Roles and Responsibilities

Economy

It has been emphasised that service is the primary objective of a store’s function, but it is obviously desirable to provide that service economically.

Frequently, but not always, the most important consideration here is to keep the inventory value at the lowest practical level, economise in the use of working capital, and minimise the costs of storage. It is understandable in stockholdings that there is some conflict between the need to provide a good service and the need to economise. On the one hand, the more stock held, the easier it is to have items available on demand; on the other hand, the more stock held, the greater the cost, though of course ordering very often in order that stockholding costs may be kept low can itself lead to excessive costs. It is necessary to look for, find, and operate a satisfactory compromise between the various opposing forces. In addition, the store organisation itself should be economically operated and cooperate with other functions to achieve savings in material and other costs wherever practicable, especially nowadays as both lean and agile supply operations are continually striving to eliminate non-value-adding activities within these areas.

Identification

Identification is the process of systematically defining and describing all items of stock. It includes the preparation of a store's code or vocabulary, the adoption of materials specifications and the introduction of a degree of standardisation.

Part of this work may be done by design, planning or standards departments, and the purchasing department has an interest.

Receipt

A receipt is a process of accepting, from all sources, all materials, equipment, and parts used in the enterprise, including supplies for manufacturing or operating processes, plant maintenance/fulfilment, offices, capital installations, and finished products.

Inspection

Inspection, in this context, means the examination of incoming consignments for quantity and quality. Very often, there is a separate inspection department, which does this work, but otherwise, store personnel inspect goods.

Whatever the system of inspection in force, it is a duty of the store’s function to see that the inspection is done before items are accepted into stock.

Quality assurance activities, and ‘co-maker’ relationships between buyers and suppliers, have reduced the extent to which the inspection of incoming goods is undertaken, but it still is an important activity.

Issue and Dispatch

This is the process of receiving demands, selecting the items needed, and handing them over to users. It also includes, where necessary, packaging and loading of vehicles for delivery.

Stock Records

These are kept in a Stock Management System that records all transactions, receipts, issues, returns, and balances of stock.

Stores Accounting

Stores accounting is the process of recording stock movements and balances in value.

Stock Control

Stock control is the operation of continuously arranging flows of materials so that stock balances are adequate to support the current rate of consumption, with due regard to the economy. It includes the related process of provisioning, which is the means whereby instructions are given for the placing of orders.

In some enterprises, the production control department may take a large share in provisioning, at least as far as production materials are concerned, via the Materials Requirement Planning (MRP) systems.

Stocktaking Stock Checking and Stock Audit

Stocktaking is the process of physical verification of the quantities and condition of goods, usually on a periodic basis to ensure that a proper figure appears in the enterprise’s accounts. Stock checking is similar but maybe done for operational reasons on an ad hoc basis. Perpetual inventory – the current balance of inventory – is sustained daily by the addition of inventory to the account when goods are received, and the deduction from the account when they are used/issued. This method, as opposed to a monthly or yearly calculation, allows an enterprise to have more timely and accurate data on inventories. A stock audit involves an external person, and the purpose is verification.

Storage

Storage is the management of warehouses, storehouses, and stockyards, the operation of handling and storage of equipment, and the safe custody and protection of stock. Here we are confronted with the conflicting aims of maximising utilisation while maintaining high levels of accessibility.

Inventory Accuracy

One of the critical success factors for a storeroom is achieving a high level of inventory accuracy. Accurate inventory is defined as the correct part and the correct quantity (physically) in a storeroom location, being the same as that shown on the inventory control system. Minor variances between actual and system counts are tolerated, such as with nuts and bolts. However, if the part, quantity, or location is not correct when matched against the system, then that location is counted as an ‘error’ for purposes of tabulating inventory accuracy.

Inventory accuracy is important for several reasons. The consequences of inaccurate inventory are:

• If the actual inventory is lower than the system record, then an out-of-stock condition can occur because parts will not be ordered on time.
• If the actual inventory is higher than the system record, then parts will be flagged for re-ordering by the system, even if it is not needed.
• If the actual inventory is not correct, then the fulfilment/installation and assurance/faults technicians will lose confidence in the inventory control system, and benefits from using other functionality in the system will be lost.
• A growing or proliferation of bench stock (stock held on the floor or in cabinets/shelves outside the storeroom) can occur if technicians do not have confidence in the service levels of the storeroom. This inventory is ‘off-the-system’ and results in excessive total inventory levels.

It is critically important that not only the storeroom operators understand the importance of inventory accuracy. Fulfilment/installation and assurance/faults technicians, planners, operations personnel, and plant management should also understand the importance of inventory accuracy since these groups would be influenced by procedures designed to improve inventory accuracy. For example, achieving high levels of inventory accuracy require:

• Recording all parts received against purchase orders or repair orders.
• Recording receipt of parts returned to the storeroom that was previously issued to a work order but not actually used.
• Recording parts serial numbers, lots, or other vital information at the time of receipt.
• Recording all parts issued to a work order, employee number, or another account.
• Performing routine and correct cycle counts.

Importance of Auditing Inventory Records

The benefits of an audit are numerous. Audits can improve a company’s efficiency and profitability by helping the management to better understand their own working and financial systems. The management, as well as shareholders, suppliers, and financers are also assured that the risks in their organisation are well-studied, and effective systems are in place to handle them.

Audits can also identify areas in an organisation’s financial structure that need improvement, and how to implement the proper changes and adjustments. Having an audit also lessens the risk and therefore the cost of capital.

Benefits of an inventory audit:

• Are your inventory records well kept? Differences in actual stock and inventory records normally point to some negligence or fraudulent activities. If the auditors produce any such indication, immediate corrective measures must be taken to ensure that all incoming or outgoing products are recorded.
• An inventory audit helps in determining the proper re-order point. Having a realistic re-order point will help you in minimising the investment you need to make in buying merchandise. Instead of getting trapped in costly inventories, which are not really needed now, you will be able to use these funds elsewhere.
• Does the enterprise have unrealistic quantities of outdated or un-saleable items? Inventory audits may not provide a solution, but they will at least expose the ineptness on part of the inventory or sales management systems.
• It will also indicate if there is abnormal overstocking (stock in excess) or shortages in your inventory levels, which is an indication of ineffective inventory management, or incompetent employees who are in charge of making new purchase orders.

An inventory audit is not a solution, but it can provide lots of useful information that will guide you towards efficiency and help you change your enterprise for the better. Auditing is not limited to counting items and matching them with the records. Professional auditors will actually come up with valuable recommendations in their audit reports, which can lead to enhanced productivity and profitability for your enterprise.