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5.storage Systems
5.storage Systems
Storage of
incoming
materials
Value Addition to
materials and
conversion to
Final product
Storage of
Finished Vehicles
Dispatch to
Customer via
Dealers
What is a Store?
A storage point of physical resources that a firm holds in stock with the intent of
selling it to the customer or transforming it into a more valuable state.
1.Raw Materials
2.Works-in-Process
3.Finished Goods
Definition of Stores:
Design of a Store plays a significant role in directly deciding the profit of the firm.
How ? ? ?
If Stores design allows for more stocks, then the amount of money locked up
will be more, leading to inconvenient business situations.
If the Stores design limits the stocks to minimal level, then smooth flow of
materials to production line will be affected during critical times leading to
Production losses.
2.Implementation of Lean Production with the help of Kanban and JIT tools is
possible only with a properly arranged Store.
Stock giving a
buffer between
Supply and
Demand
This can be further classified as Castings store, Plastic parts Store, Bought Out parts
store depending on the type of raw materials.
2.Production Store:
The point where ‘’Consumables” needed for production are stored
Receipt Store:
The materials arriving from the Vendors are retained here until they are inspected,
finally accepted and sent on to the respective places for storage, or directly to where
they will be used.
The other shops might not be able to reach this figure or the actual quantity required might
be less than the batch quantity.
-> Hence the semi-finished units are kept in the WIP Store for future use.
Example:
Vehicle Assembly
Painting unit Work in Progress requirement is only
paints 800 Stores 700 units /day
units/day
100 Units/day
kept as WIP
Stationary store:
Keeps office stationary items like pens, papers, pencils, notebooks, files
issued to various departments of the company.
Transit Sheds:
These are normally roofed sheds without any walls and open on four sides
and are mainly intended to protect goods from sun and rain
1.Centralized stores :
The Common store from which materials are supplied to all departments.
Examples:
Machining Stores, Painting Stores, Assembly Stores.
Advantages:
2. Less storage space is needed because stocks should be kept as low as possible.
Demerits:
4. All the production departments are affected if any disturbance inside Stores
occurs.
Advantages:
Demerits:
In this case, a central store is located near the receiving department, & each
department has a sub store with it.
From the central store, the materials are received by the sub-store on imprest
system & issues to the department are made.
When, from the central store, work sites are fairly distant, this system is
essential.
Inventory refers to any kind of resource having economic value and is maintained to
fulfill the present and future needs of the Organization.
A few of them are Raw Materials, Semi Finished & Finished parts and Spare parts.
Simply put, the materials which are being stored in the above mentioned Stores with an
intention of Value Adding and Sales are Inventories.
In addition to that, Human resources employed and financial resources are also a part
of the Inventory.
For a Hospital,
Number of Beds, Stock of Drugs kept, Surgical equipments, Specialized personnel are
the type of Inventories held.
Types of Inventories :
4.Seasonal Inventories
5.Decoupling Inventories
This type of inventory exist when production is done in larger quantities than the
actual immediate requirements needed to satisfy the Customer.
The inventories created during the transportation from the distribution centres to
the Customers are called as Pipeline or Transit Inventories.
2.Nature of Demand
These are also referred to as process inventories ,as the materials are actually
being worked on or moved between work centres.
. I am on the Way !
This will manage any unpredictable shortage with a high penalty cost.
Seasonal Inventories:
The seasonal inventories is needed for products whose market exhibit seasonal
patterns of demand and production varies with demand.
The manufacturers face peak demand where the production facility is unable to
meet the demand on a period by period basis.
Thus, the seasonal inventories are built up in advance or procured during the
period of low demand(on regular basis) to be used in the peak demand period.
Seasonal
160 inventory built up
140 to meet high
120 demand
100
80
60
Production
40
Demand
20
0
1 2 3 4 5 6 7 8 9 10 11 12 13
Seasonal Inventories:
Example:
The sale of TVS Pep and TVS Apache will be more during the College opening
seasons( April to July), than the regular days. Hence, seasonal inventories are
built up in prior to the same.
Decoupling Inventories:
Decoupling Inventories:
This kind of Inventory stocked between production units are called as WIP
Inventories.
Decoupling Inventories:
It is the inventory of the final products which could be released for the sale to the
customers.
The size of Inventory depends on
Demand,
Ability of the firm to sell the products,
Shelf life of the product and storage capacity
These are the parts which are used in the production process, but do not
become part of the product.
The size of the inventory depends on average life of the components.
->In an organization where many no of items ( Say 15,000) are in its inventory
listing, it is not possible to control all items closely.
->These ‘vital few’ items can be segregated for the closer control to ensure
productivity.
Total
contribution
percentage
“The Vital
few”
Total no of parts
1. ABC Analysis :
The Analysis consists of separating the inventory into 3 groups based on their
annual cost volume consumption( Unit Cost * Annual consumption).
They are
“A “- group items – constitutes to 70% of the Annual consumption Cost.
“B “- group items – constitutes to 20% of the Annual consumption Cost .
“C “- group items – constitutes to 10% of the Annual consumption Cost .
After classification, the inventory control policies are made based on this
division.
“A” category Items require special managerial attention. Hence, fixed interval
inventory control system is used.
“B” category Items are not so costly as to require special attention, but these are
not cheap that to ignore over stocking.
1. ABC Analysis :
“C“ items can be managed in a casual way.For these items, a fixed order
Quantity system is used.
The Order quantities can be relatively large without incurring excessive costs.
2.VED Analysis :
1. Vital (V) -Stands for vital – items when out of stock or when not readily
available, completely brings the production to a halt.
3.Desirable (D) -denotes Desirable items – all other items which are necessary
but do not cause any immediate effect on production.
D - are Difficult items which are procurable in market but not easily
available.
Example:
Items which have to come from far off cities or where there is not much
competition in market or where good quality supplies are difficult to get or to be
procured.
E - refers to Easy items ,Items are those which are easily available;
mostly local items.
Based on the consumption rate of the items used , they are classified as
1.Crates
2.Pallets
7.Lean Lifts
This depends on
1. To ensure the that the Products stored serves its purpose at the User Area
without affecting its value ( Quality).
Example:
If sensitive parts like Headlamp, Rear View Mirror ,painted parts of a vehicle are
stored without attention, it causes Dent, Scratch and Scoring marks in the part ,
making it not usable for the Vehicle Assembly.
These cant be easily reworked( or Cost of rework is very high ) and is directly
loss of money to the company.
The products such as CNG, LPG cylinders are locked in its location to ensure the
elimination of chances for an accident leading to Heavy losses
TVSM / PED / MSE / MHSE Slide 41
Consideration for creation of Stores
Implementing a carefully structured, cost-effective Store, will inevitably see an
organisation through to its long term business objectives and provide tangible
financial pay backs.
The key metrics involved in the designing of a store and their importance are as
follows:
1.Reorder level,
2.Buffer Stock,
3.Reorder Quantity,
5. Lead time
Inventory = Reorder level – Average demand during lead time + order lot size
Reorder level = Average demand during lead time + Reserve stock + Safety stock
Average demand during lead time = Average sales / day x lead time (in days)
Reserve stock = Dispatch std. deviation x lead time x service level (n=1)
Safety stock = Avg. demand during max. delay period x Prob. of delay occurrences (25%)
Order lot size = (Avg. demand/day + 1 std. dev.) x freq. of order in-terms of days
3000
2000
1500
1000
500
0
106
113
120
127
134
141
148
155
162
169
176
183
190
197
204
211
218
225
232
239
246
253
260
267
274
281
288
295
302
309
316
323
330
337
344
351
358
365
1
8
15
22
29
36
43
50
57
64
71
78
85
92
99
Days of year
With reduction in inventory by 753 units, only 4 days of under stocked condition exists
TVSM / PED / MSE / MHSE Slide 46
Consideration for creation of Stores
Order Cycle:
An ordering cycle is the time between two successive placement of Orders for
the Inventory.
They are determined in 2 ways
1. Continuous review:
In this case the level of inventory is updated continuously as current level is
reached at reorder point ,a new order is placed.
This is also referred to as the “Two Bin System” or “ Fixed Order size
system”or “ Q” system.
2. Periodic Review :
Here orders are placed at equal interval of time,but the size of the order may vary
with variations in demand.
This is also referred to as “Fixed order Interval System” or “ P" System.
When an order is placed, it may require some time before the delivery is
reached. The time between the placement of an Order and its receipt is
called lead time or delivery time.
Point where
Order is made
The determination of order quantities needs the identification of what lot size
provides the most economical tradeoff between relevant inventory costs –
ordering, carrying and shortage costs.
The EOQ is the size of the order that yields the optimum total incremental
inventory cost during the given period of time under the assumption that the
demand rate is constant and known.
It is an activity ratio measuring the number of times per period, a stores sells and
replaces its entire batch of inventory again.
However, a very high value of this ratio may be accompanied by loss of sales due to
inventory shortage.
Inventory turn over is different for different industries. Hence, a comparison has to be
made between similar units.
This is the average time elapsed between a truck's arrival at a facility and its
departure from the facility.
This is an indicator of the efficiency of lot and dock door space, receiving processes,
and shipping processes.
In other words, the number of trips that a truck has to make increases for a given stock.
Ultimately, the traffic of trucks to deliver the stocks increases inside the industry,
leading to congestion.
Increasing the Number of Docks is not economical beyond a point, as it leads to higher
operating costs. Hence, it leaves us with no choice other than Working on the
Turnaround time.
So What happens, if you neglect the Truck Turn Around Time?
The Truck Turn Around time of a Factory and the No .of Docks needed for the
Loading and Unloading are inversely proportional to each other, for the given fixed
amount of Traffic.
Deciding How Many Docks ( Doors for Loading and Unloading) for an Operation
depends on various factors.
The following are the steps involved in the estimation of number of docks for a factory.
The first step is to document the current condition. The Activities to be captured are
1. Date
2. Time at which truck arrived (note if the truck was delayed due to unavailability of dock
door or staging space)
3. Shipment or receipt time
4. Load type (LTL, TL, palletized vs. floor load, parcel)
Along with this the No. of truck per day needs to be recorded.
“Trucks per Day ” – This represents the Peak or near peak Activity.
However, in daily Industrial practices, the No. of trucks that can be serviced per Dock
is calculated as a measure, as the Incoming No. of trucks will vary as per the
Demand.
Waiting time –Time elapsed between the moments at which one truck leaves and the
next truck arrives.
Assumptions:
The Size (type) of the trucks arriving is considered the same, as more than 90% them
are EICHER Trucks only.
The No. of pallets carried by a truck is 8 . Taken as the average for all the trucks.
(The range is from 6 to 9 per truck)
Any type of Stores facility , which provides scope for the most utilization of the
Resources (Man, Machine , Method, Material) through applications of advancement
in the Material Storage and handling Systems and methods.
The considerations for a model store involves the factors already discussed in the
considerations for the creation of Stores.
1. Ease of Handling
2. Ease of Storage
1. Ease of Handling:
This begins with the inward material storage condition received from the Supplier.
The Incoming mode shall ensure the count free design ( No.of parts per container)
The storage shall have the flexibilty to be stacked and to be Cleaned and to be folded to
ensure return transportation.
The receipt of Material into the store shall be done without the manual intervention
through barcode Scanning& Mobile robots for the handling of Parts.
2. Ease of Storage:
The storage system shall have the flexibility to utilise the vertical space of the storage
area.
And ensure easy retrieval through AS/ RS Systems in a FIFO Sequence.
Without the search and find,Once the Order is created and fed into the system, the
AS/RS unit will pick the SKU and Supply it at the customer end.
Without the search and select, Once the Order is created and fed into the system, the
AS/RS unit will pick the SKU and Supply it at the customer end.
The above mentioned are one of the few major Objectives of a Model Store.
With the Improvements happening more and more in Material Handling and Storage
Systems, this will allow for further improvements in Model Stores.
5. Wikipedia,