Purchasing department expenses Rs 200,000Stores personnel expenses Rs 200,000Obsolescence Rs 60,000Hire charges of warehouse Rs 140,000Material handling in stores Rs 160,000Cost of bill payment Rs 100,000Insurance charges 1%Interest charges 18%Orders placed per year 5000Average total inventory Rs 200 lakhsQuestion 3. With reference to an industry where you are working or you are familiar with, prepare a detailed outline of the stores system and procedures practiced in thatindustry. Describe the weaknesses in the system and what you would do as an incumbentMaterials Manager to overcome those weaknesses.
General Automobiles Ltd (GAL) is a large manufacturer of two wheelers in the country.Last year it produced more than 80,000 vehicles in three different models. Although GALassembles all the vehicles in its own plant, it does not manufacture the componentsrequired to assemble a two wheeler itself. In fact, only some of the critical componentsfor the engine and the transmission are manufactured by GAL itself and a large number of components are purchased from outside vendors.Hasti Precision Works (HPW) is one of the suppliers manufacturing and supplying smallpressed components to GAL. Last year, it supplied about 11,000 numbers of brackets for which GAL had six more suppliers. This bracket is used on all models of two wheelersmanufactured by GAL and so last year GAL must have bought close to 80,000 bracketsfrom all its vendors for this item. HPW currently charges Rs 15 per bracket to GAL. Mr Mehta of HPW has a suggestion for Mr Sen, the Purchase Manager to GAL. Mr Mehtathinks that if he is assured minimum order size of 40,000 nos he would buy a new die,which would be faster as well as of a higher precision and this would enable Mr Mehta tosupply these brackets to GAL only at Rs 13.50 per bracket.HPW is located very close to assembly plant of GAL. It has been supplying componentsto GAL for more than 7 years now. Mr Mehta himself is a quality engineer and hehimself looks after the day to day management of HPW. GAL has never had any major problem with HPW and in fact over the last 7 years, with the growth of HPW, itsbusiness with GAL has also grown steadily. The operation of GAL is heavily dependenton the timely availability of good quality components and that is why Mr Sen tries not todepend on a single supplier for all the items. HPW had a total turnover of Rs 50 lakhs.