HAZARDOUS MATERIAL,
SCRAP AND OBSOLETE MATERIALS ETC.
4. AN ITEM MUST BE LOCATABLE WITH MINIMUM EFFORT AND EXPENSE OF
TIME,
5. ADEQUATE LIGHTING, VENTILATION, AND PROPER COLOUR SCHEMES MUST
BE DEVISED,
6. PROVIDE FOR HEATING, COLD STORAGE, AIRCONDITIONING, AND OTHER
ENVIRONMENTAL REQUIREMENTS AS AND WHEN NECESSARY.
7. KEEP SAFETY APPLIANCES SUCH AS GOGGLES, APRONS, HAND GLOVES,
ETC, AT ACCESSIBLE PLACES,
8. SCREEN THE STORES DEPARTMENT FROM UNAUTHORIZED ACCESS TO OTHER
PARTIES.
 STORES SYSTEMS & PROCEDURES

• THE STORES FUNCTION DEALS WITH

THREE MAJOR ACTIVITIES :
1. RECEIPT
2. STOCKING
3. ISSUES
 STORES SYSTEMS & PROCEDURES
THE RECEIPT SECTION
• THE RECEIPT SECTION :
• THE RECEIPT FUNCTION IS THE LAST STEP IN THE
PURCHASING ACTIVITY AND THE FIRST LINK IN THE STORES
FUNCTION.
• THIS DEALS WITH THE FUNCTION OF RECEIVING AND
PHYSICALLY HANDLING DELIVERED MATERIALS, AND
VERIFYING THAT THE DELIVERIES CORRESPOND EXACTLY AS
TO THE NATURE AND QUANTITY AS PER SPECIFIED IN
PURCHASE ORDER.
• INSPECTION OF INCOMING MATERIALS RANGES FROM SIMPLE
COUNTING TO ELOBORATE LABORATORY TESTING AND
STATISTICAL TESTS.
• ALL INCOMING SUPPLIES ARE RECEIVED, CHECKED AND
DULY INSPECTED BEFORE FURTHER PROCESSING OF
STORAGE OR USE.
• THIS SECTION IS ALSO CALLED AS GOODS INWARD SECTION.
 STORES SYSTEMS & PROCEDURES
THE RECEIPT SECTION
 GENERALLY THE INCOMING GOODS MAY BE FROM ONE
OR MORE OF THE FOLLOWING SOURCES :

 SUPPLIERS THROUGH RECEIVING SECTION ON GOODS INWARD

NOTE (GIN).
 USER DEPARTMENTS THAT RETURN SURPLUS STOCK, OBSOLETE
STOCK AND SCRAP ON MATERIAL RETURN NOTE.
 TRANSFER FROM OTHER STORES ON STORE TRANSFER NOTE.
 EQUIPMENT RECEIVED AFTER MAINTENANCE AND REPAIRS ON
STORE CREDIT NOTE OR COMPLETION SLIP.
 GOODS REJECTED BY CUSTOMERS
 OUTSIDE PARTIES, OF SUB – CONTRACTED GOODS
 STORES SYSTEMS & PROCEDURES
THE RECEIPT SECTION
 FUNCTIONS OF RECEIVING SECTION :
THE BROAD FUNCTIONS OF A RECEIVING SECTION CAN BE
OUTLINED AS FOLLOWS :
 RECEIVE INCOMING MATERIALS,
 PHYSICALLY CHECK RECEIVED MATERIALS
 ARRANGE FOR SPEEDY AND PROPER INSPECTION,
 RAISE GOODS INWARD NOTE,
 NOTIFY USER DEPARTMENTS ABOUT AVAILABILITY OR
NONAVAILABILITY OF MATERIALS REQUISITIONED BY THEM,
 INFORM PURCHASE SECTION REGARDING EXCESS SUPPLY,
SHORTAGE, OR DEFECTIVE SUPPLY,
 DELIVER MATERIAL TO APPROPRIATE STORES FOR STORAGE,
 PREPARE RECORD KEEPING.
 STORES SYSTEMS & PROCEDURES
THE RECEIPT SECTION
 THE TASKS OF GOODS INWARDS SECTION STARTS EVEN
BEFORE THE MATERIALS ENTER THE STORES.
 WHEN A PURCHASE ORDER IS PLACED, ONE COPY OF THE
SAME IS SENT TO STORES.
 THE COPY INFORMS THE STORES INCHARGE ABOUT THE
ITEM DESCRIPTION, THE QUANTITY, QUALITY / GRADE / TYPE,
AND DELIVERY DATE, SUPPLIERS NAME ETC.
 IT IS THE TASK OF THE RECEIVING SECTION IN CHARGE TO
CLASSIFY SUCH PURCHASE ORDERS AS PER A SUITABLE
BASE / BATCH SUCH AS TYPE OF ITEM, SUPPLIER, DELIVERY
DATE ETC.
 THIS COPY OF THE PURCHASE ORDER HELPS TO PREPLAN
FOR LABOUR TO RECEIVE AND UNLOAD THE MATERIAL,
MAKE ADEQUATE ARRANGEMENTSW FOR SEPARATE SPACE
AND INFORM INSPECTION DEPARTMENT ABOUT PROBABLE
SCHEDULE OF INSPECTION.
 STORES SYSTEMS & PROCEDURES
THE RECEIPT SECTION
 ONCE THE SUPPLIERS DESPATCH THE GOODS THROUGH THEIR
CARRIER THEY ARRANGE TO SEND AN ADVICE NOTE TO THE
RECEIVING STORES.
 SUCH AN ADVICE NOTE PROVIDES INFORMATION ABOUT DATE
OF DISPATCH, CARRIER DETAILS, DESCRIPTION OF
CONSIGNMENT, PACKAGING, LABELING, HANDLING INSTRUCTIONS,
VALUE OF THE CONSIGNMENT, REFERENCE OF THE
CORRESPONDING PURCHASING ORDER ETC.
 THE ADVICE NOTE IS SENT IN SUFFICIENT ADVANCE TO HELP
MAKE SUITABLE ARRANGEMENTS AND EXPEDITE CLEARANCE OF
GOODS AND RELATED DOCUMENTS.
 ON RECEIPT OF GOODS, THOSE ARE PHYSICALLY VERIFIED AND
TALLIED WITH THE CONSIGNMENT NOTE SENT BY THE CARRIER.
 THUS, THE THREE DOCUMENTS, VIZ. PURCHASE ORDER COPY,
ADVICE NOTE, SENT BY THE SUPPLIER, CONSIGNMENT NOTE
SENT BY THE CARRIER, MUST TALLY WITH EACH OTHER AND
WITH THE RECEIVED CONSIGNMENT
 STORES SYSTEMS & PROCEDURES
THE RECEIPT SECTION
 TYPE OF RECEIVING SECTIONS :
• RECEIVING SECTION CAN BE OF VARIOUS TYPE. THE PROMINENT TYPE ARE
DISCUSSED BELOW:
1. CENTRALIZED RECEIPTS: THIS IS A PART OF A CENTRAIZED STORE SET UP
WHERE ALL MATERIALS ARE RECEIVED, PHYSICALLY CHECKED, INSPECTED AND
EITHER STORED FOR DISTRIBUTION TO USERS OR ARE DIRECTLY DISPATCHED TO
VARIOUS SUB – STORES ALONG WITH THE GOODS INWARD NOTE.
2. SEMI – CENTRALIZED RECEIPTS : IN THIS ARRANGEMENT THE RECORD KEEPING
PART IS CENTRALIZED AND SPECIAL, HIGH VALUE MATERIALS ARE RECEIVED
CENTRALLY. MOST OF THE OTHER INCOMING MATERIAL IS DIRECTED TO
RESPECTIVE STORES AND IS CHECKED AND VERIFIED AND GOT INSPECTED BY
THE RESPECTIVE STORES RECEIVING SECTION STAFF. THIS ARRANGEMENT
PRECLUDES THE POSSIBILITY OF BOTTLENECKS DUE TO A HEAVY WORK LOAD
ON THE RECEIVING SECTION. IT ALSO SAVES ON TRANSPORTATION COSTS FROM
CENTRAL STORES TO SUB – STORES AND THEN TO THE USER DEPARTMENTS.
THE CENTRAL STORES CARRIES OUT TASK OF PREPARING AND RECORDING GIN.
3. DECENTRLIZED RECEIPTS : THIS ARRANGEMENT ATTACHES A RECEIVING SECTION
TO EVERY STORES. THIS IS USUALLY USED WHEN THE VOLUMES OF INCOMING
MATERIALS IS USUALLY HIGH AND USERS DEPARTMENTS ARE SPREAD OVER A
WIDE GEOGRAPHICAL AREA. GINs ARE PREPARED SEPARATELY AT EACH
RECEIVING SECTION
 STORES SYSTEMS & PROCEDURES
THE RECEIPT PROCEDURE
 ALL INCOMING MATERIALS MUST NECESSARILY PASS
THROUGH THE RECEIPT SECTION AND IN NO CIRCUMSTANCE
GO DIRECTLY TO THE USERS DEPARTMENT.
 THE RECEIVING INCHARGE MUST COMPLETE ALL
DOCUMENTATION AND PAPER WORK AT THE RECEIPT
STORES BEFORE THE DISPATCH OR STORAGE OF GOODS.
 ON RECEIVING THE CHALLAN AND OTHER DOCUMENTS FROM
THE CARRIER, THE CONSIGNMENT IS UNLOADED AND IS
CHECKED AGAINST THE PACKING LIST.
 APPROPRIATE ENTRIES ARE MADE ON THE DELIVERY NOTE
AND A COPY OF THE SAME IS RETURNED TO THE CARRIER.
 IF THE DELIVERY NOTE IS RETURNED SIGNED, WITHOUT ANY
QUALIFYING STATEMENTS THEN THE CONSIGNMENT IS
DEEMED TO BE IN PROPER CONDITION.
 STORES SYSTEMS & PROCEDURES
THE RECEIPT PROCEDURE
 WHEN MATERIALS ARE RECEIVED FROM SUPPLIERS AN ENTRY IS
MADE IN THE ‘DAILY GOODS RECEIPT REGISTER’.
 THE CONTENTS OF THE DAILY GOODS RECEIPT REGISTER ALSO
CALLED ‘GOODS INWARD REGISTER’ ARE AS FOLLOWS :
1. DATE AND TIME OF RECEIPT
2. NAME OF THE SUPPLIER
3. NAME OF THE CARRIER
4. CHALLAN NUMBER AND DATE
5. ITEM DETAILS AND DESCRIPTION
6. QUANTITY AND VALUE OF ITEMS
7. PURCHASE ORDER REFERENCE
8. CARRIER DETAILS (RR NUMBER, LORRY NUMBER ETC.)
9. GOODS INWARD NOTE REFERENCE
10. REJECTED MEMO REFERENCE
11. RECEIVED BY
12. INSPECTED BY
 STORES SYSTEMS & PROCEDURES
THE RECEIPT PROCEDURE
 ON FILLING UP THESE DETAILS THE NEXT STEP IS PHYSICAL
VERIFICATION BY COUNTING, WEIGHING OR MEASURING AND TALLYING
THE OUTCOME WITH THE CHALLAN OR DELIVERY NOTE.
 THE SAME IS ALSO TALLIED WITH THE PURCHASE ORDER.
 NORMALLY RANDOM SAMPLE CHECKING OF PACKAGES IS DONE.
 THE RECEIVING SECTION STAFF DOES CHECKING BUT IT MAY BE
FOLLOWED UP BY SECOND CHECK CONDUCTED BY THE INSPECTION
DEPARTMENT.
 THE TASK OF THE INSPECTION DEPARTMENT IS TO CONDUCT A
DETAILED INSPECTION IN RESPECT OF QUALITY AND NATURE / TYPE OF
GOODS.
 THE TIME ELEMENT IS IMPORTANT IN THE SENSE THAT ANY UNCALLED
DELAY AT THIS STAGE LOCKS IN MATERIALS THAT MAY BE
OTHERWISE REQUIRED FOR USE BY USER DEPARTMENTS.
 THE SHORTAGES MUST BE CLAIMED IMMEDIATELY AS THEY ARE TIME
BARRED AS PER STANDARD PURCHASE CONTRACT.
 ANY DISCREPANCIES PRESENT HAVE TO BE NOTIFIED WITHIN A TIME
FRAME SO AS TO INFORM THE SUPPLIERS ABOUT FOLLOW UP ACTION.
 STORES SYSTEMS & PROCEDURES
GOODS INSPECTION NOTE
• GOODS INSPECTION NOTE :
• ONCE THE GOODS ARE CERTIFIED AS ACCEPTABLE BY
THE INSPECTION STAFF AN INSPECTION REPORT (GIN)
IS PREPARED.
• THIS REPORT FORMS THE BASIS OF GOODS RECEIPT
NOTE.
• THE GIN IS A CERTIFICATE TO THE ACCOUNTS
DEPARTMENT FOR CLEARING PAYMENT OF GOODS
WHENEVER DUE AND FOR DEBITING THE STORES WITH
THE VALUE OF GOODS RECEIVED.
• IT IS ALSO AN INFORMATION TO PURCHASE SECTION
REGARDING THE RECEIPT OF GOODS, AND AN ADVICE
TO THE STORES TO TAKE THE MATERIALS INTO ITS
CUSTODY AND RECORD THEM IN THEIR BOOK.
 STORES SYSTEMS & PROCEDURES
GOODS INSPECTION NOTE
 GIN TYPICALLY GIVES THE FOLLOWING INFORMATION :
1. DATE OF PREPARATION OF GIN,
2. DATE OF RECEIPT OF MATERIALS,
3. CONSIGNOR
4. SUPPLIER’S NAME AND CHALLAN NUMBER OR INVOICE NUMBER
5. PURCHASE ORDER REFERENCE
6. MODE OF TRANSPORT
7. STORES TO WHICH MATERIALS ARE TO BE SENT
8. CLASS AND CODE NUMBER, DESCRIPTION OF MATERIALS
9. QUANTITY RECEIVED UNDAMAGED AND NUMBER OF PACKAGES
10. QUANTITY ADVISED, RECEIVED, ACCEPTED, REJECTED ETC.
11. TRANSPORT AND RELATED CHARGES PAID / TO PAY
12. DAMAGE / SHORT / EXCESS REMARKS
13. INSPECTION REPORT OR REJECTION NOTE OR DISCREPANCY REPORT NOTE
NUMBER
14. SIGNATURE OF INSPECTOR
15. SIGNATURE OF RECEIPT CLERK
 THE GIN MUST ACCOMPANY ALL THE MATERIALS SENT FOR STORAGE, RECORDS
OR DISPATCH TO USERS DEPARTMENTS. PRE – PRINTED MULTICOLOURED GINS
MAY BE USED FOR SPEEDY IDENTIFICATION AND RECORDS
 STORES SYSTEMS & PROCEDURES
INSPECTION
• INSPECTION :
• PHYSICAL VARIFICATION IS FOLLOWED BY DETAIL INSPECTION.
• WHILE PHYSICAL, QUANTITATIVE CHECKING IS A SEMI – SKILLED TASK,
INSPECTION IS A SKILLED OPERATION AND CALLS FOR THE
ARRANGEMENT OF SPECIALIZED TRAINING OF PERSONNEL, PROPER
TESTING FACILITIES AND METHODS.
• GOODS MUST BE INSPECTED FOR QUALITY TO ENSURE THAT THEY
ADHERE TO SPECIFICATIONS AS DESCRIBED IN THE PURCHASE ORDER.
• THE FIRST TASK IS TO ENSURE THAT THE MATERIAL DELIVERED ARE THE
SAME AS THOSE ORDERED, OF THE RIGHT QUALITY – DIMENSIONS,
CHEMICAL CHARACTERISTICS, ETC, AND ARE IN PROPER CONDITION.
• THE INSPECTION IS PARTICULARLY NECESSARY IN THE CASE OF RAW
MATERIALS AND COMPONENTS THAT GO INTO THE FINAL PRODUCT.
• ONE OR MORE INSPECTORS OF THE INSPECTION DEPARTMENT THAT MAY
BE A PART OF THE MATERIALS DEPARTMENT GENERALLY CARRY IT OUT.
• HOWEVER IT IS DESIRABLE TO HAVE INCOMING INSPECTION DONE BY
INDEPENDENT INSPECTORS SO AS TO GIVE AN UNBIASED VIEW ON THE
QUALITY OF MATERIAL PURCHASED.
• AT TIMES THE USER DEPARTMENT MAY CARRY OUT INSPECTION.
 STORES SYSTEMS & PROCEDURES
INSPECTION
• INSPECTION : -------------------------------------------------------------------

• INSPECTION MAY BE PERFORMED IN THE RECEIVING SECTION

OR IN A PLACE SPECIFICALLY DEMARCATED FOR INSPECTION.
• INSPECTION IS ALSO CARRIED OUT AT SUPPLIERS PREMISES
IF SPECIFIED IN THE PURCHASE CLAUSE, OR IF PAYMENT IS
TO BE MADE BEFORE DELIVERY, IF DURING MANUFACTURE OF
OUT SOURCED COMPONENTS QUALITY HAS TO BE
ASCERTAINED, AND TO AVOID LAST MINUTE REJECTIONS.
• QUALITY OF RAW MATERIALS SUCH AS IRON, ALLOY STEEL
MAY BE VERIFIED IN A METALLURGICAL LABORATORY.
• COMPONENTS, SUB – ASSEMBLIES, SPARES ARE CHECKED
WITH RELEVANT DRAWINGS AND INSPECTION EQUIPMENTS.
 STORES SYSTEMS & PROCEDURES
INSPECTION
• THE USUAL INSPECTION METHODS ARE AS FOLLOWS:
1. VISUAL - A VERY RUDIMENTARY METHOD FOR CHECKING
STATIONARY ITEMS, GROCERIES, ETC.
2. BY TOUCH – APPLIED IN CASE OF TEXTILES FABRICS,
AGRICULTURE PRODUCE ETC.
3. BY SMELL - CHEMICALS, POWDERS, OILS, ARE TESTED BY
THIS METHOD.
4. BY COMPARISON WITH SAMPLES GIVEN BY SUPPLIERS
DURING NEGOTIATIONS FOR AWARDING CONTRACTS
5. BY ACTUAL TESTING BY METROLOGICAL EQUIPMENT.
6. ISI TEST.
7. STATISTICAL QUALITY CONTROL AND RELATED CONCEPTS
SUCH AS ACCEPTABLE QUALITY LEVEL (AQL) MAY BE USED
FOR INSPECTION.
 STORES SYSTEMS & PROCEDURES
DISCREPANCIES
• DISCREPANCIES:
• VARIOUS DISCREPANCIES SUCH AS - LOSS OF PACKAGE,
DAMAGED PACKAGES, SHORTAGES, DAMAGES TO GOODS,
WRONG ITEMS SUPPLIED, EXCESS SUPPLIES ETC. MAY OCCUR.
• THESE ARE NOTIFIED TO THE SUPPLIERS IN A DISCREPANCY REPORT
ALONG WITH A COVERING LETTER.
• COPIES OF THE REPORT ARE SENT TO PURCHASE SECTION AND
ACCOUNTS DEPARTMENT FOR APPROPRIATE ACTION.
a) LOSS OF PACKAGES : A SHORT LANDING CERTIFICATE MUST BE
OBTAINED FROM THE DOCK AUTHORITIES IN CASE OF CONSIGNMENT
SHIPPED BY SEA AND AT THE SAME TIME A CLAIM BILL MUST BE
SUBMITTED TO THE STEAMER AGENT WITH ADVICE TO THE INSURANCE
COMPANY.
IN CASE THE PACKAGE WAS SENT BY RAIL, ENDORSEMENT SHOULD
BE OBTAINED ON THE RAILWAY RECEIPT AND THE CLAIM SHOULD BE
PREFERRED ON THE RAILWAYS.
IF A PACKAGE HAS LANDED BUT IS NOT TRACEABLE, A “ NOT FOUND
“ APPLICATION IS TO BE SUBMITTED TO THE PORT COMMISSIONER
WHO WILL INITIATE NECESSARY INVESTIGATIONS.
 STORES SYSTEMS & PROCEDURES
DISCREPANCIES
• DISCREPANCIES ;----------------------------------------
b) DAMAGED PACKAGES : IN CASE OF DAMAGED PACKAGES A
SURVEY SHOULD BE ARRANGED WITH THE AGENT WITHIN THREE
DAYS OF LANDING OF GOODS.
IF SUCH A SURVEY CANNOT BE ARRANGED, AN INSURANCE
SURVEY SHOULD BE CONDUCTED BEFORE COLLECTING THE
MATERIAL FROM THE DOCK AND A CLAIM FOR ANY LOSS OR
DAMAGE TO ARTICLES SHOULD BE LODGED WITH THE INSURANCE
COMPANY.
ALL ORIGINAL PACKING LISTS MUST BE PRESERVED.
IN CASE OF ITEMS DESPATCHED BY RAIL, THE PACKAGE MUST BE
OPENED IN THE PRESENCE OF RAILWAY INSPECTOR AND THE
STATION MASTER AND THE LIST OF LOST / DAMAGED ARTICLES
MUST BE PREPARED TO CLAIM THE SAME FROM RAILWAYS OR THE
INSURANCE COMPANY.
 STORES SYSTEMS & PROCEDURES
DISCREPANCIES
• DISCREPANCIES ;----------------------------------------
c) MINOR SHORTAGES AND DAMAGES; SUCH INCIDENTS CAN ONLY BE NOTICED ON
OPENING THE PACKAGES.
INCOMING GOODS ARE USUALLY INSURED AND INSURANCE COMPANY OR THE
SUPPLIER MEETS THESE CLAIMS.
AT TIMES, IF THE CLAIMS ARE NOT MET ONE HAS TO WRITE OFF THE VALUE.
THE GIN IN SUCH CASES WILL BE ACCOMPANIED BY A WRITE OFF REQUISITION
TO ADJUST THE RECORDS ACCORDINGLY.
d) MAJOR SHORTAGES AND DAMAGES; AS THESE INVOLVE HIGHER VALUES THESE
MUST BE DEALT CAREFULLY.
ALL ORIGINAL PACKAGES, PACKING SLIPS, DELIVERY CHALLANS, MUST BE
PRESERVED AND INSURANCE SURVEY MUST BE IMMEDIATELY ARRANGED.
A CLAIM WILL BE PREFERRED ON THE INSURANCE COMPANY AND THE
CONSIGNOR WILL BE NOTIFIED OF THE SAME.
AT TIMES IT MAY HAPPEN THAT THE PACKAGE IS INTACT BUT THERE IS A
SHORTFALL IN THE QUANTITY OF GOODS, CLEARLY IMPLYING THAT THE GOODS
WERE SHORT SHIPPED BY THE CONSIGNOR IN THE FIRST PLACE.
SUCH CLAIMS MAY OR MAY NOT BE ACCEPTED BY THE CONSIGNOR, IT HAS TO
BE ROUTED THROUGH INSURANCE COMPANY TO SETTLE THE CLAIM.
ANY CLAIMS FOR DAMAGED MATERIALS EXCEPT THOSE DUE TO DEFECTIVE
PACKING , ARE USUALLY MET BY THE INSURANCE COMPANY.
 STORES SYSTEMS & PROCEDURES
DISCREPANCIES
• DISCREPANCIES ;----------------------------------------
e) SHIPPING WRONG ITEMS; THIS IS A RESULT OF SHEAR CARELESSNESS
OR OVERSIGHT ON THE PART OF THE SUPPLIER.
THIS OCCURRENCE MUST BE IMMEDIATELY NOTIFIED TO THE SUPPLIER
AND TO THE PURCHASE DEPARTMENT.
THE SHIPPED ITEM MUST BE HELD IN A SEPARATE PHYSICAL SPACE
UNTIL FURTHER COMMUNICATION FROM THE SUPPLIERS.
f) EXCESS SUPPLY : AT TIMES SUPPLIERS SEND EXCESS QUANTITY AS
AN ALLOWANCE FOR WASTAGE IN TRANSIT THAT IS USUALLY NOT
TREATED AS EXCESS SUPPLY.
IN CASE OF GENUINE EXCESS SUPPLY THE SUPPLIER AND THE
PURCHASE DEPARTMENT MUST BE INFORMED AND THE EXCESS
QUANTITY MAY BE ACCEPTED OR RETURNED AS PER THE ADVICE OF
THE PURCHASE DEPARTMENT.
IN CASE OF EXCESS ITEMS ARE RETAINED THE ORIGINAL PURCHASE
ORDER MAY BE AMENDED OR THE NEW ONE MAY BE INITIATED.
 STORES SYSTEMS & PROCEDURES
REJECTION
• REJECTION :
• IF GOODS ARE REJECTED FULLY OR PARTIALLY A
REJECTION NOTE FORM IS RAISED AND A COPY IS
CIRCULATED TO THE PURCHASE SECTION AND TO THE
SUPPLIER.
• SUCH MATERIAL MUST BE MARKED APPROPRIATELY
AND STORED IN A SEPARATE AREA TO AVOID MIXING
WITH ACCEPTED LOT OR ENTERING THE NORMAL FLOW
OF MATERIALS.
 STORES SYSTEMS & PROCEDURES
THE ISSUE SECTION
• THE TERM ISSUES IMPLIES THE NORMAL SUPPLY OF
MATERIALS FROM STORES TO VARIOUS USER
DEPARTMENTS.
• EFFICIENT ISSUE OF MATERIALS FROM THE STORES IS THE
BENCHMARK TO JUDGE THE PERFORMANCE OF STORE
FUNCTION.
• MOST USER DEPARTMENTS JUDGE THE EFFECTIVENESS OF
STORES BY THE SERVICE LEVELS OF THE STORES.
• FOR THE PURPOSE OF ISSUES THE ITEMS CAN BE
CLASSIFIED INTO TWO CATEGORIES :
1. ITEMS ISSUED ON REQUISITIONS FOR DIRECT USE,
2. ITEMS ISSUED ON LOAN AND SCRAPED IN DUE COURSE.
 STORES SYSTEMS & PROCEDURES
THE ISSUE SECTION
• THE FACTORS TO BE TAKEN CARE OFF ;
• AUTHORISATION OF ISSUES
• REQUISITIONS
• MATERIAL INDENT FORMS
 STORES SYSTEMS & PROCEDURES
ACCOUNTING / PRICING RULES
GOVERNING ISSUE OF MATERIALS

• PRICING RULES GOVERNING

ISSUES OF MATERIALS;
• FIRST – IN – FIRST OUT METHOD (FIFO METHOD)
• LAST – IN – FIRST – OUT – METHOD (LIFO
METHOD)
• AVERAGE COST METHOD
• REPLACEMENT PRICE METHOD
• ACTUAL PRICE METHOD
• INFLATED PRICE METHOD.
 STORES SYSTEMS & PROCEDURES
ACCOUNTING / PRICING RULES
GOVERNING ISSUE OF MATERIALS
• THE MATERIALS STORED IN THE STOCK – ROOM ARE ISSUED TO
VARIOUS JOBS OR PRODUCTION DEPARTMENTS AGAINST THE
AUTHORISED MATERIALS REQUISITIONS.
• THE ISSUES ARE RECORDED IN THE STORE LEDGER AND THE
RESPECTIVE JOBS OR PRODUCTION DEPARTMENTS ARE DEBITED WITH
THE PRICE OF THE MATERIAL ISSUED.
• AS THE TIME OF PURCHASES AND THE TIME OF ISSUES ARE MOSTLY
DIFFERENT AND THE MARKET PRICE OF THE MATERIALS TENDS TO
VARY, THE PROBLEM OF PRICING THE MATERIALS ISSUED
NECESSITATES CERTAIN POLICY FORMULATIONS.
• IT IS AN IMPORTANT CONSIDERATION NOT ONLY UNDER STORE
MANAGEMENT BUT ALSO FOR COSTING AND PRICING POLICIES.
• THE FUNDAMENTAL CONSIDERATION IS WHETHER TO PRICE THE
ISSUES AT HISTORICAL PRICE I.E., THE ORIGINAL PURCHASE PRICE,
AT THE REPLACEMENT PRICE I.E. THE PREVAILING MARKET PRICE AT
THE TIME OF ISSUE OR AT SOME OTHER PRICE.
• THE VARIOUS METHODS ARE USED FOR PRICING THE MATERIAL
ISSUES WHICH ARE BASED ON DIFFERENT PRINCIPLES.
 ACCOUNTING / PRICING RULES
GOVERNING ISSUE OF MATERIALS
FIRST – IN – FIRST – OUT – METHOD (FIFO METHOD)
• FIFO METHOD, AS ITS NAME SUGGESTS, IS GOVERNED BY THE
PRINCIPLE THAT THE MATERIALS WHICH ARE RECEIVED FIRST ARE
ISSUED FIRST.
• THE ISSUES ARE PRICED AT THE COST PRICE OF THE OLDEST
CONSIGNMENTS TILL IT GETS EXHAUSTED.
• AS SOON AS THE OLDEST LOT IS EXHAUSTED, THE ISSUES ARE
PRICED AT THE COST PRICE OF THE NEXT OLDEST LOT IN THE
SEQUENCE, E.G. THE FOLLOWING TRANSACTIONS OCURRED DURING
THE FIRST WEEK OF APRIL 2007:
APRIL 1, 300 UNITS PURCHASED @ Rs. 10 PER UNIT
APRIL 3, 600 UNITS PURCHASED @ Rs. 15 PER UNIT
APRIL 5, 500 UNITS ISSUED TO JOB NO. 1001
THE ISSUE OF 500 UNITS WILL BE PRICED AS UNDER;
FROM THE FIRST LOT : 300 @ Rs. 10 = 3000
REMAINING 200 UNITS FROM SECOND LOT = 200 UNITS @ Rs. 15 = 3000
TOTAL PRICE OF THE ISSUE 500 UNITS = 6000

THE VALUE OF THE CLOSING STOCK OF 400 UNITS ( I.E. SECOND LOT 600 UNITS
LESS 200 UNITS ISSUED WILL BE COSTED @ Rs. 15 I.E. THE VALUE OF CLOSING
STOCK WOULD BE Rs. 6000.
 ACCOUNTING / PRICING RULES
GOVERNING ISSUE OF MATERIALS
LAST – IN – FIRST – OUT – METHOD (LIFO METHOD)
 STOCK VARIFICATION
• THE STORES MANAGER HOLDS THE PHYSICAL CUSTODY OF
THE MATERIALS AND IS RESPONSIBLE FOR SAFE UPKEEP AS
WELL AS FOR ANY MAJOR DISCREPANCY.
• HE MUST CONSTANTLY REVIEW THE STOCKS AND RECONCILE
THE PHYSICAL AND BOOK STOCKS, WHICH DIFFER IN ALMOST
ALL ORGANISATIONS.
• THE MAGNITUDE OF THIS PROBLEM WILL INCREASE AS THE
NUMBER OF TRANSACTIONS INCREASE, BECAUSE MISTAKES
MAY BE COMMITTED IN TRANSACTIONS AND THIS CAN
ACCUMULATE TO MAJOR DISCREPANCIES.
• FOR EXAMPLE, IF THE WEIGHING SCALE INDICATES 1 KG
LESS EVERY TIME THEY WEIGH, AND THERE ARE 100
WEIGHING IN A PERIOD, THE STORE KEEPER WOULD HAVE
ISSUED 100 KG WITHOUT ANY RECORDS AND WILL FIND
HIMSELF SHORT WHEN THE PHYSICAL CHECK IS MADE USING
THE SAME WEIGH BRIDGE.
 STOCK VARIFICATION
• ISSUES WITHOUT INDENTS,IMPROPER CHECK OF RECEIPTS,
PILFERAGE, OBSOLESCENCE, DETORIORATION AND DAMAGE
DUE TO DIFFERENT CAUSES OF IMPROPER STORAGE,
SHRINKAGE, EVAPORATION, SPIILAGE, ETC. ARE OTHER
FACTORS THAT HAVE TO BE CONSIDERED IN THIS CONTEXT.
• IN ORDER TO EXERCISE STRICT CONTROL ON THE ABOVE,
THE STORE MANAGER MUST VERIFY THE STOCKS
PERIODICALLY.
• EXPERIENCE INDICATES THAT MANY DISCREPANCIES IN
PRACTICE ARE DUE TO IMPROPER DOCUMENTATION, LIKE -
a) COMPLYING WITH URGENT ISSUES WITHOUT VOUCHERS,
b) DELAYS IN POSTING THE RECEIPTS AND ISSUES AND
c) ISSUE BY NUMBERS, RECEIPT BY WEIGHT AND ACCOUNTING
BY NUMBERS, ETC.
 PROCESS OF VERIFICATION
• STOCK VERIFICATION CAN BE DEFINED AS THE PROCESS OF
PHYSICAL COUNTING, WEIGHING OR MEASURING THE STOCK
OF MATERIALS THAT IS HELD AND MAKING A RECORD OF
THESE FIGURES.
• NORMALLY PERSONNEL FROM THE ACCOUNTS DEPARTMENT
ARE GIVEN THIS RESPONSIBILITY.
• SOMETIMES THE AUDITORS ( OR BANKERS TO WHOM THE
STOCK IS HYPOTHETICATED) – ALSO UNDERTAKE THE
VERIFICATION OF STOCKS ON A SAMPLE BASIS ; IN ORDER TO
CHECK THE REALITY OF THE PERFORMANCE STATEMENTS.
• A WELL DEFINED VERIFICATION PROCESS, CAN ALSO
PINPOINT ANY DRAWBACKS OR SHORTCOMINGS IN THE
METHODS OF STORAGE, MOVEMENT OF MATERIALS, HANDLING
OF MATERIALS, OBSOLESCENCE, ETC.
• A REGULAR VERIFICATION PROCESS ENSURES THAT THE
SYSTEM AND PROCEDURES LAID IN THE MANUAL ARE
ADHERED TO.
 PROCESS OF VERIFICATION
• PHYSICAL VERIFICATION OF STOCKS STARTED OFF AS A PERIODIC
EXERCISE, USUALLY COINCIDING WITH THE ANNUAL ACCOUNT
CLOSING, UNDER THE DIRECTION OF ACCOUNTS DEPARTMENT.
• THIS PROCEDURE ACTING AS A POSTMORTEM EXERCISE, CAN STOP
THE NORMAL FUNCTION OF THE PLANT TOWARDS THE YEAR END, IF
THE NUMBER OF ITEMS ARE LARGE.
• SINCE THERE IS AN URGENCY FOR QUICK COMPLETION, THIS MAY
LEAD TO AN INEFFECTIVE VERIFICATION PROCESS.
• TO OVERCOME THIS DIFFICULTY, MATERIALS ARE CHECKED
THROUGHOUT THE YEAR AND VERIFICATIONS ARE SO STAGGERED,
THAT ALL MATERIALS ARE COVERED IN A YEAR.
• IT WILL BE ADVANTAGEOUS TO COVER THE HIGH CONSUMPTION
VALUE A ITEMS MORE THAN THE OTHER ITEMS IN THIS PERPETUAL
CONTINUOUS SYSTEM.
• THE VERIFICATION PROCESS, WHETHER PERIODIC OR PERPETUAL
SHOULD BE THOROUGH, OR WELL ORGANISED WEIGHING AND THE
UNIT OF MEASUREMENTS MUST BE CONSISTENT AND THE MEASURING
INSTRUMENTS MUST BE PROPERLY CALIBRATED, SO THAT MEASURING
ERRORS ARE MINIMAL.
• CARE SHOULD BE TAKEN TO AVOID DOUBLE COUNTING,
OVERLOOKING ITEMS KEPT AT OLD PLACES, WITH ANCILLARIES AND
IN TRANSIT, ETC.
 PROCESS OF VERIFICATION
• THE PROCESS OF PHYSICAL VERIFICATION CAN BE COMPLETE ONLY
IF NECESSARY FOLLOW – UP ACTION IS PLANNED.
• AFTER TABULATION OF PHYSICAL STOCK, ATTEMPTS SHOULD BE
MADE TO RECONCILE WITH BOOK BALANCE, INDICATING OPERATING
STOCK PLUS RECEIPT MINUS ISSUES.
• IT IS VERY COMMON THAT THE TWO SETS OF FIGURES FOR EACH
ITEM MAY NOT TALLY AND HENCE THE PROBLEM ARISES IN STORES
MANAGEMENT.
• A DETAILED INVESTIGATION IS CALLED FOR, IF THERE ARE MAJOR
DIFFERENCES PARTICULARLY IN HIGH VALUE ITEMS, TO AVOID
RECURRENCE OF THE SAME IN FUTURE.
• USUALLY, ORGANISATIONS FIX – UP LIMITS FOR DISCREPANCIES AND
DISCREPANCY VOUCHERS ARE SIGNED BY THE APPROPRIATE
AUTHORITIES.
• HOWEVER, STOCK VERIFICATION SHOULD NOT BE PERCEIVED AS A
WITCH HUNTING PROCESS AND STORE PERSONNEL MUST BE
INVOLVED IN THE EXERCISE.
• THE ORGANISATIONS WILL GAIN, IF THE STORES PERSONNEL ARE
MOTIVATED BY A PROPER DEVELOPMENT OF THE ATMOSPHERE,
CULTURE AND VALUE SYSTEMS.