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BASICS OF STORES AND MATERIALS MGT, (1)

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BASICS OF STORES AND MATERIALS MGT, (1)

  1. 1. 1 A HAND NOTE ON: STORES AND MATERIALS MANAGEMENT DELIVERRED BY: MR. PIUS O. KPEBEIKO B.Sc.,Dip., MCISM, ACIWM. BEING A TRAINING MATERIAL FOR A ONE DAY COURSE ORGANISED BY : MAXIMILIAN CONSULTS DATE: 29TH DECEMBER, 2012. VENUE: NO. 3, EFFURUN SAPELE ROAD, ISOKEN PLAZA 3RD FLOOR, WARRI DELTA STATE.
  2. 2. 2 FUNDAMENTALS OF STORES MANAGEMENT INTRODUCTION Stores are often considered as a temporary location for materials needed for operational purposes and should be planned and organized in such a way that the period of residence of each item is as short as possible consistent with economic operation. One of the major reasons for carrying operating stocks is that the material is needed. And the supplies can hardly be matched with demand. As materials are received into the storehouse, information must flow in the opposite direction from the store house to the supplier in order to ensure that a reasonable equation is established between the supplier and the demand for the material thereby allowing for a high degree of profitability and added value to the organization. People in a typical store house are enlarging their understanding and competence in relation to the arrangement of physical stocks and related inventory and supply systems. They are also to show knowledge of the management of stores and inventory within the overall supply chain. Definition of a store: A storehouse is a building which is designed to provide accommodation for materials for a given period before serving the end user. The material stands for: Raw materials, Parts, Equipment and personnel. It also stands for finished goods. End users include factories, manufacturing house or machinery and consumers. THE STORES FUNCTION The stores function is a vital part of industrial concerns, public and private utility undertakings, agricultural enterprise, municipal authorities, armed services and government department, and it must be designed to suit the particular needs of the organization it serves. There is therefore no standard system which can be universally recommended or applied but, in the course of time certain principles and practices of more or less general application have been evolved. In this book it is proposed to examine at length some of these principles and practices but it must always be borne in mind that the conditions of preparation are very diverse.
  3. 3. 3 PURPOSE OF THE STORES FUNCTION The stores function is set up in any concern to assist in the production of goods or services and no industrial unit or public undertaking or substantial size can be efficiently managed without it. The primary objective is to provide a service to the operation functions and this must be fully appreciated. All other stores activities although they have their own relative importance are subordinate to this main responsibility. The Objectives and Functions of Stores and Materials Management The objectives and functions of stores and materials management as asserted by Sadiwala and Sadiwala, (2007) can be categorised in two ways as follows: (i) Primary objectives (ii) Secondaryobjectives 1. Primary Objectives (i) Efficient materials planning (ii) Buying or purchasing (iii) Procuring and receiving (iv) Storing and inventory control (v) Supply and distribution of materials (vi) Quality assurance (vii) Good supplier and customer relationship (viii) Improved departmental efficiency 2. Secondary Objectives There can be several secondary objectives of materials management. Some of them are given below: (i) efficient production scheduling (ii) to take make or buy decisions (iii) prepare specifications and standisation of materials (iv) to assist in product design and development (v) forecasting demand and quantity of materials requirements (vi) quality control of materials purchased (vii) material handling (viii) use of value analysis and value engineering (ix) developing skills of workers in materials management (x) smooth flow of materials in and out of the organisation To fulfill all these objectives, it is necessary to establish harmony and good co- ordination among all the employees of materials management department. This
  4. 4. 4 department should have good co-ordination with the other departments of the organisation to serve all production centres. DUTIES OF STORES AND MATERIALS MANAGERS RESPONSIBILITIES OF THE STORES AND MATERIALS DEPARTMENT 1. Economy It has been emphasized that the service is the principal objective of the stores function, but it is obviously desirable to provide that service economically. The most important consideration here is to maintain the value of stores in stock. (i.e. the inventory value) at the lowest practicable level at all times in order to economize in the use of working capital and to minimize the costs of storage. It will be readily understood that there in some conflict between the need to give a good service and the need to economize in stock-holdings. On the one hand, the more stock held the greater the cost incurred. It is necessary to seek, find and operate a satisfactory compromise between these two opposing forces and in addition, to see that the incurring savings in material and other costs wherever practicable. 2. Identification Identification is the process of systematically defining and describing all items of stock. It includes the preparation of a stores code or vocabulary, the adoption of materials specifications and introduction of a degree of standardization. In certain circumstances, part of this work maybe one by design, planning, or standards departments, and the purchasing department also has an interest. 3. Receipt Receipt is the process of accepting, from all sources, all materials and parts which are used in the organization, including supplies for manufacturing or operating processes, plant maintenance, capital installations and finished products. 4. Inspection Inspection means the examination of incoming consignments for quality. Very often there is a separate inspection department which undertakes this work for most, but not all, material but otherwise goods are inspected by stores personnel. Whatever the system of inspection in force, it is the duty of the stores function to ensure that the inspection laid down is carried out before items are accepted into stock. 5. Issues and Dispatch
  5. 5. 5 This is the process of receiving demands, selecting the items required and handling them over to users. It includes also, where necessary, the packaging of issues and the loading of vehicles with goods for delivery. 6. Stocks Record These are the documents, which record, from day to day, full particulars of individual receipts, issues and balance of stock. 7. Stores accounting Stores accounting is the process of recording details of stock movement and balances in value. 8. Stock Control Stock control is the operation of continuously arranging receipt and issues to ensure that stock balances are adequate to support the current rate of consumption, with due regard to economy. It involves the relate process of provisioning, which is the means whereby instruction are given for the placing of orders. In some industrial concerns the production control department may take a large share in provisioning, at least as far as production material are concerned. 9. Stocktaking Stocktaking is the process of physical verification of the quantities and condition of goods in stock. 10. Storage Storage comprises the management of storehouse and stockyards, the operation of handling and storage equipment, the safe custody and protection of stock. DUTIES OF THE STORE-KEEPER Among the duties usually performed by the store-keeper are the following:- 1. Receiving and storing all materials coming into the organization after satisfying himself that physical quantities and description agree with the details on the purchase order and goods received note. 2. Keeping all materials and goods held in store neatly packed to facilitate easy location of any material required. 3. Ensuring that no unauthorized person is allowed to enter the store. 4. Maintaining records of receipts and issues for all stores items.
  6. 6. 6 5. Maintaining a constant check on the balances shown by the individual bin cards for store items so that the purchase requisition could be raise whenever any of the materials reaches the level where fresh order have to be placed. 6. Reporting on any slow-moving and obsolete stocks to enable prompt action to be taken on them.
  7. 7. 7 STORES DOCUMENTATION AND CONTROL STORE DOCUMENTS A. Bin Card. B. Stores ledger C. Stores requisition Note D. Bill of material E. Materials transfer note. a) Bin Card After inspection of materials, the approved materials are received by the storekeeper. These materials are stored in bins, racks admirals and other equipment provided for the purpose of storage. For systematic storing, each type of materials are kept in different bins, racks, admirals, e.tc. It may be noted that a bin is a place, i.e a rack, a shelf, an admiral or an open place where goods are stored. For each bin, a card is maintained containing the name of a material only and updated by the storekeeper. Each card is attached to each bin. A bin card is a quantitative record of receipts, issues, and balances of materials in stores. The bin card is attached to the bin or rack in which materials are stacked. It enables you to know the quantity of materials in hand at a glance. Bin card maintained by the store-keeper to prepare purchase requisition to replenish the exhausted materials. It also helps in locating the discrepancy when doing physical stock verification; undertaken and the balance compared with bin card. It contains particulars such as number, description of materials, code number of materials, maximum, minimum,order and danger levels. Benefits of a bin card Bin card has the following benefits or utilities; i. As the most important store record it gives up-date record of receipt, issues and closing balance of items of stores. ii. It is helpful in placing requisitions for replenishment as when necessary. Reordering quantity is also available in this card.
  8. 8. 8 iii. It makes perpetual inventory system meaningful by reconciling physical stock with balance shown in the bin card. iv. It helps to control materials cost within minimum investment as the storekeeper keeps the stock within the prescribed limit v. It discloses at a glance to anyone in the stores about the quantity balance of stock. It helps in a system of internal check as a y information relating to store keeping is available from bin card. b) Stores Ledger A store ledger is a record of materials showing receipts, issues, and balances of materials in quantities and value. It is maintained by the costing department and is outside the control of store keeper, is maintained in order to ensure correct store accounting. This ledger is usually of loose leaf of type and each account represents an item of materials. The sheets are numbered serially and initiated by a responsible official so as to avoid the risk of removal or loss. In some concern, the stores ledger is maintained in bound volumes so as to rule out the possibility of loss of folios. Benefits of Store Ledger The benefits of stores ledger are given below i. It is an account record which provides information about receipt, issue and balances both in quantity and value. ii. It is maintained centrally in cost office from where consolidated information may be made available. iii. It constitutes a check on the quantity recorded in bin card. iv. Frequent overall review of store balance may be conveniently made with the help of stores ledger Differences between a bin card and a stores ledger A stores ledger differs from a bin card in the following respects:
  9. 9. 9 Bin Card 1. Bin card records particulars of materials only in quantities. 2. It is maintained in the stores by the store-keeper. 3. It is normally kept inside the stores and it is used for controlling materials. 4. Entries are posted before the transactions take place. 5. Entries are posted individually. 6. Entries are made on the basis of quantity received or issued. Store Ledger 1. Stores ledger records particulars of materials both in terms of quantity and value. 2. It is maintained by the cost accounting department by the accounts clerk. 3. It is normally kept outside the stores and it is used to determine the value of materials, i.e., pricing of materials issues. 4. Entries are posted after the transactions take place. 5. Entries are posted periodically. 6. Entries are supported by material received note and material requisition note. Reconciliation of Bin Card and Stores Ledger After making necessary entries in the bin card, the receipt and issue document are valued and handed over to the stores ledger clerk for posting in the ledger normally, there should be no difference between the balances disclosed in the ledger books of records. But in practice difference arises due to the following reasons: i. There may be some arithmetical error in working out the balances. ii. There may be posting in the wrong bin card or in wrong sheet of stores ledger. iii. There may be posting of receipt documents in issue column or vice versa iv. There may be complete omission of posting a document either in a card or in a stores ledger. v. There may be some temporary entry only in bin card or stores ledger.
  10. 10. 10 c) Stores Requisition Note The store-keeper is required not to issue any material unless it is authorized by the competent authority. Stores or materials requisition note is an authorization to a storekeeper to issue materials or other stocks. “This is prepared by the foreman of the production department. The contents of a requisition are: i. Number and date of requisition ii. Name of the section requiring the materials iii. Particulars and code number of materials iv. The quantity of materials demanded and its unit of measurement v. The rate at which issue is to be made vi. The total value of materials vii. Authority for requisition d) Bill of material A bill of material may be defined as, “a document containing a complete list of materials and components required for manufacturing or production of a particular product or of a particular job, process or work-order”. It is known as ‘specification of materials. Bill of material often serves the purpose of material requisition as it contains the complete list of material required for a particular job. But a store requisition cannot replace a bill of material. A bill of material is a schedule of material required for each job, process or operation. It gives the detail, of materials necessary like materials specification, weight and the quantity of each item. The bill of material is prepared by production or planning department as soon as order is received it is a requisition to the store department for supplying the desired materials in proper time. ABC company Ltd Bill of material Job order No. Prepared by……………………………. checked by……………………………….
  11. 11. 11 Advantages of bill of material i. It serves the purpose of advance intimation to all concerned of the order to be executed. ii. It acts as authorization for issue of materials from store. iii. It serves the production department as an authority to place material requisition iv. It may be used as a guide for controlling consumption of materials as it provides detailed list of materials required v. It is possible to calculate material cost of all articles before their production vi. It may be used as a basis passing accounting entries in the stores ledger and cost ledger. e) Material Transfer Note Material transfer note is prepared when materials or equipment’s are transferred from one sub-store to another sub-store or from one production section to another or from one job to another in the factory. Normally inter departmental transfer is not allowed. However, it may be encouraged in the following situations: Where the surplus materials are of very heavy weight and involve more handling expenses.
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  13. 13. 21 WAREHOUSE SAFETY AND SECURITY WAREHOUSE SAFETY Just as safety is very important in any other work environment, safety must be given a serious attention also in warehouse management. For this reasons safety measures has to be observed and the use of warehouse safety items must not be neglected. SOME WAREHOUSE SAFETY ITEMS/EQUIPMENT (1) Safety glasses (2) safety shoes (3) Dust Mask (4) Gloves (5) Aprons (6) Respirators (7) Hard Hats (8) Wheel Chocks (9) Fire extinguisher (10) Fire Alarm (11) Water sprinkler All these items are necessary in warehouse operation for safe working environment. Warehouse Safety Principles: 6 key guidelines to keep your workplace safe. When it comes to warehouse safety there are many benefits that are often overlooked. Safety procedures are frequently disregarded in a variety of workplaces due to insufficient time, inadequate resources or an opportunity to cut corners in an attempt to save money. However, when safety procedures are soundly implemented there are major benefits such as higher employee satisfaction as well as increased productivity. By minimizing the risk of injury, fewer workplace disruptions take place and absenteeism associated with injury is also reduced. Equipment downtime is another factor which can be avoided through the appropriate use of safety procedures. Here are a few safety guidelines to help keep your warehouse safe: 1. Ensure Safety Equipment is Used at all Times In the warehouse it is vital that forklifts or hydraulic dollies are used to lift items that are too heavy. Appropriate eyewear and hard hats should also be worn when required. Employees should be aware of emergency exits and the sprinklers installed in the roof should not be blocked at any time. Safety equipment is implemented in order to minimize workplace injury, so although it may be time consuming to initiate its use, it does pay off in the long run. 2. Eliminate Any Potential Safety Hazards
  14. 14. 22 Ensure all warehousing floors are free of ‘slip and trip’ hazards. It is important that this safety check is carried out on a regular basis, by all employees, and that the floor is always free of stray cords, liquids and any other potentially hazardous items. It is also essential that any cracks and pits in the flooring are attended to as these can cause serious injuries to employers as well as damaging expensive machinery. 2. Clearly Label Designated Hazardous Zones Dangerous equipment should be stored away in an area that is clearly labeled and safe walk ways should be highlighted through necessary signage. The easiest way to illuminate hazardous zones is by using tape or painting black and white stripes on the floor of the designated area. This enables employees to be aware of dangerous surroundings and can be useful in avoiding accidents that can cause serious injury. 3. Always Use Safe Lifting Techniques When a load requires transporting, firstly assess what method is the best option for its movement. If lifting is the most suitable method; check the route to ensure no obstacles are in the way and ensure there is enough space for the load at its destination. Safe lifting techniques should always be carried out and the load should not obstruct the view of the lifter. Use all materials handling equipment carefully and follow the proper operating procedures including push rather than pull, whenever possible and lean in the direction that is being travelled. Also, never drive a forklift or use other powered equipment without training or authorization. 5. Provide Training and Refresher Course Ensure all staff are educated and up to date with knowledge about safe practices within the workplace. This allows for greater adherence to procedures as staff members will be completely aware of the consequences that can emanate from an unsafe workplace. Accidents most commonly occur when corners are cut in an attempt to save time. If staff and management are completely aware of the repercussions that can arise from this fact, procedures may be followed more closely. 6. Promote Awareness in your Warehouse Having a sense of awareness in the work place is an important safety factor. This can be achieved through communication between staff members. By employees being vocal and yelling out to others their location, collision incidents can be drastically
  15. 15. 23 reduced. When carrying items or driving machinery, a simple “coming through” can alert other coworkers of their whereabouts and can allow them to steer clear of dangerous pathways. All staff members should be encouraged to be constantly aware of what’s around them and to communicate where they are to ensure the avoidance of collision accidents.Safety should always be a priority in the workplace. Do you have any more safety guidelines to add to the list? OSHA’s Top 10 Warehouse Citations OSHA issues many publications on safety issues in a warehouse and the solutions that can be adopted by businesses to reduce accidents and minimize injury. The list below is their top 10 areas for which they issue citations. 1. Forklifts 2. Hazard communication 3. Electrical, wiring methods 4. Electrical, system design 5. Guarding floor & wall openings and holes 6. Exits 7. Mechanical power transmission 8. Respiratory protection 9. Lockout/tagout 10. Portable fire extinguishers Forklifts Forklifts can be dangerous, OSHA records about 100 warehouse employees are killed and 95,000 injured every year in forklift accidents while operating forklifts. The majority of fatalities are caused by forklift turnovers. Being crushed between a forklift and another surface is the second highest percentage, followed by getting struck a forklift and then getting hit by falling material from a dropped load. OHSA issue guidelines on forklift operation including the following:  Train, evaluate and certify all operators to ensure that they can operate forklifts safely, follow safe procedures for picking up, putting down and stacking loads  Drive safely and never exceeding 5 mph and slow down in congested areas,  Maintain sufficiently safe clearances for aisles and at loading docks or passages where forklifts are used  Train employees on the hazards associated with the combustion byproducts of forklift operation, such as carbon monoxide.
  16. 16. 24 Hazard Communication Hazard communication refers to the information about chemical hazards and the associated protective measures that is communicated to employees and employers. Chemicals pose a wide range of health hazards, such as irritation, and physical hazards, such as flammability and corrosion. Chemical manufacturers and importers to evaluate the hazards of the chemicals they produce or import; and providing information about them through labels on shipped containers and more detailed information sheets called material data safety sheets (MSDS). OSHA recommend a number of measure with regards to hazard communication:  Employees should be trained on the risks of each chemical being stored.  Provide spill cleanup kits in any area where chemicals are stored.  Have a written spill control plan.  Train employees to clean up spills, protect themselves and properly dispose of used materials.  Provide proper personal protective equipment and enforce its use.  Store all chemicals safely and securely. Electrical Safety Many times electrical hazards are the cause of injuries and fatalities in the workplace. As well as being dangerous in a warehouse it is one of the leading causes of accidents in construction sites. The first step towards electrical safety is controlling or eliminating factors in your warehouse that pose electrical hazards. Ground fault electrical shock is a common electrical hazard. OSHA requires that employers provide ground fault circuit interrupters (GFCIs) for receptacle outlets. Warehouses should provide assured equipment grounding conductor program. Either of these methods can eliminate hazards in ground fault electric shock. Guarding Floor and Wall Openings and Holes The easiest way to avoid falls in the warehouse is by eliminating and controlling fall hazards. This can be achieved by the use of fall protection equipment or devices. There are basically two types of fall protection. With a combination of both, you can ensure a safer environment for employees who are exposed to fall hazards. One type of fall protection is the fall restraint; these systems consist of equipment that prevent a free fall, for example guardrails/standard railings, full body harness, and warning lines. The other type is the fall arrest, these systems help by stopping a fall in progress or saving an employee in the middle of a fall, for example the use of safety nets.
  17. 17. 25 Respiratory Protection Many accidents occur each year and most of the time it’s because of the absence or lack of personal protective equipment (PPE). OSHA strictly regulates employers to provide their employees with proper PPE. Many accidents occur not because of absence or lack of PPE but because employees do not to wear it. This is particularly true of respiratory protection. In some warehouses there is the presence of toxic airborne substances. This is where respirators should be used by employees. Respiratory protection is designed to protect the wearer from dust, fumes, paint spray, pesticides and other substances that could bring about long-term or permanent impairment or even death. As with other types of PPE, safety programs provided to warehouse employees must specify the proper ways to clean, maintain and repair respirators. Lockout/Tagout In the warehouse there is often defective or damaged equipment. It is important that these items are tagged with an “Out of Service” until it gets replaced or repaired. This will keep employees away from items that may cause serious injury or illness. According to OSHA, tag is “a device usually made of card, pasteboard, plastic or other material used to identify a hazardous condition”. Many companies are cited by OSHA because tags are not used in the correct way. WAREHOUSE SECURITY USE OF SECURITY DEVICES IN WAREHOUSE MANAGEMENT The security protection equipment market is vast, reflecting the current levels of crime in distribution as elsewhere. Within the distribution context the following measures are considered essential: On Premises  High, strong fencing  Lockable gates  Floodlighting  Manned entrances and exits during working hours  Night patrols  Closed-circuit television (CCTV) with manned and video recording  Alarm systems-connected to the police
  18. 18. 26  Guard dogs-with provisions about the safety rules associated with this form of security (that is, they must not be allowed to roam loose, and notices about the presence of the dog must be clearly exhibited on the premises). On Vehicle  Steering column lock  Engine immobilizer  Good cab door and load space locks  Alarms on vehicle and trailer (which must be set)  Kingpin or other types of lock on trailers and semi-trailers  Tracker system.

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