REGIONAL TRAINING INSTITUTE, AVADI, CHENNAI - 600 054

Course on

(FOR GROUP 'C' STAFF)

VENUE: REGIONAL TRAINING INSTITUTE, AVADI, CHENNAI

Conducted by
Government of India, Ministry of Defence
Ordnance Factory Board, Regional Training Institute
Avadi, Chennai - 600 054

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 Store Provisioning & Material Management
INDEX

SL TOPIC PAGE NO

1. Purchase Procedure 1
2. Forecasting/Planning of Direct/Indirect Materials 5
3. Tender Purchase Committee 8
4. IFD/Indent 9
5. ABC technique and Selective Control 13
6. Inventory Control 35
7. Import 37
8. Introduction to Stores - Salient Features 46
9. Store Functions 47
10. Stores Receipt, Issues, Stores Office Procedures 48
11. Disposal 51
12. Store Keeping 54
13. Issue of Stores 55
14. Stores Accounting Responsibility 55
15. Issue of Stores/Preparation of Documents/I.Vr. 56
16. Book Keeping 57
17. CRV, IV, Demand Notes 58
18. ABC Analysis 59
19. Stores Organisation & Control 59
20. Preservation 64
21. Biological Hazards 64
22. Stock Verification 67

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 INTRODUCTION TO STORES:

1. RAW MATERIALS STORES

2. PRODUCTION ITEMS STORES
3. GENERAL STORES
4. TOOLS STORE
5. SOLVAGE STORES
6. PACKING STORES
7. SPARE PARTS STORES
8. RECEIPT STORES
9. FINISHED GOODS
10. WORK IN PROGRESS STORES
11. STATIONARY STORES
12. BONDED STORES (CUSTOMS/EXCISE NOT PAID)
13. SCRAP/OBSOLETE STORES
14. ISSUE STORES
15. STORE OFFICE
Store keeping relates to safe custody and preservation of the materials stocked in
the store.
The task of the stores is:

1. To provide what is required?

2. To provide when is required?
3. The condition in which it is required?

And all the above things efficiently and economically.

Store keeping adds noting to the value of a product. It is a cost with no return,
hence the importance economic operation keeping efficiency at a desired level.
CAPITAL EXPENDITURE IN STORES DEPARTMENT:

1) LAND 2) BUILDING 3) ROAD 4) YARDS 5) MATERIAL HANDLING

EQUIPMENTS 6) MACHINERY & OTHER FACILITIES.
REVENUE EXPENDITURES:
1) Salary to the employees of the store 2) Maintenance cost 3) Stationary 4)
Communication expenditures 5) Cost of maintain the inventory at an average low
level.

Through it adds nothing to the value of the product, store keeping is an essential
function in any organisation. Stores is just an overhead for any organisation.

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 STORES FUNCTION:

I. To make available a balanced flow of raw materials, components, tools,

equipments and other misc, components, which are absolute necessary to
meet operational requirements.
II. To provide maintenance materials, spare parts and general stores as
required.
III. To receive & issue of WIP & finished components.
IV. To accept and store scrap and other discarded materials and arrange for
proper disposal
V. To keep the stores area in a tidy and neat way.

RESPONSIBILITY OF STORES FUNCTIONS:

1. Identification
2. Receipt
3. Inspection
4. Storage & Preservation
5. Material Handling
6. Packing
7. Issue & Disposal
8. Stock records
9. Stores accounting
10. Stock control

RESPONSIBILITY OF STORES PERSONALS:

RECEIPT:

1. Receive incoming goods

2. Asst Unloading
3. Count tally
4. Check for damage/shortage & prepare report
5. Enter in goods inward register & Prepare goods inward slip
6. Complete vender's consignment note (challan)
7. Arrange for inspection
8. Prepare receipt voucher
9. Prepare goods rejection note
10. Send goods to respective stock godowns

Further:

(1) Ensure house keeping is OK i.e checking for spillage oils, dirty walls and any
obstacles.
(2) Check all the material handling equipment are OK.
(3) Report an accidents and dangerous occurrences (if any) and fill accident
register and arrange for immediate medical treatment as early as possible

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 (4) Report to management utilisation factors, idle time working etc.

(5) Ensure FIFO system.

STORES RECEIPT, ISSUES, STORES OFFICE PROCEEDURES

Ordinance Factories are manufacturing from a pin to a Tank. Effective store

keeping is playing a vital role in manufacturing store in the Ordinance Factories.

Desired degree of service at minimum ultimate cost can be made available to the
production/service shop by effective control of stores (known as inventory control)
taking following points into the consideration.
1. Systematic location
2. Storage
3. Recording
Main record of stores in stores section is maintained through bin cards. Another
record is maintained jointly by provision section and accounts are known as STORE-
CUM-PROVISION LEADGER.
According to the various functions involved, main stores is divided into the following
units.
1. Receipt Group
2. Stock
3. Issue

FUNCTION OF RECEIPT GROUP:

The receipt group as responsibly to receive a materials intended for the factory
against proper authority such as Firms Challan, Invoice, Railway Receipt (RR), Issue
Voucher, Registered Post Parcel, Value payable post (VPP) etc. Counting, measuring or
weighing, as the case may be by this group carefully checks up the stores on receipt. On
receipt of material, MIS (Material Inward Slip) are prepared in five copies within 24
hours whch are forwarded to WI (Works Inspection) along with stores for inspection to
specification and quality as stipulated in the supply order.
On receipt back of MIS from WI after inspection (if the full quantity is accepted)
receipt voucher number is to be allotted on MIS sent to stock for taking material on Bin
cards i.e stock charge). The receipt Data processing section/provision section. If there is
any rejection on the MIS after inspection, Discrepancy report (DR) should be raised on
the consignor factory in the Form No. IAFZ 3045 within one month from the date of
receipt off consignment. This reports (DR) are prepared in six copies-two copies for
consignor factory/dept one copy for consignor's A.O., one copy for L.A.O., one copy for
local planning office and the rest for office records.
Material in dispute will only be returned at the consignor's specific
request/agreement, in the absence of such agreement it will be retained by the consignee.
It will be used if useable; otherwise it is to be disposed in the usual manner.
AUTHORITY FOR ACCEPTING MATERIAL:
All materials are to be accepted based on:-

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i) Local purchase ii) Central Purchase iii) Foreign Purchase iv) Cash Purchase v)
One time buy (OTB) vi) Indent etc.
PLACES OF COLLECTION:
Collection of stores made by Receipt Group Generally from
a) Local items against supply order
b) Ordnance Dept/A.S.C (Army Supply against demand/indent
c) Sister Ordnance Fys against I.F.D
d) Govt. store Govt. stationary office against demand/Indent
e) Railway Yard/Godown/Station
f) Embarkation Hqrs incase of stores shipped by foreign supplier

MI slips are prepared in five copies, the distribution of which is as following:-

a) One copy for office record b) One copy for record in WI c) Two copies for
accounts office d) One copy for Bill section for payment.

The following service of receipt voucher is allotted to MID after inspection

depending upon categories of stores. Henceforth the M.I slip will be renamed as receipt
voucher.

'S' denotes serviceable items

'M' denotes machinery items
'R' denotes reserve stock
'N' denotes nominal transactions.

REGISTERS MAINTAINED:
For proper functioning of the following registers is maintained in the receipt Branch.
i) RR/PWB (parcel way bill)register.
ii) Wagon register
iii) Central record for incoming stores
iv) Discrepancy registers
v) Claim register
vi) Receipt voucher/guard file
vii) Dak book for incoming & out going papers.

STOP PAYMENT: Payment to supplier on the spot can be made only after inspection
and acceptance of stores by the authorised inspection.

ONE TIME BUY: The stores of non-recurring nature are purchased as one time buy.
These stores procured against transit ledger should not be taken on stock charge.

PROCEDURE OF CLAIM TO RAILWAYS:

As for DGOF' instruction the following procedures are adopted in claiming

compensation in case of consignment booked under the PWB/RR by the firms/factories
etc.

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 a) Notice of inform for all claims should be served to Rlys (Chief commercial
Spndt/G.M) copy endorsing to the consignor in case of non arrival of stores
within 30 days from the date of booking.

b) Formal claim (Monetary claim) should be made with 90 days from the date of
booking in case of non-arrival of the consignment.
c) No claim shall be entertained by Rlys., if the claimant fails to submit his claim
within 6 months from the date of booking.

d) No claim can be made from the Rlys., if the value of the lost stores does not
exceed Rs.25/-

e) If any packet/case/drum is found in damaged, broken or in doubtful condition at

the time of collection of the same the consignee should issue a memo to the station
Master to issue a "Short Certificate" if the quantity is found short on joint
survey.

f) Reports of damage/shortage of store after opening of the case should be intimated

to the consignor within 30 days from the date of receipt of stores.

g) On the basis of "Short Certificate" consignee factory should serve on informal

notice of claim and after receiving the assumed value received from L.A.O in
respect of monitory claim bill would be settle.

h) Ledger should be maintained by trained staff, who is well aware of the financial
aspects of the transaction for which the ledgers are kept.
Inventory of stores
a) Annual Inventory through stack verification group is normally being carried out
once in a year between 1 st April to 31st march and SV sheets are being prepared
to this effect for valuation.
b) Perpetual inventory of stores-whenever any receipt or issue is made the BCB (Bin
card balance) after positives reflected on the documents to cross check the qty
available after that posting. This will be called perpetual inventory i.e. to reflect
the stock at any item after every transaction.
c) Departmental verification by senior staff.

d) Surprise check of any item by orderly Officer/Manager/GM or any one deputed

by them.

e) Inventory is the means of verification of physical stock and Inventory control is

the means of regulating the stocks in terms of value and to control the cost so as
to re-cycle the money as many times as possible during the financial year to avoid
idle capital/dead capital.

Inventory Control Methods:

i) EOQ (Economic ordering quantity) to avoid overstocking/idle capital.

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 ii) Phased supplies to spread over certain period to avoid overstocking/idle capital
and to conserve storage space.

iii) Control charts by the respective material control/production control Department

to picture out the correct position of stocks/dues in with dates.
iv) Release of correct qty of material for each job against each work order and
warranty.
Costing:

Costing is one part of stores accounting so far as the production items are
concerned. For this purpose the ledger called "Priced Production Ledger" is employed
with the help of cost cards. Cost cards will show the materials used and the labour used.
Besides material cost. Labour cost over head charges like fixed overhead and variable
overheads are also charged to make up or arrive at the cost of the product i.e item
produced at the Factory.

DISPOSAL:

Disposal is also a part of stores accounting.

Disposal shall be as under:-

a) Disposal of surplus and products at premiums (Discount sale)

b) Disposal of raw materials used as well as unused to avoid over stocking / idle
capital

c) Disposal of scrap by open tender or public action periodically

d) Disposal of material to sister units as stop gap arrangements only to re-call at any
time as the need arrives.

e) Disposal of products at concession to employees as incentive

f) Retrieval of useful parts or salvage of useful parts that could be re-used and the
balance may be disposed of by any one of the methods stated above.

CODING OF UNITS

UNIT CODE NO UNIT CODE NO

MILLIMETER 01 PAIR 41
CENTIMETER 02 DOZEN 42
DECIMETER 03 GROSS 43
METER 04 SHEET 50
SQ-MILLIMETER 11 QUIRE 51
SQ-DECIMETER 13 REAM (50Pcs) 52

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SQ-METER 14 BOTTLE 60
SQ-CENTIMETER 12 PACKET 61
CU-MILLIMETER 21 BAG 62
CU-CENTIMETER 22 TIN 63
CU-METER 24 BOX 64
CU-DECIMETER 23 CARTON 65
LITRE 25 SKEIN(Qty of 70
Yarn)
HECTO LITRE 27 REEL 71
CENTIGRAM 32 ROLL 72
GRAM 34 CALORIE 73
DECIGRAM 35 MEASURE 75
HECTOGRAM 36 BAR 77
KILOGRAM 37 SET 78
METRIC TONNE 38 LOT 79
NUMBER 40 WHOLE JOB 80

DISPOSAL OF STORES

Disposal of stores is a complex job by itself. The purpose behind the concept
being to retrieve as much money (value) as possible for the surplus stores to the best
advantage of the state and at the same follow the norms stipulated by the state for such
disposal.

Detailed instructions to be followed by all concerned in case of disposal of

samples stores are contained in circular 212/MM dated 15 th June 1981 of DGOF, 6
Esplanade East Calcutta-700 069. However guideline for information of the dealing
assistance the following may be noted and action taken as per the DGOF Circular of 15-
06-81 cited above.

CAUSES FOR THE STORES BEING DECLARED SURPLUS

A) Over Provisioning of stores and non-moving of stores.

B) Slow drawal of stores by the user shops
C) Stores held in stock beyond shelf life

D) Stores being declared obsolete due to revision of drawings/functions etc

E) Cut in the production programme
F) Accommodation of stores, especially the scrap materials which are the by
products of the production programme.

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 G) Inability of the Factory/Unit to utilise the existing stocks.
H) Replacement of worn out machinery stores.

WAYS AND MEANS OF DISPOSAL OF SURPLUS STORES

I) By mutual add-In such cases, circulars of surplus stores with all details to
all the Factories and priority indentures as listed in the DGOF circulars

II) By public action through an approved/authorised Govt. auctioneer at site

III) By calling open Tender by advertising in local dailies

IV) By negotiated limited sales agreement with known parties.

V) Through DGS & D and through the local DGS & D offices located near
the Factory / Unit in case of capital items and high value items beyond the
value Rs. 10,000/-

VI) Destroying by burning, such of those classified and Top secret stores, but
under the direct supervision of a board of officers approved/appointed by
the state.

CLASSIFICATION OF SURPLUS/DISPOSAL

1. Standard stores that could be used by all. For e.g. M.S plates/Sheets/Bars.
Blooms. Billets. Mild structural materials like MS Angles. Channels. I-beams etc.
Special steel materials stainless steel bronze, Brass and Aluminum Materials.

2. Standard machine Tools like Lathe Milling, Broaching, Drilling, Center less
Grinder and Tool Grinder etc.

3. Standard misc. items like Ele, bulbs, cables, cloth, unused Timber, oils, paints,
cement etc of consumable nature.

4. Special stores such of the stores procured specifically against specific production
requirements which are peculiar only to such production job and which cannot
be used by others. This can also be said as non-standard items the usage of which
is restricted to certain productions only.

5. Scrap materials like steel turnings and borings. MM scrap, HM Alloy scrap
(steel), Brass, Bronze, Aluminum, Misc, Scrap used oils, used Timber., used
barrels, Jerricans etc

6. By general condition of stores such as:

a) Serviceable b) Repairable c) Unusable d) Doubtful

FIXING OF THE PRICE FOR DISPOSAL

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 Normally while fixing the reserve price for the auction for negotiated sales. Sales
to priority indenters, the last auction price shall be taken in to consideration. Also the
book value of the items shall be taken in to consideration. The GMs of Factories in
liaison with the local Accounts officers can fix the price for such stores subject to the
limitations specified in DGOF's circulars from time to time. In case of dispute between
the GM and the Accts. In fixing of the prices. The matter shall be preferred to DGOF.

STORE KEEPING

a) Basic documents involved in stores Accounting are:-

i) MIS/Inspection Report/Receipt voucher for items received through bonds
receipts
ii) Return Notes from shops
iii) Inspection report for HVF Factory manufactured items.
iv) Issue Vouchers.
v) Demand Notes
vi) CIVs/CRVs

b) The Bin cards will contain the LF No, Nomenclature. Accounting Unit, Location,
Minimum Level, Danger level & Maximum levels as well ato guide the material
division of the inventory control. Min level, danger level and maximum levels will
be given by the respective material divisions for endorsement on the Bin card.

c) Basically the stores are classified and codified into convenient groups blocks for
accounting purposes.

d) Once the stores are received, they are binned and Vrs cleared to all concerned
with the "Bin card Balance" after that posting.

e) Care and custody of stores in also part of store keeping. Hence periodical
preservatives, turnover, issue of first in first out is also part of this duty.

f) Bulk-handling of stores

Where there is bulk of stores involved a percentage 10% or 20% will be physically
verified for Qty/Quality and on the basis of test certificate/1. Note, the data obtained on
the percentage check will be utilised to clear the bulk of stores while under receipt or
under issue.

B) LEDGER KEEPING

a) Basic documents involved in ledger keeping are:-

i) The receipt voucher
ii) The supply order
iii) Return notes
iv) Inspection notes

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 v) Issue voucher
vi) Demand notes
vii) CIVs / CRVs
viii) Transfer vouchers

b) Ledger sheet which will contain Nomenclature, LF No, A/C code, Qty, Unit cost,
Total value, source of receipt, to whom issued, work order No, warrant No etc
and the balance at any one time in qty and value.

c) Ledger sheet is the basic record from which the value is taken and the balance
sheet, profit and loss statements and also prepared. This is a very important
document, maintained by the accounts and will contain all the information
required for any transaction whether 'Receipt' or 'Issues'

ACCOUNTING OF STORES

Accounting stores accounting has five distinct functions such as:-

i) Store keeping
ii) Ledger keeping
iii) Inventory control
iv) Costing
v) Disposal

Responsibility of the above functions are divided between various section either
jointly or alone.
STORES ACCOUNTING
RESPONSIBILITY

Store keeping Ledger keeping Inventory Control

Numerical accounting Financial accounting EOQ/Phased supplies

Bin card Ledgers Control charts
(By stores division) (By accounts) (material division)

Cost Disposal

Numerical accounting Realisation of residual cost of material

Price prod ledgers Ledgers

(By accounts) (By public Auction and open tenders jointly

by
Management and Accounts)

ISSUE OF STORES
GENERAL PROCEDURE;

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 The ultimate of any production unit is "delivery of goods to the consumers or the
concerned at the right time, at right place the right material as efficiently and as quickly
as possible. This is the case with all the Ordnance Factories in 'delivering the goods to
the Defence Forces / Defence Dept. it is the quantum of the Goods delivered (issued) that
is recognised in the over all performance of the Factory. Hence "Issue of stores" is a
very important function of Ordnance Factories and to effect the ISSUES, certain norms
are laid down are evolved by experience and commonsense.

A) Norms For Issue

j) An indent from the Army, a demand from other Factories a requisition from
other units or firms specifically indicating the requirements and delivery
schedules.
ii) Acceptance of the indent / demand/ requisition and proceeding the camp for
production by release of orders on shops and advice to stores on the made of
despatch and schedule of despatch. This will be the authority for issue.
iii) Release of material /stores for issue against specific workorders. Besides
authority for issue a release from PC/MC/PV is essential in all cases to
provide required materials.

iv) Quality assurance by an independent inspection authority for having inspected

the stores as per specifications and passing the same as "serviceable" for
immediate use.

v) Preparation of ISSUE documents like Issue Vrs packing notes, forwarding notes,
export documents etc as the case may be.

vi) Packing of stores as per specifications.

vii) Despatch of stores as per the authority, as per made of despatch advised, freight
paid or to pay.

viii) Despatch documents to all concerned in time to clear the consignment and
also release the Issue vouchers with all despatch details to PC/PV/Accounts.

B) PREPARATION OF DOCUMENTS RELATING TO ISSUE MATERIAL

a) Authority for issue of material

I) Extract of work order
II) Letter authorising the issue, method of packing, mode of transportation and
whether freight paid or to pay
III) Release order / letter from PC/Matl control PV stating specifically that the
material can be issued against the authority given.
IV. Inspection report from the independent inspector of work inspection as the case
may be
VI. Examination order in respect of stock items.

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b) Preparation of Issue Vouchers
Having received the documents cited above and having decide the type of issue
involved the IVr will be prepared on IAFZ-2096. The issue voucher will contain the
following information IVr no and date consignee's reference LF no if any,
Nomenclature, Qty in figure and words, as brief as into why issued and how issued,
packing details and despatch details. The issue voucher will be signed by an official not
less than the rank of store holder or Asst. Manager.
In case of 'P' Vrs demand note for the stores also will be released by the PC/MC/PV
which will be signed and delivered at the stock Godowns. The stores will be collected
and labeled and sent to Issue bond packing area.
In case of stock items the items will be collected against the issue voucher at the
respective stock godowns, labeled and sent to issue bond packing area. The same applies
to nominal loan and nominal issue also.
BOOK KEEPING

Introduction:-

Before we decide on the methods of record keeping, It is essential to know the

accounting of stores to begin with the fundamental of the documents/records involved
should be understood so that equal importance could be given to Management cover
purchase/provision and the stores management. Hence it is essential to cover the entire
field and all the records involved.

Purchase Records:-

i) The planning sheets or store holders inability sheets:

This is the basic record authorising the purchase to initiate provision action as
per details contained in it. This is maintained by the provision/purchase section
(Material Division).

ii) Tender Enquiry folder, which is later converted in to a supply order folder:

This record would be very essentials from the audit point of view as the basic
record for effecting payments for the stores purchased. This record is to be kept number
wise and year wise for o5 year from the date the PDC and is avital record often required
for reference. At times in disputes over payments by the firms, the record is often called
of by the courts of law. Pre audit before release of the supply order or post audit of the
supply is very essential.

iii) Material control charts or Master planning sheets:-

These charts are the control charts indicating the entire procurement and control
of issue there of, of each and every item, but for this sheet, it would be impossible to go
for purchase / procurement action. This chart will give the quantity required for any
period the phase of procurement, the phase off distribution to the shops, dues in both
dates.

iv) Bills for payments of cost of materials:

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 The bills are auditable documents and are booked to the supply order, receipt
vouchers released by the stores for effecting payment to the firms. The bills are
submitted to the accounts section only after the supply order folders are audited and
cleared by the Accounts. The bill register and the bills are subject to test audit as well.
The bills are to obe maintained number wise and year wise for TEN years or final bills
are paid/cleared.

v) Stores Record

Material Inward slips (MI SLIP) which are prepared with reference to the supply
order, one for each item and its packing materials. MIS will be converted into Inspection
report after the MIS, the stores are inspected and cleared by the inspection department
and at this stage it is controlled as receipt voucher and passed on the stock Group /
Godowns for collecting the materials, binning and posting in the Bin cards and
thereafter releasing the receipt voucher to concerned sections. Receipt voucher is an
auditable document and controlled by analyst called receipt voucher controlled register
by the record Group of stores. Receipts are also indexed in each supply order folder at
the bond and through progress sheets are kept number wise and year wise in the records
room. It is essential to keep all the receipt vouchers for FIVE years for reference.

CERTIFIED RECEIPT VOUCHER (CRV):

Vouchers which could not be directly linked to any document at the same time
required to account for certain stores to pass through the ledger. These vouchers are
kept with the regular receipt vouchers in the record room.

Return Notes:

Just like demand notes the return notes are prepared by the shops / PC to return
to stock group. The return notes are also auditable documents and are to be signed by
the inspection authority to ensure the serviceability of stores. This should be routed
through PC/MC which released the materials for production. One copy is filled in the
record room.

Discrepancy/Deficiency and lost statements:

This is one of the very vital stores document. It is prepared by the receipt group
of stores division, whenever any discrepancy / deficiency in the quantity is noticed. Full
text of the circumstances leading to the discrepancy deficiency is to be recorded in the
body of the voucher for correct assessment of the deficiency. A register is maintained in
stores for this purpose, which controls the DD vrs prepared and separating in the same
register as art-II for losses incurred. In case of losses a certificate authenticated by the
accounts officer, recommending of the intermediate officer and the final order of the
GM or DGOF as the case may be is recorded.

DEMAND NOTES:

This is the authority to draw stores from the stock group. Demand notes are
released by PC/MC group for production items. The demand notes are to be presented

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only at the time of drawal of respective bincards. It is essential to keep the demand notes
for five years. It is an auditable document.

ISSUE VOUCHERS:

(IAFZ 2096) Issue vouchers are prepared by the issue branch of for all issue to
outside. The issue vouchers are normally prepared only on specific authority of CP/MC
section clearly indicating the purpose for are made. For stock items 'S' series vouchers
are made. For nominal transactions 'NL' vouchers are made.

CERTIFIED ISSUE VOUCHERS:

The CIVs are prepared in case where the issue could not be directly linked up to
any documents or records basically to change if the stores CIV is prepared. This is an
auditable document.

Finally it is the scope of the paper only to highlight the importance of these
documents so as to keep proper record of it. Which should be record keeping for the
prepare Accounting of stores.
A.B.C.Analysis

Analysis of all stores items representing the entire inventory in terms of annual
consumption of each in rupee will reveal 10% of the items will represents for about 80%
of the total annual consumption cost., 20% of the items will account for about 15% of
the annual consumption cost, while balance 70% will cover only 5% annual
consumption cost =100%. The small number of high consumption value items are called
'A' items, the medium consumption value items are 'B' items while the large number of
items whose annual consumption value is very low are 'C' items -ABC analysis does not
depend on the unit cost of the item, but only on its total annual consumption.

STORES ORGANISATION AND CONTROL

Stores Management plays a vital role Material Management. The Primary

objective of the stores function is to provide a service to the production service shops.

MAIN FUNCTIONS OF STORES MANAGEMENT:

1. Receipt of stores and related accounting.

2. Issue of stores and related accounting
3. Stock and disposal of stores and related accounting including
observation/Turnover of stores.

MAIN BRANCHES OF STORES ARE :-

1) Receipt 2)Stocks 3) Issues.

STORING SYSTEMS:-

Two basis systems can be used in physically controlling stores Material.

1) Closed stores system

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 2) Open store system.

Closed stores system:

In this system all materials are physically stores in closed or controlled area. As
per rule no one other than stores personnel is permitted in the store area. Materials
enter and leave the area along with accompaniment of an authorising document. This
system is designed to offer maximum physical security and to ensure tight accounting
control of the inventory materials.

Open store system:

In this system no store room as such exists. Each materials is stores as close to its
point of use as is physically possible. Storage facilities are completely open and any
worker has access to this storage facility.

The open system is designed to expedite production activities. It places little

emphasis on the physical security of the material. Material handled in open system
should not be subject to pilferage nor they should be easily damages.

If production requires delicate or pilferage items, they should be controlled in

close store room.

Ordnance factories follow closed stores system. The stores are received and
issued by the stores on proper authority only. However bulky materials such as steel,
billets required in large quantity may be stores in open near the production section to
minimize the handling.

PLANNING ASPECTS CONNECTION WITH STORES:

STORAGE SPACE:

While planning for storage the following points are to be taken care of:

a) All types of items required by Industry

b) Quantity of each item expected

c) Closed storage system items/ Open storage items.

d) Layout of godowns leading to minimum transportation with respect to loading/un

loading point and consuming / Issuing section.

e) Special storage arrangements like explosive, inflammable item, Gases, acids,

Textiles, paper, rubber items, various chemicals, petrol, oils and lubricants etc.

f) Layout of Railway Track and Construction of Platforms:

In the Present days facilities are used in most of the cases for receipt and issued in
most of the cases for receipt and issue of bulk of the items. Railway tracks are laid inside

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the Factory where factory locomotives can directly take the wagons. No. of
platforms/hand stands are constructed according to the requirement of
wagons/Loaded/unloaded on day to day.

Transportation:

Transport facilities are planned for the following purposes:

I. Receipt and despatch of Railway wagons from the factory

II. Shifting of materials from unloading point to respective godowns

III. Transportation of materials from godown to consuming section

IV. Collection and despatch of materials from Road / Railway station

V. Transportation of materials from issuing section to loading point

VI. Collection and despatch of materials from road transport companies.

VII. Collection and despatch of items from contractors premises and other
sister factories, Embarkation Commandant etc.

Weighing Arrangements:

Wagon Weigh Bridge, Road Weigh Bridge and Weighing scales are to be
provided for weighment of incoming materials.

Material Handling equipment and Accessories:

Due to heavy cost of storage space, It is essential to make the stacks higher.
Similarly it is essential to use minimum man power for unloading / Loading, stacking
and transportation to achieve economy. Hence handling equipments and accessories are
planned and used depending upon the requirements.

RECEIPT BRANCH:

For convenience, the receipt branch has been divided into receipt office and receipt
Bond. The functions of both the groups are as under:-

a) To receive and collect materials.

b) To check quantity, compare with despatch documents/packing notes as per

S.C.A/Ts IFD and other connected authority and prepare material inward slip
(M.I.Slip).

c) To put up material for Inspection and provide necessary facilities like providing
samples etc. to inspection.

d) To prepare receipt voucher on clearance of MI slip and inform all concerned for
further action.

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 e) To regularise quantitative discrepancies by preparing:

i) Expense voucher.
ii) DD voucher for discrepancies as receipt
iii) By preparing claims on Railways / Transporters.
iv) DD voucher and loss statement for transit loss.

f) To have correspondences with the firm/factories till their settlement.

g) To return the rejected stores to concerned factories/firms.

h) To clear 2&5 copies of I/Notes.

i) Redirection of stores received in economy wagon to other factories/Units.

j) Payment of demurrages and regularisation.

STOCK BRANCH:

STOCKS ARE MAINTAINED UNDER FOLLOWING FOUR CATEGORIES:

1) Regular stock: For which L.F.S are existing. This includes production and non-
production items.

2) Deposit stock: These are stores held deposit in the factory on behalf of Air
Forces, Navy and Armed Forces in repaired on conversion for ultimate utilisation
in manufacturing.

3) Stock pile stock: Strategic items or stores which are difficult to procure in case of
normal supplies and are of non-perishable nature. It should be of imported
origin. Value of the item should be above Rs.5000/-

4) Nominal stock: For these items there is no L.F.Nos. (Ex-Stationary items,

protective clothing, items purchased under contingency grant, Estate funds etc.

Functions of stock group:-

a) To collect material from receipt bond on receipt of receipt vouchers.

b) To count / weigh stock and enter into bincards

c) Issue against authority of D/Notes, Issue voucher and post these issued in bin
cards.

d) Carrying out preservation and care and custody of stores.

e) To maintain first in first out / turning over of materials.

f) To make action for disposal of slow moving / non - moving items.

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 g) Raising examination orders for items sent outside the factory in case of mix - up.

h) Stocking of items lot wise taking care of expiry period etc, incase of some specific
items like grinding wheels.

i) Departmental and DGOF stock verification.

j) Investigation and regularization of discrepancies in stock.

k) To take materials on stock charge against return notes.

ISSUE BRANCH:

This group deals with the issues made outside the factory only. Issues are make to
sister Ord. factories, depots, private firms by factoroy transport, Rail, Air Sea etc.

Main function:-

I. To issue materials by full wagonload, full Turk load, and post parcels,
part Turk load, part wagons load etc., after making RR/Despatch
documents.

II. To make correspondences and settle discrepancies.

III. To arrange wagons, trucks and other modes of despatches.

Issue vouchers certain by issue Group:-

"P" Series voucher - Production items.

"S" Series vouchers - Brought out items purchased by
LP/Oobtained by IFD
"R" Series Issue Voucher - Stock pile items
"D" Series Issue Voucher - Deposit stock
"N" Series Issue Voucher - Nominal items
"M" Series Issue Voucher - Machiner items
"NL" Series Issue Voucher - Nominal loan issue voucher

control:- Stores should continuously identify, analyse and isolate items into:-

i) Items with no receipt and no Issues.

ii) Items with receipts and no Issues.
iii) Items having high stock.
iv) Items that have recorded abnormal increase and from normal or specified
limit.

I. Feedback on these will increase the awareness of the management towards better
inventory Management.

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II. Need to cut down the paper work / office procedure and thus internal lead time
can be reduced. This in return will reduce the buffer stock.

III. A.B.C analysis can be applied and 'A' category items can be given priority right
from receipt stage till it reaches stock stage. Different colored documents can be
utilized to identify 'A' category items.

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 PRESERVATION
INTRODUCTION:

In Indian Industries the Material is represented as 60% of the gross out put of
the goods. In Ordnance Factories the cost of the material works out to 67% to 69% of
the cost of the production. Even 1% saving in material cost will be of great saving.
Preservation of stores plays a vital role in minimizing the deterioration and spillage with
the result the material available is in fully serviceable condition as and when needed by
the production / service section.

IMPORTANCE OF PRESERVATION:

Considerable importance is given to preservation in Ordnance Factories. I.S.S.P

Organisation (Inter services stores preservation) formed by Govt will be responsible for
safe guarding Defence stores from ravages of biological as well as non biological attacks
and deterioration in stage.

DEOF is represented in ISSP committee. The committee will formulate the

policies and make recommendations in prevention of deterioration of service stores and
also co-ordination the activities in different organisation. ISSP Organisation also
conducts training course. Quarterly reports are submitted by Factories to ISSP and
DGOF regards the lesses in storage.

HAZARDS: Hazards while storage can be divided into two types

(1) Biological Hazards

(2) Climatic Hazards

BIOLOGICAL HAZARDS:

These are caused due to living organisms like rodents, silver fish, moth, insects,
fungi or bacteria, rats mildew and ghoons etc.

CLIMATIC HAZARDS:

These are due to temperature, atmospheric pressure, moisture, gases, vapour,

dust and light.

Biological Hazards can be prevented by two methods as shown below:

BIOLOGICL HAZARD

Preventive method Curative method

Use chemicals like creesite, To kill the pests by exposing to DDT,

Naphthalene etc., sun Fumigation etc.,

22
Climatic Hazards:

Can be prevented by creating a barrier between the article and the surroundings.
For e.g some coatings like zinc coating, wax coating etc., given over the article.

CAUSE OF CORROSION:

All metals with the exception of the metals, such as gold or platinum are subject to
corrosion, the difference between them is an the degree and rate of corrosion. In all
cases, the eventual destruction of a product is inevitable unless protective measures are
taken.

a) Reaction of metal with moisture and Oxygen:-

About 70% of all instances of corrosion are due to reaction of metal with moisture
and oxygen from the air. Taking iron as an example: 2Fe+H2o+O2+Fe2O3+H2

b) Reaction of metal with Acid:-

This type caused by the reaction of metals with acids is more severe and is generally
caused by the corrosive fumes in the atmosphere or various chemicals on the surface of
the metal. The chemicals present react with moisture and form traces of acids that
attack the metal. These metal acid products react with more moisture to form the metal
hydrates that finally decompose leading to corrosion.

c) Reaction with salt water:

Another accelerated process of corrosion occurs when metals react with salt water or
salt atmosphere. Particularly salt spray from the ocean. Salt being hygroscopic, picks up
water from the atmosphere and holds it to the metal surface, where it acts as a catalyst
to promote corrosion.

The metal parts, subjected to rust or corrosion should be stored indry area they may
be covered with suitable rust inhaviting compunds.

The different types of storage / Preservation method for different materials in the
Annexure 'A'.

Annexure 'A'.

1. Preservation of steel Reds/Plates: Iron coming in contact with water and

moisture forms rust/corrosion. After cleaning, rust line or anti corrosive
compound may be used to put over the surface.

2. Tools: Cutting surface to be protected by coating with plastic, or dipping in

paraffin solution. For files, greasing by mineral jelly reduced with mineral all to
suitable consistency maoy be used and then wrapped with paper.

3. Cement: Supplied in gunny, paper or cloth bag. Gross wt being 50 kgs should
stored in weather tight godown. Dampness will cause setting.

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4. Castings: Cast iron casting improve by ageing in atmospheric temperature. Steel
casting may remain in open with a cost of paint to ensure that these do not rust.

5. Machined parts : Castings with machined faces may be dept outside but the
machined faces, particularly threaded portion and holes to be protected properly
with grease, plugged where necessary. Journals should be packed with wooden

6. slots over a coat of paint (white lead).

7. Paints Varnish and Enamel : To be stored under covered accommodation. The

godown should be cool and well ventilated. The containers to be leak proof. In
order to avoid setting caking sealed paint drums to be rolled and turned about.
Enamel improves by storage up to 2 years but after that, it has a tendency exidise
and thicken.

8. Chemicals: Chemicals to be packed in leak proof containers. The containers are

kept on a thick layer of sand spreded on floor. Chemicals to be tested periodically
to ascertain the degree of deterioration if any. Accommodation to be equipped
with fire proof goods and well ventilated. In case of acid containers, the cock to
be sealed with melten wax or plaster of paris or with quick lime and linsed oil.

9. Timber: Wooden sleepers stacked should have end clamps to prevent and
splitting. 2) Coal tar is preventing for white ants. End of pieces are coated with
coal tar. 3) Timber and plywood are stacked over pillar type dunnage the top of
the stacks to be covered.

10. Rubber goods: Separate godown with low room temperature (16 deg to 20 deg C)
afairly high humidity and complete darkness is suitable. During periods of very
low humidity i.e during dry summer care should be taken to maintain high
humidity. Tyres should always stand on end. Tubes should be wrapped in
greased paper dusted with French chalk. Don’t keep stock fomore than 6 months.
Sunlight has adverse effect through antinitic rays. Keep away from grease or oil

11. POL ITEMS: Depots for POL items should be sited on reasonably leveled hard
ground. The site should be well drained. The fire caution arrangement should be
provided. Only one item should be stored in one stack. The drums should be leak
proof. First in first to be followed.

12. Leather stores. The leather goods deteriorate due to drying fungal attack,
termites and rates attach. To prevent drayage, the leather should not be exposed
to sun. it should be periodically treated with authorized preservative and
properly wrapped. Wet leather should be wiped with dry cloth and aired under
shad. Leather to be treated with 1% parantitophenol in methylated aprit to
protect against macro organisms. Soad laundry is the authorized preservative
where stiffness rigidity is required.

13. Optical Instruments. The Moisture in air forms condensation on lens or the
optical instruments. To prevent items, silicacel in small packets is kept along with

24
 the optical instrument and the entire unit is heat-sealed. These are then packed in
Thermocoal boxes and kept inside A/C Rooms.

14. Cotton and woolen Fabrics: Moisture and water are harmful. Store in steel
Almirah, 1.5 meter wide wooden goods, felt, should be wrapped with paper. Rats
and white ants are destructive agent. Wooly bear, moths silver fish are harmful
for whool. Insecticides should be sprayed.

15. Coal: should be piled in rows of slacks, preferable not over 3 metres length and
30 metre wide at the base, each pile being preferably not in excess of 1,500,000
kgs. Clear space of 3 metres to be maintained between piles. Should not be
slacked against wooden posts nor in touch with or warm pipes or flues. Shunting
pilets should not throw sparks.

CANNALISED ITEMS

The items canalised for Import through public sector Agencies have been shown
in Appendice 5 of Import & Export policy 1984-85.

CANNALISING AGENCY
1. Minerals & Metals Trading Corpn.
Of India (MMTC)
2. State Trading Corpn., of India (STC)
3. Steel Authority of India Ltd., SAIL
4. Electronics Trade & Technology
Development corporation ETTDC
STOCK VERIFICATION
APPENDIX 5-A
ITEMS
Platinum, sulphur, Aluminium,
Antimony Asbestos, Copper,
Zink, Lead Tin & Nickel
Chemicals like Calcium, Borate,
Vinyle, Acitate sodium, polyster
filamentt yarn, Natural rubber,
writing & printing paper DDT,
Cuprolactum, Viscose filament yarn.
Pig Iron, Corbon Steel Alloy Steel
Calculator, chips Tc picture Tubes,
CRTS for TV sets.

These are verified annually by SVG. During verification the balance of the
documents should tally the ground balance. If any discrepancies found that will be
endorsed by Stock Verifier in Red Ink. Discrepancies can be settled only with CRV/CIV
as the case may be.
Production shops should enter on Inventory Register, the items drawn by them.
Which will be verified by Stock Verifier periodically. The responsibility of the verifier is
vast such that he has to verify each and every item whether it is movable / immovable /
portable. Verifier is the authorised person to verify the Assets of an Organisation as per
the record maintained from time to time.
In short the following documents are maintained for verificatin purpose.
1. Capital Register'

25
 2. Furniture / Office Equipment
3. Tools & Gauges
4. Miscellaneous Items
No. of registers can be as per the Volume of Items dealt. In any case a Register
cannot exceed 100 pages per Volume. Which should be duly numbered and enforced
with a certificate from Head of Section and Accounts as per Specimen. Stock verification
is a statutory requirement of a factory. Departmental stock verification will be carried
out in factories by the independent D.G.O.F Stock verification organisation. In addition
to but not concurrently with this stock will be verified by factory staff. If any
discrepancies, the matter will be referred to the G.M of the factory as early as possible
for necessary actions endorsing copies to A.O. duly signed by the concerned section
representative. Stock verifiers posted at the factories will be under the G.M./Officers in-
charge for all ordinary administrative purposes and will normal factory working hours
as observed by stores section. They are independent, so far as their work is concerned
and each individual will be responsible directly to D.G.O.F. Senior stock verifier at each
factory who in addition to performing his share of stock taking, will liaison with the
factory management, the local Accounts Officer and D.G.O.F.

Responsibility of stock verifiers: Stock verifier will be responsible for the

physical verification of stock and deposit stock items, inventory articles (including
schoolbooks and technical books in the factory libraries) machinery, building, electrical
installation, Medical Stores.

Note: Verification of finished articles on charge on production ledger cards and stock of
materials in process of manufacture held by the shops will not be their responsibilities.
Responsibilities of senior stock verifier: Collecting & distributing instruction
information and reports.
C) Drawing up the programme of stock taking.
D) Allocating the work among stock verifiers.
E) Maintaining progress details.

F) Reporting with details to O.F. Board when work is falling or is likely to fall,
behind planned programme.

G) Regularly submitting periodical progress reports.

H) Ensuring that all stock verification records are properly maintained.

Working condition of stock verifier:

Stock verifiers will not give advance intimation to the factory of particular items to
be verified on any day/days.

Factory representation:

Verification will be carried out in presence of a representative of the factory.

Technical identification: It will be the responsibility of the factory management to

identify such items as may not be recognizable by the stock verifier.

26
Assistance:
All labour and equipment needed for proper verification will be supplied by the
factory as required for the work.
Difficulties:
In difficulties in connection with verification of any item should be brought to the
notice D.G.O.F Verification cycle procedure and maintenance of report.
Record:

A register will be maintained (entries in ink) to show the number of items

checked daily by each stock verifier.
B) Weekly totals will be recorded for communication to Directorate General, the
week or Saturday, calendar monthly total will also be recorded statistical and audit
purpose as necessary record will be in the prescribed form.
Weekly progress reports:
Weekly progress reports will be forwarded promptly to the O.F. Board and
Account Officer in the prescribed proforma.
Annual Reports:
At the end of each Stock Verification cycle of the factory GM. In conjunction
with S.G. Group should determine; as have been left unverified and reasons for Non-
verification. Tohe factory management will prepare a statement of full details in respect
of those items comprising a) Serial No b) L.F. No. C) Nomenclature d) Accounting unit
e) Stock Balance on 31st March f) Value of stock g) Date of last verification and h)
reasons for non-verification.
Following upon the detailed statement referred to above a regular report will be
furnished to the O.F. Board in order to show the progress of clearance of the items
which are not verified in the previous cycle. The S.G. group will accordingly, indicate
this regularly on their weekly progress reports, by referring to the specific serials Nos. of
the annual reports which of the items have since been verified.
Turn Over:
All stock and deposit items will be verified at least on during each financial year,
unless specified sanction for a deviation in respect of any item has been received from
D.G.O.F.
a) New items of stores received after the 31st January in each year should be taken
as verifiable in the next verification cycle, with the provision that they one to be
completed within 12 months of being brought to account in the factory. If any of
these new items received during February/March can, however, be verified
conveniently by 31st March, provided that such verification does not affect the
current annual programme.
b) The work of each stock verifier will be planned and verification will proceed
according to plan, locally co-ordinate and as generally approved by D.G.O.F. d)
List of certain valuable items will be consultation with the Factory management

27
 and the items enumerated thereon will be verified at more frequent interval and
these lists to be approved by O.F. Board.
c) List of certain items will be consultation with the Factory Management and the
items enumerated thereon will be verified at more frequent interval and these
lists to be approved by O.F. Board.
d) List of stores Ledger Folios which have shown a nil balance (regarding both
quantity and value) continuously for at least two years and on which no
transactions have been recorded during this period, will be submitted by the A/C
Officer to the management (Fy) who will scrutinise the items and select those
which are to be considered as "dead", i.e. store unlikely to needed in the near
future. These will be intimated to the Account Officer for removal of the folios
from the current ledger, and the factory also promptly remove corresponding
Bin Cards.
e) Inventory articles, Machinery, Building, Electrical Installation and Medical
Service will be verified once in each financial year.
f) In order to keep stock verifiers fully posted as to the amount of work to be done,
Factories will notify them of all new items and also those detailed, in respected of
stock ledgers and the other registered involved.
Stock-taking sheet:

Stock verifiers will enter the date serial No. Nomenclature, L.F. No. Stores
Accounting unit and Bin card or Inventory balance on date of verification. Balance
found a physical check and date of last verification. Each sheet will be signed by the
stock verifier and the associated Fy. Representative.

Method of verification:

General - verification will be carried out a) by actual counting, weight or

measurement, except where other methods to determine accurately the quantities in
stock have already been adopted or will be approved, in consultation with the local
Account Officer.

It should be obtained for the modified method before stock verification is actually
carried out.

a) Uniform unopened package - when verifying store, contained in uniform

unopened packages, at least 5% of the packages will be opened at random and
examined.

b) New Receipt - The stock verifier will be informed of all new Receipts, which will
be weighed/measured in this presence and stocked a part from the old stock, in
such a manner that he can take measurement to guide him a future stock
verification.
c) Continuous tock taking - will be carried out departmentally, S.V. Group will
verify every item once a year or in two years according to the nature of the stores.
d) Stock-taking of Coal - Coal will be weighed in on receipt and stock in units of 500
tons and stock will receipt and stock in units of 500 tons and stock will be suitable

28
 marked with while bands and a certificates as to correctness of the quantity in
each stock will be furnished to the stock verifier when required.
e) Stock taking of Soda, Nitrate, Cotton Waste etc. will be weighed in on receipt in
the presence of the stock verifier and stacked in lots of convenient size. Lot will
not be disturbed or re-stocked in a different from that is which it was originally
stacked. If it should be necessary to do this, the bags or bales will be counted
again in the presence of stock verifier.
Stock Taking of Textile Materials:

a) A test check not exceeding 5% of the stock will first be conducted and the contents of
the remaining packages accepted in accordance with package making.
If wide variation is observed in first test, a second and third test check not exceeding
5% of the stock from a different lot will be conducted in each test.
If wide variation is observed in all the three test check, the matter will be reported to
the G.M. for necessary action.
Computed verification - Lists will be maintained for items which are not actually
counted, weighed or measured with conversion factor recorded for each item. Details of
exact method of arriving at the conversion factories will be recorded, including the
number of samples counted/weighed/measured, the number of such checks, variation
etc. duly certified by the senior Stock Verifier.

Inventory Register - Each sheet of the Register will bear the initials and dates of the
Stock Verifier and number of item checked.

Machinery, Building Electrical installation: - Items to be verified are those, which

are separately borne in Block Register of Capital Assets.

Medical Stores Register - Stock verifier will enter in red ink the balance found in
physical verification by him on the day of stock taking.

Addition and Alteration - All amendments to original entries will be made neatly and
attested with initial and date.

Internal Verification:

In addition to but not concurrently with the regular stock verification carried out
in factories by the DGOF stock verification organisation, at least 10 percent of the total
items of stores stock will be verified by factory staff as an additional check. The items
selected should be those which are costly per unit, those frequently received and issued
and easily salable in the market and in general, where past experience shows the
desirability of greater vigilance.

29