WAREHOUSING OPERATIONS AND STOCK CONTROL

INTRODUCTION TO WAREHOUSING

Definition

The term ware means ‘article’ or merchandise. A warehouse therefore refers to a building or a room for storing goods.

Warehousing– This is the process of storing goods within a storage facility.

Characteristics of Good Warehousing Function.

Warehousing function will be deemed to be productive if certain indicators are prevalent. These may include:

  1. Maximum utilization of the available space.
  2. Higher labour productivity.
  3. Maximum utilization of the available warehousing facilities.
  4. Substantial reduction in total warehousing operating cost.
  5. Higher inventory turnover.
  6. Substantial shortening of lead times.
  7. Less or no cases of accidents i.e higher safety degree.
  8. Sound hygienic house-keeping.
  9. Minimal or no cases of stock-taking discrepancies.
  10. Good working relationship with other interested parties.
  11. Must operate under the existing laws of the land.
  12. Warehouse should be located in an ideal place.
  13. The buildings should be suitable for the intended operations.
  14. Proper recording systems and practices.
  15. Proper handling equipment.
  16. Operative staff should be well trained and competent.
  17. Effective safety and security measures.
  18. Very accessible to users.

 

Objectives & Functions of Warehousing/Store-housing.

Warehousing is not just a simple act of storing items but a package of services that enables the smooth running of the wheels of logistic industry.

 

The main objectives of warehousing therefore will include:

  • To receive incoming consignments.
  • To meet the demands of customers both internal and external making available a balance flow of the required materials.
  • To account for all the activities transacted accurately.
  • To minimize or avoid stock redundancy.
  • To protect stock items against possible deterioration.
  • To create the bulk collecting materials from various sources to meet the market demands.
  • To dispatch the deliveries to the premises of the customers.
  • To break the bulk into smaller convenient units to meet the needs of each specific individual customer.
  • To combine or avail varieties of materials to ensure one stop warehousing.
  • To package materials appropriately for convenient handling.
  • Loading and unloading the consignments as appropriate.
  • To smooth the materials safely and securely until the need arises.
  • To pick the orders, marshal, sort out and document for onward delivery.

 

FACTORS CONSIDERED IN SETTING UP A WAREHOUSE

The essentials of a good warehouse are:-

  • Ideal location: A warehouse must be located in the area where goods are stored in greater quantity and they are to be used at a later stage.
  • Suitable building: The building of a warehouse must be of large size and appropriate to store goods of different kinds more safely
  • Proper equipment: A good warehouse is that which is fully equipped and has all necessary facilities (eg cold storage) to store goods for a longer time without being spoiled or damaged.
  • Efficient staff: The staff of a warehouse must be well trained
  • Transport system: The goods are moved to a warehouse from the place of production and from the warehouse to the place of consumption. The system of transporting the goods must be appropriate and speedy otherwise they will be spoiled.
  • Protection measures: Protection measures against any losses or damages fire, water or other calamities must be adequate.

 

LOCATION OF A WAREHOUSE

The following factors are taken into consideration in deciding the warehouse location;

  • Number of markets to be served
  • Location of production centres
  • Quality, availability and versatility of transportation
  • Quantity to be transported or stored.
  • Accessibility: Road is open the year round.
  • Utilities: Site served water and electricity.
  • Communications: Reliable telephone service.
  • Drainage: Neither site nor surrounding area subject to flooding due to direct runoff or high water table
  • Size: Unimpaired entry and exit for large vehicles.
  • Security: Area not likely to invite intrusion or vandalism.
  • Proximity: Good access to transport links, railways, highways

TYPES OF WAREHOUSES

  1. Private warehouses: They are built, owned and operated big manufacturers and merchants to fulfil their own storage needs. The goods purchased the owners are stored in the warehouse until they are sold out

Advantages

Easy distribution of goods-A manufacturer or wholesaler may have a network of his own warehouses hence can access them when supplying the goods.

Storage of goods-The manufacturer or purchased goods are kept the owner until they are sold out.

Disadvantage

Very few people can own a warehouse.

It is very expensive to construct.

  1. Public Warehouses: It‘s a specialized business establishment that provides storage facilities to the general public for a certain charge. It may be owned and operated an individual or a cooperative society. It has to work under a license from the government in accordance to the rules and regulations provided for them. The warehouses are located at sea ports, railway stations, or airports for any importer or exporter who has limited space at his premises. When goods are placed in these warehouses, the warehouse authorities issue a warrant to certify that the goods are received. By means of this document, ownership of the goods can be transferred from one person to another.

Advantages

Transportation of the goods to and from the warehouse is made easy since it‘s located near the major means of transportation.

The wholesalers‘, who may not be able to own a warehouse, can store their goods in these warehouses.

The warehouse is not limited to a special persons, but to the general public. Disadvantages

For one to store their goods, they have to pay a certain fee for them.

  1. Central warehouse: This is generally recognized as one which acts as a wholesale supplier to other units, department or sub stores. It is located in a central point to serve the whole organizatione. its departments/branches.

Advantages of a central warehouse

  • A wider range of goods is provided for all users
  • Stock of tools, fixtures, equipment and spares can be kept to a minimum
  • Economies in storage space are likely to be obtained
  • The use of modern handling methods is facilitated
  • Better purchase prices are possible because of bulk buying and delivery to a single point
  • Inspection and testing of goods can be more effectively organized
  • Opportunities for standardization are improved
  • It may be possible to provide the same level of service to all customers

Disadvantages of central warehouses

  • Extra transport costs may be involved
  • More staff may be required
  • If the organization is not efficient, there may be recurrent shortages at the point of usage.
  • There is a tendency for stock investment to rise if the stock level is not strictly controlled.
  • There is the risk of greater loss fire
  1. Departmental warehouses: This is a warehouse established to serve one department or branch. They are normally located inside the main departmental building or adjacent to it.
  2. Specialized warehouses: These are warehouses used to store the items which require special attention. Examples of these items include flour, grain, fuel oil, petroleum, explosives etc. These warehouses contain special facilities used to preserve these items so that they are not spoiled/damaged. In fact the storage of explosives like fuel are governed government regulations which must be observed.
  1. Bonded warehouse: These are like the public warehouse except that they are licensed the government to accept imported goods for storage until payment of custom duty. They are located near the ports. The controller of the warehouse is required to give an undertaking or bond that it will not allow the goods to be removed without the consent from the custom authorities i.e. until all the relevant taxes are paid.

Advantages of a bonded warehouse

  • The goods can be prepared for sale while in bond
  • The owner can look for the market first before paying the duty
  • If they are sold while on bond, the duty passes to the buyer
  1. Some goods lose weight so the duty paid becomes lower if it is based on weight
  2. Bonded warehouses ensure that no duty is evaded since the goods cannot be released without payment
  3. It enables the government to check on prohibited goods and smuggling
  1. Stockyard

These are open-air storage space. Buildings for housing stock are expensive and certain heavier and less perishable materials may be kept in the open for a reasonable length of time without serious deterioration. Items that can be kept in a stockyard include:- heavy steel bars, rails, metal pipes, timber, bricks, sand, concrete, metal scrap awaiting disposal. Unlike storehouse storage, open-air storage receive less attention and the following are some of the possible shortcomings that may be experienced in outside storage facilities:-

    1. Stock is scattered over a wide area, making proper control very difficult
    2. There is an excessive employment of manual labour
    3. The absence of fencing or other means of enclosure increases the risk of theft, fraud or unauthorized issues.
    4. Road and rail access is inadequate, thus slowing down transport and hindering the use of mechanical handling equipment.
    5. Lack of artificial lighting impedes efficient working during the winter(cold) months and makes night work impracticable.
    6. Material is mostly stacked on bare earth and in course of time becomes overgrown vegetation or corroded.

DESIGNING THE STOREHOUSE.

A storehouse has be designed in a manner that adds a lot of value to the business entity. It may be designed as single storey or multi-echelon. Most organizations prefer single storey storehouses to multi-echelon store-houses for the following reasons :

 

  1. The total cost of building single storey store-house is much lower than multi-echelon store-houses.
  2. Single storey store-house has higher carrying capacity than multi-echelon as weight carrying capacity of the later is strictly limited to structural considerations.
  3. The total cost of handling materials is much lower in single storey store-house than multi-echelon store-houses.
  4. Handling materials in single storey store-houses involves less movements as opposed to multi-echelon store-houses where materials have to be moved up and down between the floors..
  5. There is maximum use of free natural ventilation thus no need for air conditioning.
  6. High rise handling equipment can only be used conveniently in single storey store-house but very much limited in multi-echelon store-houses.
  7. The cost of maintaining single storey storehouses is much more lower than the later.
  8. Total labour cost is kept much lower in the former than in the later.
  9. A lot of time is saved in the former than in the later.

 

ASPECTS TO BE CONSIDERED WHEN DESIGNING A WAREHOUSE.

  • Adequate space to provide for air circulation.
  • Special storage facilities such as cold rooms to main materials stored in good conditions.]
  • Air conditioning facilities to improve the flow of air.
  • Use water-proof materials in the construction of the warehouse.
  • Strong structures and fixtures to withstand weight of the materials handled.
  • Use dust-proof materials to avoid accumulation of the dust for hygienic purposes.

 

 

RECEIVING AND ISSUING OF GOODS

Receiving

Def: This is an administrative function that involves checking of the quality, quantity and condition of the incoming goods followed their proper storage.

Goods may be received from outside suppliers, from production departments or from other stores within the organization. The may come hand, post, road, rail or air. The amount of amount of recording and checking depends greatly on the nature of goods and the management technique of the business.

RECEIVING AND INSPECTION PROCEDURE

Receipt of material involves all the materials delivered whether from internal or external sources.

 

All the materials delivered must be strictly controlled to ensure efficient and smooth operations.

 

To ensure effective and efficient receipt of materials delivered, the following procedures are necessary:

 

  • Notification of Order. The purchasing section will notify the stores section on when to expect deliveries. This will help stores staff to prepare for receiving the materials for storage.
  • Confirmation of Delivery. This will enable stores staff to make definite arrangements for receiving the expected materials to be delivered.
  • Stock Allocation. Stores staff will allocate space to accommodate expected incoming deliveries.
  • Labour Allocation. Adequate labour needs to be organized in advance to ensure efficient handling of the delivered materials.
  • Allocation of Handling Equipment. Appropriate equipment to handle the materials should be organized for in good time to ensure proper handling of materials.
  • Delivery Scheduling. Schedules on how materials are to be delivered and handled are prepared in advance to provide steady operations to make deliveries successful.
  • Actual Delivery of Materials. On arrival of materials, all the relevant documents to keep records of materials delivered are made ready. Actual delivered materials are then physically checked and verified against the purchase requisition, purchasing order, delivery note and any other appropriate documents. If the stores staff are not able to check all the materials delivered, then delivery documents should be signed with the word “Unchecked” written. Where the stores staff are satisfied with the delivered materials, Goods Received Note is prepare and signed.
  • Unloading and Inspection. Materials must be checked for both consignment and detailed content. Consignment check involved physical counting of packages eg. cartons, bales, drums, crates, bags etc. delivered the transporter and comparing with the relevant documents. Incase of any shortage, the transporter will be held liable. The transporter will additionally be held responsible for any physical damages to the packages. Detailed check on the other hand involves unpacking and conducting detailed check on each individual items held inside each package and comparing with quantities indicated in the packaging lists. Incase of any shortages where packages are not tampered with, the supplier will be held responsible and should be notified within reasonable period of time.
  • Acceptance and Storage of Deliveries. Upon satisfactory checking and inspection, materials are then recorded and placed in their respective storage location for safety and security until issued out.
  • Notification of Deficiency. All damages, shortages, errors etc should be notified to the following parties for action taking:
  • Purchasing unit.
  • Production unit.
  • Quality control unit.
  • Stock control unit.
  • Finance & Accounts unit.
  • User department.
  • Notification of Delivery. All the materials delivered and accepted in the

Storehouse should be notified to all the parties named in (j) above for record keeping and decision making.

DOCUMENTS USED IN RECEIVING GOODS

 

  • Goods Advice Note : – Document from supplier to buyer notifying the expected date of delivery of the materials ordered.
  • Purchase Order : – Document from buyer to supplier specifying materials to supplied.
  • Delivery Note : – Document from supplier to buyer indicating quantities of materials delivered.
  • Consignment Note : – Document from independent transporter indicating the consignor and consignee of the goods specified therein.
  • Inspection Certificate : – Document prepared buyer’s quality assurance team certifying quality of the materials delivered.
  • Goods Received Note : – Document prepared stores confirming that the goods have received and accepted in the storehouse for safe custody.
  • Credit Note : – Document from the supplier to the buyer correcting overcharge in the invoice for the goods delivered.
  • Debit Note : – Document from supplier to buyer correcting undercharge in the invoice for the goods delivered.

 

 

ISSUE AND DISPATCH

This is the process of receiving demands (request), selecting the items required and handing them over to users. It includes also, where necessary, the packaging of issues and the loading of vehicles with goods for delivery.

Methods of issuing stores

Some of the methods in common use are described below:

  1. Issues on request

This is the simplest method and there are three ways in which it can be done;

  1. Immediate issue on presentation of an issue note hand. The user comes to the store and presents a properly authorized issue note giving details of what is required. The storekeeper then selects the items required and hands them over in exchange of that document.
  2. Issues made after the receipt of an issue note post. Under this arrangement the issue note is sent in post the demanding department and the physical handing over of the items takes place later either when the user calls for them at a prearranged time or when they have been loaded. In this method the storekeeper have adequate time for selection and marshalling of the material.
  • Immediate issues on verbal request only. Here, the person requiring the items calls at the issue counter and states his requirement. The storekeeper then selects the required items and hands them over. This method is normally applied for small value items which are required at short notice such as hand tools, nuts, bolts etc.
  1. Schedule issue to production.

This is where the materials are issued to the production department to correspond to the production timetable. The required materials are usually assembled into a marshalling area in the first place. Thereafter, they may be dealt with in several different ways

  • Collected from the storehouse the production department
  • Delivered the storehouse staff to the points on the production line at which production comments
  • Transferred into ‘open-access’ within the production shops. Open access stores are storage areas on the shop floor which are not enclosed and are fitted with bins or racks containing materials which are taken and used production personnel without documentation
  1. Assemblies and kits

This is mostly encountered in the assembly stores of production factories where balanced sets of parts are required for assemblies or subassemblies included in the manufacturing programme. For example the piston assembly for a diesel engine might consist of the following list of separate parts; piston head(4), compression ring(8), scraper ring(4), Small end bush(8) etc. Here when the production wants to assemble one piston engine the storekeeper is expected to see to it that all the individual parts are supplied in the right quantities.

  1. Imprest issues

An imprest system is one wherea list of certain types of materials in given quantities is approved to be held either in a substore or on a production line or elsewhere. At the end of a given period say a week or a month, the user concerned prepares a list of the material consumed during that period and presents an issue document at the main storehouse for replacement to bring the imprest stock up to the same level.

  1. Replacement issues

For certain items e.g. tools and gauges, operators may be required to present a used article to the storekeeper before a new one is issued. This can be done wit or without an issue note.

  1. Loan issues.

This is applicable where an item is required for a short period of use at frequent intervals. The users signs the register for everything issued to them and sign again when items are returned to the store

  1. Issues to employees on repayment

This is applicable where some items are to be given to employees and they are expected to pay for them. They make payment through the accounts office either cash or salary deduction of which a document indicating a prove of this payment is delivered to the storekeeper.

  1. Allocated issues

In accordance with manufacturing schedules, some materials may be received on a programmed delivery basis and kept for use only on the production line for which they have been purchased. This is done to make sure that there will be no interruption of production and the storekeeper and the storekeeper will check that issues are not made elsewhere.

  1. Capital issue

Where the replacement of capital goods is a normal day feature, or where a capital development or reconstruction programme is in operation, special attention is usually given to the control and recording of the issues of capital material from storehouses. Instructions are given about the authorization of such issues and stock records are marked to show that the items concerned are reserved for a particular capital project.

Bulk issues

Bulk issues are made in set agreed quantities to designated departments. Materials issued in this way are usually for a low value high usage category e.g. cleaning materials. After issue from the storehouse, these materials are normally placed in an open access location in the user department so that staff can easily draw their requirement.

Bulk issues do need to be carefully monitored and controlled to make sure the goods are carefully located and cared for in the user departments; otherwise waste is likely to occur.

Issuing procedure

  • Recognition of need. The user has to analyze his requirements and be able to accurately describe.
  • Compilation of issue/requisition note.
  • The requisition note to be signed the one in charge of the user section requisitioning the item.
  • Presentation of the requisition note to the store.
  • The store after receiving the requisition note will then identify the items required the stock code number.
  • Once the items required have been identified, they can be selected from the store.
  • Issue of the stock required. Once the items have been selected, delivery or collection will take place.
  • Cost allocation. The collecting department can now be charged as per the cost of items collected.
  • Notification to stock records and stock control for the purpose of adjusting stock levels.

 

STOCK LOCATION SYSTEMS

Stock location system may be defined as the procedure or means which materials in the storehouse could be found whenever they are needed.

 

Importance of Efficient Stock Location System

  • Enables the storehouse staff to easily and quickly retrieve materials from their respective areas of storage thus saving time and efforts.
  • Easy stock taking as materials are easily and positively identified from their locations points.
  • Facilitates faster farmiliarisation of stores operations especially to new stores staff.
  • Storehouse customers are satisfactorily served.
  • The total operating costs are significantly cut down.

 

Determinants of Stock Location Systems.

  • Turn over rate of the stocks.
  • Similarity and difference of stock items handled.
  • Compatibility in the value of the materials handled.
  • Size of the storehouse and design.
  • Source of the materials.
  • End use of the materials handled.
  • Availability of space.
  • Characteristic features of the materials handled.
  • Nature of stocks to be held.
  • Volumes of materials to be held.
  • Safety and security considerations.
  • Frequency at which materials enter and leave the storehouse.
  • The cost of putting in place the stores location chosen.
  • Staff ability to adopt the selected location system.
  • The policy of the organization where there are standing policies on which systems to be used in the organization.

 

Types of Stock Location Systems

 

  • Fixed Location System.

In this system, each and every stock item held in the storehouse has its own permanent storage area so that even if an item is not in stock, its space remains empty or vacant. Racks may be used and may be further divided into divisions for more efficiency.

 

Advantages.

  • It is easy to remember the location of the items the stores staff since there are no changes.
  • Location numbers help in maintaining accurate records and documents.

 

 

Disadvantages.

  • Wastage of space as no item can be placed in an area not meant for it.
  • Only suitable for larger stores with huge operational volumes.

 

  • Random Location System.

This is where items are stored in any place vacant within the storehouse. There is no permanent storage area  for a particular item.

 

Items may keep on changing their storage areas from time to time depending on prevailing circumstances in the storehouse.

 

Random  stock location may only be justified under the following circumstances:

  • When many varieties of items are handled in the storehouse.
  • When there is need to economise on the available storage space.
  • Where warehousing operations are fully automated.
  • When the stock turnover is very high.
  • When there is need to make maximum use of the available facilities.
  • When there is need to speed up the warehousing operations.
  • Where storage space is so small that identifying and retrieving stock items is not a challenge.

 

Advantages.

  • The storage space available is fully utilized.
  • Very convenient to a small storehouse with limited storage space.
  • The total operating costs are significantly reduced. As the available storage capacity is put to maximum use.

Disadvantages.

  • It is difficult to locate items in the storehouse especially the new staff.
  • Some items may be placed in unsuitable areas thus compromising the quality.

 

( c )   Zonal Location System.

This is where a storehouse is divided into zones for convenience of handling. Zones are further sub-divided to suit specific storage of the materials.

 

Within each zone individual items may be stored at random or on fixed basis.

 

Advantages.

  • Facilitates easier and faster issuing out of materials.
  • Very convenient in large storehouses with huge volumes of activities.

 

Disadvantages.

 

  • Wastage of space when some zones are left vacant since different items cannot be moved to zones not meant for them.

 

SECURITY AND SAFETY IN THE STORE

Introduction

One of the most important aspects of stores management is security, which covers not only theft and fraud but also stock deterioration, damage, location and special storage.

Methods of stores security

  1. Use of security firms

This means making use of specialized organizations that supply trained team of security guards.

Advantages;

  • Trained staff are able to cope with difficult situations
  • Twenty four hour cover is available if required
  • It reduces the damaging effect of conflict between members of the company’s staff

Disadvantages;

  • Very expensive
  • Friction can arise between the organization’s staff and management because of outside intervention in case of theft
  • Trade unions defense of members involved in theft will be much stronger in cases where security firms are involved.
  • A high security staff turnover makes it difficult to built relations with them
  1. Use of internal stores management security

This is where the organization relies on stores management staff to control stores security.

 

Advantages

  • It is cheaper
  • It builds up good relationships and trust between organization and its staff.
  • Stores management will be held responsible for stock loss
  • Stores staff will be able to cover the aspect of deterioration, damage and special stores

 

Disadvantages

  • Large scale theft involving the stores staff may not be uncovered
  • Stores management staff would not be fully trained in security techniques

 

Reasons why stores security is vital

  • Stock records become meaningless as a means of stock control if stock is lost and not recorded.
  • Stock control of any sort becomes impossible unless stock data records is accurate.
  • Production planning relies on stock being available against a predetermine plan. Stock should therefore be secured to meet production plans.
  • Stock represents a major part of the organization’s capital or money.

 

 

Responsibility of stores management in relation to storehouse security

The warehouse manager has a direct responsibility for stores security in all the areas in which materials are stored, marshalled and handled namely: Stores building, stockyards, stock sheds, marshalling points, work in progress stores etc

 

Security policy

A uniform security policy should be put in place and should include the following points(aspects);

  • Appointment of a senior manager with overall responsibility for security.
  • Allocation of reasonable budget to cover the costs of security
  • Consistent enforcement of the stated company penalties for theft from the shop floor to the manager.
  • Regular discussions at managerial level regarding security

 

Custody of keys

The following rules should be observed

  • All keys should be numbered for easy identification
  • All keys should be kept in a central point
  • Individual stores staff should be made responsible for certain keys
  • Keys taken from the central point should be signed out.
  • The number of duplicate keys must be kept to a minimum to ensure adequate control

 

Control of entry into stores installations.

Stores manager must ensure that no unauthorized persons are allowed to enter the stores area.

 

Marking of stock

Certain materials can be marked in some way to identify their ownership and origin. This applies mostly to equipment or items of high value. There are two reasons for marking stock;

  • It discourages theft
  • If the stock is stolen and recovered it will be easy to identify the owner

Marking of stock can be done in several ways

Colour marking paint or dye

Trade marks. Trade mark and company’s name can be embossed on the item

Dye marking. If the item is touched hand the dye will be transferred on to the hands of the thief.

Fire precautions

  • The following precautions can be taken to prevent fire;
  • Firefighting equipment must be placed in strategic positions. The following are some of the firefighting equipment;
    1. Fire extinguishers
    2. Horse reels. They are linked to a large tank of the main supply of water
  • Sprinkler systems. They are controlled smoke or heat. When smoke or heat is high then they start sprinkling the area
  1. Fire blankets. Used for small fires. They are made of fireproof fabric.
  2. Fire buckets. They are used for small fires. Buckets are filled with sand
  • No smoking signs must be placed in all parts of the store.
  • Installation of alarm system
  • Organizing fire drills so that the staff are trained/given instructions on what to do in case of fire.
  • Regular inspection the local fire brigade’s prevention officer will help to ensure safe and efficient system.
  • Installation of fire doors and emergency exits.

 

Segregation of high risk materials.

High risk materials such as petrol, oils chemicals, explosives, spirits etc can be kept in a store usually designed for that purpose.

Advantages of segregation of high risk materials

  • expensive firefighting equipment can be concentrated in those areas
  • in case of fire in the main store it will not be able to reach the high risk store
  • fires in the high risk store can be left to burn themselves out if need be.
  • Concentration of efforts to prevent fires in a small high risk store will benefit the whole operation in terms of overall fire risk.

 

Knowledge of materials

The following are reasons why storekeepers must have knowledge of materials;

  • Application of materials issued will often be guided the advice of the storekeeper. He should therefore have full knowledge on how the items should be used.
  • So he that he can issue the materials for a particular part of the production process. He should therefore understand the production process.
  • So that he can be able to understand the correct methods and equipment of handling certain items to minimize damages.
  • For thorough inspection of materials.
  • So that he will be able to understand the units of issue.
  • To minimize explosion or contamination during the process of handling storage of materials.

Deterioration

Factors that cause stock deterioration

  • Poor storage areas that allow damp to enter through broken windows, leaking roofs and doors.
  • Failure to follow supplier’s storage instructions.
  • Poor handling
  • Contamination of materials in the store e.g. storage of oil drums alongside foodstuff.
  • Failure to follow stock rotation code and therefore allowing old stock to be left unused while newer stock is used.

 

Prevention of stock deterioration

  • Ensure that all storage facilities are clean and damp free.
  • Follow suppliers’ instructions.
  • Conditions of temperatures and humidity are correct for the goods being stored
  • Proper handling methods and equipment
  • Supervision of all storage and handling of materials trained and experienced staff reduces the risk of bad storage or fault handling.

 

HEALTH AND SAFETY

Common causes of accidents in the store

  • Incorrect manual handling of materials thus causing strain, muscle damage and long periods of sickness.
  • Faulty equipment that suddenly breaks down at a vital movement.
  • Storage and handling equipment overloading or misused against manufacturers specification.
  • Poor storage conditions in the form of bad floors and unstable racks, shelves, bins and general fittings.
  • Lack of supervision within the stores resulting in bad stores practices, untidiness and carelessness.

Material handling

The following should be observed to ensure safety:

  • Do not lift a weight that is too heavy for you.
  • Protective gloves and foot wear must be worn on rough sharp or when heavy objects are being carried.
  • Floor surface should be free of any obstructions.
  • When lifting manually, always obtain a correct hold, keep a straight back, chin in arms to the body and correct balance with knees bent.
  • Mechanical lifting devices must be maintained and examined regularly.
  • Give clear signals.
  • Use the correct equipment.
  • Have one person in charge in a team operation and ensure that every person knows his job.

 

Storage

Ensure the following in the storage area;

  • Check the floor load capacity to avoid sinking
  • Do not stack against walls
  • Do not lean a stack against the one next to it.
  • Stack straight, avoid overbalancing, and do not exceed seven feet high manually.
  • Ensure that gangways are adequate and free from obstruction.
  • Do not overload racks or bins.
  • Movement of material within the store should be minimized
  • Highly flammable items like gas should be stored in a special building or container.
  • Use the right ladder for the right job and exam it first for good condition.
  • Fire points, electrical points and exits must be clear of obstructions.

 

Stores discipline

  • Be a good storekeeper i.e. tidiness is essential.
  • Floor surface should be kept clean
  • Good behaviour is important. No horse play, running or unauthorized riding on trucks.
  • Do not open doors carelessly
  • Take care when pulling hand trucks. Avoid hitting persons or objects.
  • Do not smoke in the storage area.
  • Protruding nails and sharp edges should be reported and action taken immediately.
  • Hand tools e.g. knives, scissors, hammers etc should be handled sensibly.

 

Fire precautions

  • Escape doors must not be locked during working hours.
  • Heating appliances must be based on incombustible hearths and away from combustible material.
  • Fire points should be clearly identified and easily accessible.
  • Broken or ineffective electrical equipment should be repaired without delay.
  • Electrical repairs should only be done experts.
  • In case of fire sound the alarm and report to your supervisor.

 

 

Protective clothing

  • Protective clothing should be worn when dust, falling material, handling hazards and corrosive or poisonous substances are likely to be encountered.
  • The following clothing are available to the stores staff; overalls, gloves, goggles, steel toe-capped boots, helmets, warehouse coats etc.
  • Disciplinary action will be taken against employees who fail to use protective clothing.

 

Health

  • Storehouses should be inspected from time to time to ensure that it is maintained.
  • The walls and windows should be kept clean
  • Toilets should be cleaned and adequately equipped
  • Refuse must be collected regularly
  • Stairs should be well lit
  • Lighting and heating in working areas should be adequate.

 

First aid

  • First aid boxes should be available at every storehouse and inspected regularly the storekeeper.
  • In the event of an accident;
    • Telephone for help and report to your supervisor
    • Do only what is necessary to put the casualty in a comfortable position
    • Do not move the casualty more than necessary before the arrival of experts
    • Do not give the casualty anything to drink
    • Talk quietly i.e. act calmly
    • As soon as possible inform management, complete the accident report and enter the details in the accident book.

 

MATERIAL HANDLING

 

Material handling embraces all the basic operations involved in the movement of bulk, packaged and individual products means of machinery and within the limits of a place of business. It involves the movement of materials in an horizontal (transfer) and a vertical (lifting) direction as well as the loading and unloading of items.

 

Objectives of material handling

  • To increase the efficiency of material flow ensuring the availability of materials when and where they are needed.
  • To reduce material handling cost.
  • To improve facilities utilization.
  • To improve safety and working conditions.
  • To facilitate the manufacturing process.
  • To increase productivity.

 

Basic material handling principles.

  1. Integration principle- This may be achieved combining together as many operative activities as possible and co-or dinating full scope operations including supply source selection, receiving and issuing out, value conversion, smoothing of stock items, dispatch, transportation and customer care.
  2. Simplification principle- This involves avoiding non-value adding activities and formulating best practices that operations easier, safer, faster and cheaper.
  3. Flow principle- This involves planning operations sequentially to facilitate faster movements of the operations.
  4. Gravity principle- This is done utilizing natural gravity advantage where possible to enhance faster operations.
  5. Cubic unit principle- This may be realized using available carrying capacity maximumly to hold larger quantities of materials using smaller space.
  6. Kaizen principle – Ensuring continous improvement in all the activities undertaken.

 

Types of material handling equipment

 

They are classified into three main groups:

  • Cranes
  • Trucks

 

Conveyors.

They are used for moving materials continuously over a fixed path. They move bulk materials over long distance. Examples of conveyors include;

  • Are conveyers consisting of a set of rollers with a driving mechanism incorporated in the system.
  • Belt conveyors.
  • Chute conveyers. Metal slide that guides materials as they are lowered.

 

Advantages of conveyers.

  1. Their high capacity permits moving large number of items.
  2. Their speed is adjustable.
  3. Handling combined with other activities such as processing and inspection is possible.
  4. They are versatile and can be on the floor or over head.
  5. Temporary storage of loads between work stations is possible especially for overhead conveyors.
  6. Load transfer is automatic and does not require the assistance of many operators.
  7. utilization of the space is feasible through the use of overhead conveyors.

 

Disadvantages of Conveyors

  1. They follow a fixed path serving only limited areas.
  2. Bottlenecks can develop in the system.
  3. Breakdown in the system part can stop the whole line.
  4. Since they are fixed in position they hinder the movement of mobile equipment on the floor.

 

Cranes and Hoists

They are overhead equipment for moving loads intermittently within a limited area. They include:

  • Hoist: Is a lifting devise attatched to monorail or a fixed point. It can be manually or electrically. These hoists include; chain hoists, monorail hoist etc.
  • Cranes. Are power driven self propelled unit fitted with a boom mounted on a mobile chasis. Cranes can be operated independently without moving the chasis. They include the following cranes: Bridges cranes jib cranes monorail cranes etc.

 

Advantages:

  1. Lifting as well as transferring of materials is possible.
  2. Interference with the work on the floor is minimized.
  3. Valuable floor space is saved for work rather than being utilized for installation handling equipment.
  4. They are capable of handling heavy loads.
  5. They can be used for loading and unloading materials.

 

Disadvantages:

  1. They require heavy investment.
  2. They serve a limited area.
  3. Some cranes move only on a straight line and thus cannot make turns.
  4. Utilization may not be as high as desirable since cranes are used only for a short time during daily work.
  5. An operator has to be available for operating some types such as bridge caranes.

 

Trucks

They move loads over varying paths. They are hand (manually) or driven. They include the following:

  • Lift trucks
  • Hand trucks
  • Fork trucks
  • Trailer trains
  • Automated guided vehicles

 

Advantages.

  1. They are not required to follow a fixed path of movement and therefore can be used anywhere on the floor where space permits.
  2. They are capable of loading, unloading and lifting in addition to transferring materials.
  3. Because of their unrestricted mobility which allows them to serve different areas, trucks can achieve high utilization.

 

Disadvantages.

  1. they may not handle very heavy loads.
  2. they have limited capacity per trip
  3. Trucks can easily interfere with the work on the floor.
  4. Most trucks have to be driven an operator.
  5. Do not allow handling to be combined with processing and inspection.

 

Degree of mechanization

Material handling ranges from completely manual to fully automated. The levels of automation can be classified as follows.

  1. Manual and dependent on physical efforts: This level includes manually driven equipment only e.g hand trucks.
  2. Mechanized. Power instead of physical efforts is used for driving equipment. Operators are needed for operating equipment and not provide power.
  3. Mechanized complemented with computers: The function of computers is to generate documents specifying  the moves and operations.
  4. Automated: Minimum human intervention is used for driving & operating the equipment, and most of these functions are performed computers e.g. conveyors, automated guided vehicles. The equipment receive information from keyboard, push buttons and tape or card readers.
  5. Fully automated: This is similar to the 4th level but computers perform the additional task of online control, thus eliminating the need for human intervention.

 

Advantages of using mechanized equipment.

  1. Increase in speed of handling operations thus reducing overall production time.
  2. Reduces fatigue
  3. Improvement in safety
  4. Better control of material flow
  5. Lower labour cost
  6. Better record keeping regarding inventory status.

 

Disadvantages of using mechanized equipment.

  1. Requires large investment in acquiring the mechanical.
  2. Requires training of personnel
  3. High maintenance cost.
  4. Requires specialized personnel and thus reducing flexibility.

Factors considered in choosing material handling equipment

  1. Type of items to be handled i.e. their bulk, weight and size. Care is required in moving items and type of container (if required) should be carefully chosen.
  2. Quantity and rate of movement, volume of material to be moved or handled and number of times movement will be required.
  3. Distances material will be moved.
  4. Direction and variability of travel i.e. horizontal, vertical or combination of the two.
  5. Limitation of buildings i.e. number of floors, ceiling heights floor loads, elevators and obstruction in the floor.
  6. Available handling equipment that which is presently in use an that which is available but not being used.
  7. The cost of the equipment.

 

STOCK CONTROL

DEFINITION

Inventory is the stock of any item or resource used in an organization. Inventory includes: raw Materials, finished products, component parts, supplies, and work-in-process. An inventory system is the set of policies and controls that monitors levels of inventory and determines what levels should be maintained, when stock should be replenished, and how large orders should be.

 

 

Types of Inventories:

  1. a) Raw materials (Working stock) – These are parts and components, which enter into the product during the production process.
  2. b) Cycle stock– This is the inventory that results from the replenishment process and is required in order to meet demand and lead times perfectly e.g. if the rate of sales for a product is constant at 200 units per day and lead time is always 5 days. No inventory beyond cycle stock will be required.
  3. c) In-transit inventories – These are items that are enroute from one location to another. They may be considered part of the cycle stock even though they are not always for sale or shipment until they arrive at the destination.
  4. d) Safety or Buffer stock – They are held in excess of cycle stock because of uncertainty in demand or lead times. This maintains smooth flow of materials without impairing production.
  5. e) Speculative Stock – This inventory is held for reasons other than to satisfying current demand e.g. materials may be purchased in volumes larger than necessary in order to receive quantity discount or because of forecasted or anticipated price increase, materials shortage or to protect against the possibility of a strike.
  6. f) Dead Stock – This is a set of items for which no demand has been registered for some specified period.
  7. g) Seasonal Stock– this are products that are stockpiled to allow for expected large increases in demand.
  8. h) Maintenance, Repairs and Operating Stocks (MRO) – Refers to supplies consumed during the production process and generally do not form part of the produce itself e.g. Oils, lubricants, tools and fixtures.

 

 

Reasons for Holding Stock

 

  • To provide a buffer between supply and demand
  • To take advantage of quantity discounts
  • To account for seasonal fluctuations/speculation
  • To help the production and distribution operations run more smoothly
  • To minimize production delays caused lack of spare parts
  • To provide variety of materials from which the customer can select
  • Some materials appreciate in value with long storage e.g. wine, Timber etc
  • To accommodate variations in demand
  • For work in progress (WIP) where it is practically impossible to balance production flow

 

Disadvantages of holding stock

 

  • Increased carrying cost – interests on capital tied in stocks, warehouse rent (space), taxes, materials handling and insurance as well as management requirements.
  • Decreased customer responsiveness – inventories obstruct production systems and the ability to respond to change is diminished e.g. changes in technology requiring different stocks. This can lead to a negative response to customers.
  • Increased production coordination – more management time is needed to manage and coordinate large inventories. This can lead to managers overlooking other core activities.
  • Reduced return on investment – inventories increase assets of the company. Much capital is tied up in the stocks hence reducing productivity of the firm.
  • Overproduction – large lots of stocks cause overproduction, which may result in obsolete production. Stocks also tend to be misused if they are plenty with loose control over them.

 

Inventory costs

 

Inventory costs are the costs related to storing and maintaining its inventory over a certain period of time.

Inventory fall on three main categories;

  • Holding costs( Carrying costs)
  • Ordering costs( Set up costs)
  • Shortage costs ( Stock out costs)

 

Holding costs- relate to physically having items in storage. These are cost to carry an item in inventory for a length of time, usually a year. Costs include interests, insurance, taxes, depreciation, obsolescence, deterioration, spoilage, pilferage, breakage, and warehousing costs (heat, light, security). They also include opportunity costs associated with having funds that could be used elsewhere tied up in inventory.

Ordering Costs- are the cost of ordering and receiving inventory.  They are the costs that vary with actual placement of an order. Besides shipping costs, they include determining how much is needed, preparing invoices, shipping costs, inspecting goods upon arrival for quality and quantity and moving the goods to temporary storage. Ordering costs are generally expressed as fixed dollar amount per order, regardless of order size.

When a firm produces its own inventory instead of ordering it from supplier, the ordering costs constitute the costs of machine set up (e.g. preparing equipment for the job adjusting the machine, changing cutting tools).

 

Shortage Costs-costs resulting when demand exceeds the supply of inventory; often unrealized profit per unit. These costs include; the opportunity cost of not making a sale, loss of customer goodwill, late charges, and similar costs.

 

Inventory Control/Management

Stock control or inventory management can be defined as the principles and procedures necessary to regulate the amount of stock of items in order to meet economically the demand for them. In Companies or Institutions, sound stock control ensures that the stock of items at all levels of the logistics and supply system; is regulated so as to meet the demand of the acceptors economically. It can be regarded as the “nerve centre” of the logistics and supply system.

Aims and objectives of inventory control:

  • Supply constant flow of materials to the operation- items needed for production, maintenance, engineering and distribution should be in stock and ready for use.
  • Ensure correct quality of stock required- inventory control is responsible for ensuring that the correct type and quality of stock needed is always available for operation. The user, purchasing and quality control will set the type and quality of the required. It is up to inventory control to ensure that specifications set is the one that stores will issue.
  • Distribute stocks – this can relate to both pre-production and finished stock. It is the aim of inventory control to ensure that goods needed for operation are at the point of consumption.
  • Supply information for control of production – inventory control has to advice production planning about what to produce in order to keep up established levels of the organization finished stock and must also advice on the amount of production, maintenance and distribution that can be carried out in the light of the working stock held.
  • Control obsolescence of stock – inventory control ensures that all stock
  • Control stock rotation – stock rotation is the process of consuming materials in the correct order and in accordance to their shelf life or sells date. This ensures that all stocks issued are in correct condition. Other activities include:
  • Determining of limits of inventories to be held
  • Determination of inventory policies.
  • Follow up to examine the working of inventory policy and effecting changes as and when needed.

 

Inventory Control Systems

 

Fixed order quantity:

This is also known as continuous review system or reorder point system. It is also termed as two-bin. This system can be based on a manual or computer system. In each case every movement of stock is recorded and the re-order level checked against it thus inventory controller has information of his/her allocated or reserve stock.

  • The ledger totals are periodically reviewed against physical stock for accounting system. The system is used when a close control is needed of class A items and critical materials.

 

  • Visual control or 2/3 bin or automatic ordering inventory control system: The stock of each item is stored in 2 or 3 adjacent bins. The first bin contains the buffer stock (safety stock). The second bin contains the quantity which goes up to reorder level and the third bin carries the free or working stock. The bins are marked with Red, Yellow and green respectively. The stores keeper issues materials from the free stock bin (Green) until it is exhausted and then switches to the second yellow bin. Once the re-ordering level has been reached, an ordering card (Green) is passed to the stock controller for an order to be placed. If the yellow bin is empty before new stock arrives, the store keeper starts to issue materials under safety stock (Red) and then sends a yellow card to the inventory controller who expedites the order.

 

Advantages of fixed order system:

  • On average, stocks are lower than with periodic review systems
  • Economic order quantity (EOQ) are applicable
  • Enhanced responsiveness to demand fluctuations
  • Appropriate for widely differing inventory categories
  •  Replenishment orders are automatically generated at the appropriate time comparison of actual stock levels against re order levels

 

Disadvantages:

Ø The re ordering system may become overloaded if many. Items of inventory reach re order level simultaneously.

Ø Random re ordering pattern due to items coming up for replenishment at different times thus increasing ordering costs.

 

Periodic review systems:

In this system an item‘s inventory position is reviewed periodically rather than at a fixed order point. The periods or intervals at which stock levels are reviewed will depend on the importance of the stock item and the costs of holding that item. A variable quantity will be ordered at each review to bring the stock level back to maximum. Maximum stock can be determined adding one review period to the lead time, multiplying the sum the average rate of usage and adding any safety stock. This can be expressed as:

M-W (T+L) +S

Where: M= Pre-determined stock level

W= Average rate of stock usage

T= Review periods

L= Lead time

S= safety stock

Advantages

 

  • Greater chance of eliminating of obsolete items owing to periodic to periodic review of stock
  • The purchasing load may be spread more evenly with possible economies in placing of orders
  • Large quantity discounts may be negotiated when a range of stock items are adhered from the same supplier at the same time.
  • Production economies due to more efficient production planning and lower set-up costs may result from orders always being in the same sequence.

Disadvantages:

  • On average, larger stocks are required than with fixed order point systems since re- order quantities must provide for the period between reviews as well as between lead times.
  • Re-order quantities are not based on economic order quantity (EOQ)
  • If the usage rate changes shortly after a review period, a stock out may occur before the next review date.
  • Difficulties in determining appropriate review period unless demands are reasonably consistent.

 

 

Key differences in approaches to managing inventory

  1. a) Dependent versus independent demand:

This approach is important in selecting an appropriate management approach. Demand for a given item is termed independent when such demand is unrelated to demand for other items e.g. a wholesaler holds stocks of products for distribution to retailers. The motive for holding stock is to be able to satisfy customer‘s demand for products. The demand arises from outside the organization and the wholesaler has no control over it. Hence, products are being stocked to meet demand arising in a way not connected to any activity. Dependent demand on the other hand is demand that is directly related or derived from some predicted activity such as production or planned maintenance. When demand is dependent, stock items can no longer be considered singly. If for example components are stocked in order to assemble finished products then there is an obvious need to consider the situation. Each component will need to be available in those quantities and at those times, which will meet the requirements set the demand for the final product.

  1. b) Pull versus push:

Pull or reactive system approach relies on the customer demand i.e. to ‗pull‘ a product through a logistics system. In contrast, the ‗push‘ or proactive approach uses inventory replenishment to anticipate future demand. A fast food restaurant basically operates on a pull system, while catering services basically operates on a push system. A fast food café cooks hamburgers generally in response to current demand. In effect individual purchases ‗triggers‘ more food items production. In contrast, the catering service tries to have a picture perfect idea of what customers will need and when and pushes food items to where customers need them at the right time in the right quantity.

A principal pull system attribute is that it can respond quickly to sudden or abrupt changes in demand. Alternatively, a push meets system wide inventory needs in accordance with some master plan in an orderly and disciplined way. In general, the pull system applies more to independent demand and the push system to dependent demand.

 

 

Principal approaches and techniques for inventory management.

Although there are many systems for control of stock, both manual and automatic, there are really only two basic approaches on which these systems are based: Re ordering will take place when either stocks fall to a predetermined level, or according to the situation discovered when levels are reviewed on a periodic regular basis. Sometimes these approaches will be used in combination e.g., it might be the case that the re-order level approach is employed with the backup of regular review of physical stock levels. The two approaches are commonly called:

 

Ø Re – order level system (Fixed order quantity system)

Ø Re- order cycle system (Periodic review system)

The Re-order level system:

The basic method of controlling stock quantity is means of fixing for each commodity, stock level, which are recorded in the stock control system and subsequently used as a means of indicating when some action is necessary. There are various kinds of stock levels but the fundamental controls are minimum, ordering, hastening and maximum levels. It does not follow that all these are necessary or even desirable for every item, and they should be employed with discretion because the fixing of too many levels makes the work of provisioning unduly complicated.

 

  • The minimum stock level: Is the amount expressed in units of issue below, which the stock of any commodity should not allow to fall. When the level is reached, it triggers off urgent action to bring forward delivery of the next order and it is sometimes called the ‗danger level‘. In fixing a minimum level, the main factor to be taken into account is the effect, which a run out of stock would have upon the flow of work or operations.
  • Re-order level: Is the amount expressed in units of issue at which ordering action is indicated in time for the material to be delivered before stocks fall below the minimum. Two main factors are involved in deciding the ordering level:
  1. The estimated time, which will lapse between the raising of a provision demand and the actual availability of goods in store after receipt and inspection i.e. the Lead-time.
  2. The anticipated rate of consumption.
  • Hastening stock level: Is the amount expressed in units of issue at which it is estimated that hastening action is necessary to request suppliers to make early delivery. It is fixed between the minimum and ordering levels.
  • Maximum stock levels: Is the amount expressed in units of issue above which the stock should not be allowed to rise. The purpose of this level is to curb excess investment. In fixing a maximum level, the main consideration is usually financial and the figure is arranged so that the level of stock will not become excessive at any time. Other factors affecting this level are the possibility of items becoming obsolete as a result of operational changes, shortage of storage space and the danger of deterioration in perishable commodities. When the level is reached, it is a signal to defer or cancel outstanding deliveries if any.

The periodic review system.

It will be appreciated that under the re-order level system of provisioning, commodities are ordered at unspecified intervals from day to day as and when ordering levels are reached. This means that orders can only be placed usually for one item at a time and this may not produce the best purchase price. Very often, it is possible to obtain discount or more favorable prices for large quantity purchases and the normal re-order level system of control does not lend itself to this practice. Where a range of similar commodities can be ordered at one time, the value of individual orders will be much greater and the possibility of lower prices more likely. For example this would be the case if an order were placed for a large range of spare parts covering three months requirements instead of placing single orders for individual spare parts day to day. To take advantage of this situation, periodic review or cyclical provisioning may be introduced. In general terms this involves examining either the physical stocks recorded for a particular class of commodity at regular intervals and taking simultaneous action for all items requiring replenishment. This may be one at intervals of one month, three months, six months or a year or whatever other interval is found satisfactory in practice. Where this method is employed, if there are unexpected variations in consumption or if deliveries are seriously delayed, there may be danger of a stock out. On the other hand if consumption unexpectedly declines or if deliveries are too far advanced, the amount of stock can become excessive. For these reasons, periodic review system is usually supplemented using maximum and minimum stock levels as an additional safeguard.

The two bin system

This is a straightforward approach that depends on the use of two separate storage containers, one in current use and the other in reserve. When the current container is exhausted the second container which is usually sealed in some way, is brought into use. The act of starting on the on the contents of the second container triggers the re-ordering process and when stocks arrive they are placed in the vacant first container, which is the sealed, the contents becoming the new reserve. This is a visual approach to controlling inventories.

 

ABC analysis/ Pareto analysis / 80:20 Rule.

This system assigns items to three groups according to appropriate criteria. The most important is group A i.e. small in number, high in usage value- also known as vital few from a functional point of view. Category B items are medium in number, medium usage value – also known as ‗normal items‘. While category C items are high in number and low in usage value – also known as ‗trivial many‘

 

Conducting an ABC analysis

  • The first step is to select some criterion eg sales value or usage volume for developing a ranking.
  • Calculate the usage value of each item in the inventory
  • Rank the items in descending order of usage value or sales volume.
  • Build up a series of sub-totals entering the biggest usage value at the top of a list then adding in each successively smaller usage value generating a new subtotal time.
  • Using the total or combined usage value as the extent of the vertical axis and the number of items in the inventory as the horizontal axis, plot the pareto curve.

Insert the A-B and B-C break points at suitable places.

 

Economic Order Quantity (E.O.Q)

Traditionally, the E.O.Q based approach has been a cornerstone of effective inventory management. While not always the fastest way to respond to customer demand E.O.Q has been a useful and widely used technique. E.O.Q model can be developed using standard mathematical form using the following variables:

 

 

 

Where; D= Annual demand

C0= ordering cost

H= carrying cost

 

Firms using the approach need to develop a minimum stock level to determine when to reorder the fixed quantity. The principal assumptions of E.O.Q include:

  • There is a continuous constant and known demand rate.
  • A constant and known replenishment or lead-time.
  • The satisfaction of all demand.
  • Constant price or cost that is independent of the order quantity or time e.g. purchase price or transport cost.
  • No limit on capital availability.

 

 

STOCK  TAKING.

 

The terms “Stock-taking” and “Stock checking” are often regarded as meaning the same thing.

 

Practically stock checking refers to checking on physical quantities and conditions of all the stocks held which may be applied either regularly or intermittently.

 

The security and accountability for all the materials and equipment held within the stores or warehousing system is the direct responsibility of the officer in-charge of stores and his/her staff.

 

Stock represents the organisation’s money and must be controlled and accounted for as such. Stocks must be carefully protected, counted and checked routinely. This responsibility for stock demands that the stores staff perform regular and complete physical checks of all the items held in stock and varieties that count in terms of the calculated stock figures contained within the stock record system.

 

In essence, recorded balances are compared with the physical balances of stock available in the storehouse.

 

For the purpose of determining the physical balance and comparing the same with recorded balance  of each stock item, it is important to carry out activities such as counting, measuring, weighing, estimating, sorting out etc.

 

 

Benefits of Stock Taking.

  • Avails information that may be used in decision making.
  • Safeguards against pilferage or theft of materials from the stores.
  • Helps in appraising the warehousing or storekeeping efficiency.
  • Helps in obtaining value of stock balance for the purpose of preparing organisation’s final accounts.
  • Helps in determining the conditions of stocks held eg. damaged, obsolete, surplus, etc.
  • Determines stock turnover for each stock item held.

 

Methods Used in Stock Taking.

There are several methods of carrying out stock taking and these are:

 

 

  • Periodic Stock-taking Method:

This is where a complete stock taking is performed at regular and consistent time interval, usually at the end of each financial year or in some cases at quarterly or monthly intervals.

 

It is the commonest method of  checking and counting stock items. The entire range of stock is checked thoroughly.

 

During the exercise, the warehouse or storehouse is closed for routine business eg. receiving, issuing etc.

 

All the records are updated before the exercise begins. In bigger organizations, external personnel from other branches or units or departments are fully engaged in the exercise.

 

Periodic stock taking method has advantages of:

  • The stock auditors have adequate time to count carefully and check discrepancies as the exercise is carried out on non-working days with stores closed for routine business.
  • Since every stock item is covered, the results are highly reliable.
  • All records are updated before the exercise begins hence easier to compare and contrast between physical and recorded stock balances.
  • A complete and comprehensive stock taking enables discrepancies to be brought to light for further effective investigations.

 

This method on the other hand has the disadvantages of:

  • It is very costly and involves a great number of staff from both inside and outside as well as overtime and other allowances especially for the staff coming from outside.
  • Closure of storehouse to facilitate the stock taking exercise may inconvenience the stores customers and other business activities.
  • Since it is done after a long period of time, malpractices of some kind may go on undetected for long.
  • Closure of storehouse for stock taking exercise may mean loss of large sums of money due to disrupted sales.

 

This method of stock taking may be appropriate to adopt if the following circumstances prevail:

  • When stock turn over is relatively steady over a period of time.
  • Lack of adequate staff to carry out continous stock taking.
  • When the level of handling alternative materials is low or not existing.
  • When the value of materials handled is of less consequences.
  • When interfacing among the user departments is not existing.
  • When it is the policy of the organization to apply this method of stock-taking.
    • Continous Stock Taking Method.

In this method, stock is checked on a continous basis eg. daily, weekly, fortnightly and monthly such that the end of the trading period every item held in stock will have been checked at least once.

 

It is normally done as part of routine work the regular stores operative staff themselves.

 

As the exercise goes on, normal storehouse operations continue as usual and undisrupted.

 

Continous stock taking has advantages of:

  • Enables routine store operations to continue without disruptions.
  • Spreads the disruption caused stock taking over a long period and therefore the disruption is minimized.
  • Since it is done on a continous basis, errors and malpractices can be effectively detected early for corrective action taking.
  • May scare the would be culprits as stock taking schedules are not known in advance.

 

On the other hand, this method has demerits of:

  • It is not effective enough as it lacks great deal of time to investigate thoroughly, sufficiently and exhaustively.
  • The fact that other storehouse operations continue without stores closure means that physical balances may differ since records may not be updated immediately.
  • It is conducted storehouse staff themselves thus doubtful results.

 

 

STOCK-TAKING PROCEDURE:

To ensure that stock-taking is an accurate and meaningful exercise, stores management must organize and control all stock-taking activities.

 

Stock-taking demands a very high degree of care and attention to detail if the physical count is to be effective and productive.

 

Stock Auditors therefore need a stock-taking procedure to achieve the set objectives of the organization. This may be outlined as follows:

  • Stock-taking team should be selected and Team Leader appointed. The team should be emwith full authority to discharge its duties independently and clear lines of responsibility for those involved be spelt out.
  • A comprehensive stock-taking meeting should be held several days before the actual stock taking is due to commence. This helps in making clear any issues pertaining the exercise.
  • Stock areas should be allocated to individual members of the stock-taking team.
  • Adequate materials and equipment must be made available before the stock-taking begins.
  • The actual stocks for auditing and recording must be clearly classified and explained eg. quarantine, normal, damaged, in transit etc.
  • A pre-stocktaking clear up of stock-rooms, marshaling areas etc should be done to make the actual stock-taking more accurate and efficient.
  • There should be a complete closure of all store installations and the stopping of all stores activities until the stock-taking exercise has been completed.
  • All the stocks and equipment which do not belong to he organization must be counted and recorded separately from the other stock classifications.
  • All stocks in transit or held in depots or elsewhere must be accounted for at the time of stock-taking.
  • All previously active stores documents such as Issue Notes, Delivery Notes, Quality Notes, Goods Received Note etc should all have been documented and filed before the actual stock-taking begins to ensure accurate results.
  • Each and every stock item held in the storehouse should be physically counted and balance compared to recorded balance in the records available.
  • All the findings from the stock-taking exercise should be recorded down accurately and kept securely.

 

STOCK-TAKING DOCUMENTATION.

A  complete and comprehensive stock-taking involves large numbers of stock lines and several locations  will demand a variety of stock-taking control documentation and these include the following:

  1. Stock Counting Sheets. These are the sheets produced specifically for stock-taking purposes. They are designed to be used each individual stock Auditor for each type of stock item to be counted and therefore every stock item will have its own stock counting sheet.

 

The sheets must be consecutively numbered so as to avoid a possibility of the same item being counted twice or more.

 

A standard stock counting sheet will contain the following minimum information:

  • Quantity of stock physically counted.
  • Description or code number of the item counted.
  • Unit of issue eg. tons, kg, g, m, cm, litres etc.
  • Date of stock-take.
  • Exact location of the counted stock item in the storehouse.
  • Name and signature of stock-taker or Auditor.
  • General comments on conditions of each stock item counted.
  • Any other relevant information.

 

  1. Master Stock Sheet/Roll. This document is provided collating all the individual stock counting sheets from each of the various stock items counted.

 

Each contribution from stock counting sheets is added and a total stock quantity for each stock item held is produced.

 

The production of the master stock sheet will be responsibility of the  Lead Stock-taker, who must ensure that all the relevant stock taking sheets are contained within the master stock sheet.

 

The master stock sheet/roll plays roles such as:

  • Controlling investment into all types of materials handled in the organization.
  • Close monitoring of the movements of all the materials handled in the organization.
  • Providing basis for allocating responsibilities to the stores operative staff.
  • Providing the data required to support the preparation of the final accounts at the end of the trading period.
  • Helping in indicating the entire range of stock accounts held in the organization.

 

  1. Stock Certificate. This is a formal document which indicates the value of total stock as at the date of the stock taking.

 

It is usually checked and signed a member of the organisation’s senior

Management staff, in most cases a member of the finance/accounts

Department.

 

  1. Outside Storage Installation Stock Reports. These are in fact a smaller version of the master stock sheet, produced the individual storehouse or warehouse or depot and outside Storage Unit Managers and sub-lead stock takers.

They are also included in the total stock calculations.

 

  1. Internal Transfer Notes. Theses are needed to account for the stocks which are in transit at the date of the stock-taking.

 

  1. Stock Reconciliation Form. This document is used to write off or on the

Stock taking discrepancies so as to reconcile the balances.

 

TRANSPORTATION

Transport is the process of moving goods or people from one place to another. Through transport, goods and services are availed to consumers at places convenient to them. It helps in bridging the geographical gap between the producers and consumers. From this point it can be said that transport facilitates trade. Thus transport is an aid to trade because it creates place utility.

 

MODES OF TRANSPORT

Modes refer to the manner in which transport is carried out. There are three modes of transport, namely;

  1. Land transport
  2. Water transport
  3. Air transport

 

  1. LAND TRANSPORT

This mode of transport involves movement of goods and people using units of carriage that move on dry land. The various means under this mode include the following:

  1. Human Porterage

This involves human beings carrying goods on shoulders, heads, or backs. Human porterage as means of transport is the oldest kind of transport and very common in our society. The means are suitable for transport where other means of transport are not available or convenient.

 

Advantages of human porterage

  1. Could be the only means of transport available
  2. Compliments other means of transport
  • Flexible as it has no fixed timetables or routes
  1. May be a cheap means compared to other means of transport
  2. Readily available when required
  3. Convenient over short distances

 

Disadvantages of human porterage

  1. Not suitable for long distances
  2. They add onto congestion on roads
  • Not suitable for transporting heavy and bulky goods
  1. It is relatively slow
  2. Relies on human energy which is exhaustible

 

  1. Carts

Carts are open vessels usually on two or four wheels that are pushed or pulled ether human beings or animals such as donkeys. The carts are pushed or pulled human beings are referred to as hand carts or Mikokoteni. The one pulled animals, on the other hand, are called animal driven carts. Carts are used to carry relatively large quantities compared to human porterage. Like human porterage, they are not suitable for long distances. Types of goods that are transported using this means include, agricultural produce, water and animal feeds.

 

Advantages of Carts

  1. Compliments other means of transport
  2. Relatively cheaper
  • Initial buying and maintenance cost is low
  1. Appropriate in remote areas where other means are not available
  2. Readily available for hire
  3. Can carry fairly heavier and bulky goods
  • Convenient for transporting goods over short distances

Disadvantages of Carts

  1. May not be suitable for transporting heavy and bulky goods
  2. Cause traffic jams on roads leading to congestion and accidents
  • Not suitable for transporting goods over long distances

 

  1. Vehicles

These are means of transport that ferry goods and people on roads. Vehicles are the most commonly used means of transport. Vehicles are either passenger or goods carrier. Passenger carriers may be buses, matatus, taxis and private cars while goods are transported using Lorries, tankers trailers and pick-ups. Vehicles are expensive to acquire and maintain. The convenience of vehicles may depend on the nature of road on which they travel. Some roads are impassable especially when it rains while others are usable throughout the year (All weather roads)

 

Advantages of matatus

  1. Supplement regular bus companies especially in remote and rural areas where they are the only means
  2. They fill up faster than buses hence save time
  • They are more flexible since they can change routes easily depending on demand
  1. They reach out into the interior of rural areas where the big buses cannot access
  2. They easier to hire as most them are readily available
  3. They are cheaper to acquire as compared to buses

Disadvantages of Matatus

  1. Some matatus are poorly maintained to the extent of being unroadworthy
  2. Most drivers are reckless as they rush to compete for customers. They pick or drop passengers anywhere
  • In some cases, touts use impolite language when dealing with passengers
  1. They may cause noise pollution such as unnecessary hooting and loud music
  2. They may cause congestion in town unnecessarily because of careless driving and parking
  3. Uncalled sudden increase in fares at peak hours, during night and on public holidays
  • Their operations is concentrated on peak hours, rarely operating at night
  • They at times unexpectedly change their route hence causing breach of contract

Advantages of vehicles

  1. Most readily available means of transport
  2. Relatively fast compared to carts and human porterage
  • Relatively cheaper over short distances
  1. Flexible as it can offer door to door service
  2. Vehicles may be available for transporting special goods
  3. Roads are widely spread theremaking many areas accessible

Disadvantages of vehicles

  1. Acquisition and maintenance costs are high
  2. May not be suitable for transporting heavy and bulky goods over long distances as compared to railways
  • Traffic jam in roads may cause delays
  1. Some roads may be impassable especially during the rainy season
  2. Trains

Trains are vessels that transport goods and people on rails hence railways. The terminuses of trains are the railway station. Therefore, the goods to be transported trains have to be taken to the railway station. Railway transport is suitable for heavy and bulky goods as well as passengers. There are two types of trains: cargo and passenger train.

 

Advantages of trains

  1. Relatively secure as cases of theft and accidents are rare
  2. Enables a transporter to plan for the transport  for his/her goods trains follow a fixed timetable
  • Economical for transporting heavy and bulky goods over a long distance
  1. Trains may have facilities for carrying special types of goods e.g. gas, petrol etc
  2. Where shunting facilities are available trains may deliver goods up to or from owner’s premises

Disadvantages of Trains

  1. Not flexible as trains follow a strict timetable
  2. Railway lines are expensive to construct and maintain
  • Not all area are served railway lines
  1. Not suitable for transporting urgently required or perishable goods as it is slow
  2. Unsuitable for transporting goods over short distances
  3. Trains are expensive to acquire and maintain

 

  1. Pipeline Transport

Pipeline is the movement of gases and liquids from one place to another through a pipe. Products transported through pipes include water, gases, petrol and diesel

Solids that cannot be dissolved or damaged water may also be transported through pipes as suspension. Examples coffee berries from machines to drying places.  The pipeline is both a vessel and a way. Products flow forces of gravity or pressure from an original station. If the original terminal is at a higher level than the receiving terminal, the force of gravity is adequate to move the product. But if the receiving terminal is at higher level than originating terminal, then power is required to pump the product uphill.

Advantages of pipeline transport

  1. Labour saving as it requires minimal man power
  2. Environmentally friendly since it is free of noise or smoke
  • May be constructed in areas where it is difficult to construct roads or railway lines
  1. Allows continuous flow of goods being transported
  2. Ensures that road damage is reduced as the number of tankers is reduced on roads
  3. Helps reduce accident that may be caused tankers on roads
  • It reduces delays arising from congestion on roads
  • Maintenance costs are reduced as it relies on gravitation force and booster stations
  1. Pipeline transport may not be affected adverse weather

Disadvantages of pipeline transport

  1. A leakage not detected in good time may lead to high losses
  2. Initial construction cost is high
  • Accidental leakages may lead to environmental pollution
  1. It is unidirectional i.e. travels only in one direction
  2. It can transport only one product at a time
  3. Not flexible since once a line is laid, it cannot be adjusted according to transport patterns demand
  • Generates comparatively fewer jobs opportunities as it is capital intensive
  • It is vulnerable to sabotage enemies
  1. WATER TRANSPORT

Water is a mode of transport where the units of carriage transport goods and people on water. Water in this case includes; navigable rivers, lakes, seas and oceans. The means of transport which are the units of carriage or vessel using this mode include; ship, dhows, boats, steamers and ferries. Water transport can be divided into inland waterways and sea transport

  1. Inland waterways

This is transport carried out on lakes, rivers, and inland canals. Most rivers in Kenya are not navigable due reasons such as:

  1. Too small
  2. Presence of rapid and waterfalls
  • Too shallow
  1. Most ate seasonal
  2. High gradient
  3. Sea transport

This is where goods and people are transported in seas and oceans. All types of water vessels may be used in sea transport. Sea transport connects continents of the world therefacilitating international trade

Types of vessels

  1. Ships- This is a large vessel that transports people or goods through water. Their sizes vary depending on quantity of goods and passengers they carry. They load and offload in terminals referred to as harbours found at the sea port. Ships that transport people are referred to as passenger ships while those that transport goods are referred to as cargo ships. Ships may also be classified as either liners or

Liners are ships owned and operated shipping companies called conferences. Each conference is responsible for specifying the route on which each liner would operate the rates to be charged and setting rules and regulations to be followed members.

Characteristics of liners

  1. Have fixed routes
  2. Follow a fixed timetable
  • Charges are fixed
  1. Call at specified ports along the route specified intervals
  2. Travel at regular intervals

Tramps are ships that do not follow a regular route or timetable. Their routes depend on demand. During times when demand is high, they charge higher rates and when demand is low, they lower the rates. Tramps can therefore be likened to matatus.  Tramps can be owned either individuals or firms.

Characteristics of tramps

  1. Do not have a fixed rate
  2. Have no set timetables
  • Theirs fares according to demand
  1. Their travelling patterns are irregular and therefore cannot be relied upon

From the foregoing, it can be noted that liners and tramps owners are in constant competition for business. Therefore traders therefore need to choose the type of ships to hire. Liners are however popular than tramps because of their reliability.

When a trader hires an entire ship to transport goods to a given destination he/she and the ship owner signs a document called a charter party. This document shows the terms and conditions under which the goods would be transported. Other information included in the agreement are; destination, nature of goods and freight charges. When the ship is hired to carry goods for a given journey the document signed is referred to as voyage charter. On the other hand, if the ship is hired to transport goods for a given period of time, the document signed is called time charter.

  1. Boats and Ferries

These are water vessels used in transporting goods and people over short distances. They are therefore found in both inland water transport and also the sea transport.

Advantages of water transport

  1. Economical to the owner as the number of employees to carriage volume ratio is less compared to road transport
  2. Suited for transporting heavy and bulky goods
  • It is cheap as the way is natural and free
  1. Connects countries of the world which border the sea
  2. Special types of ships are available for transporting goods
  3. Large volume can be carried therereducing cost per unit
  • Reliable due to adherence to strict schedule

Disadvantages of water transport

  1. Slowest means of transport
  2. Sea-sickness, sea-pirates and storms may occur
  • Not suitable for transporting perishable and urgently required goods
  1. Expensive to construct and maintain artificial harbours
  2. Unfavourable weather conditions may affect water transport
  3. Sea transport is not accessible to land locked countries
  • Lack of loading and off loading facilities may lead to delay
  • Cost of acquiring and maintaining ships is high
  1. AIR TRANSPORT

Comprises air bound means of transportation e.g.  aeroplanes, helicopters etc. Aeroplanes travel through air and land onto airports or air strips. Air is the way while airports and airstrips are the terminuses. Aeroplanes are fast compared to other means of transport. Aircrafts may be classified as either passenger planes or cargo planes. Aerolplanes are expensive to ac quire and to maintain.

Advantages of air transport

  1. Less handling of goods on the way since aeroplnes may move direct to the final destination
  2. The does not require construction or maintenance as it is natural and free
  • Planes can move through places where other means cannot ,such as over the earth poles and across mountains
  1. Have efficient interconnections between airlines all over the world which makes it convenient
  2. Suitable for long distances travelers
  3. Suitable for transporting perishable and urgently required goods
  • Reliable due to strict time schedules
  • Has wider reach in global presence
  1. Guarantee of safety and security of cargo is generally high

Disadvantages of air transport

  1. Causes noise pollution
  2. Air fields are not available in all places
  • Cannot be conveniently used to carry heavy and bulky goods
  1. Expensive to acquire and maintain aircrafts
  2. Requires highly trained manpower
  3. Unfavourable weather conditions may cause delay
  • It is an expensive means of transport in terms of freight charges
  • Not suitable for transporting inflammable goods
  1. It is expensive to construct and maintain airfields
  2. In case of accidents, results are catastrophic

 

CONTAINERIZATION

This involves transporting goods in standard  “ box like”. The containers are made of either wood or metal. They can either be hired or bought. Containers are designed in way appropriate to transport goods ship, train, lorries and air. To safeguard the goods against risks such as theft and unfavourable weather conditions the containers are sealed immediately after goods have been packed. The sealed containers are then transported to the final destinations where they are off loaded. The consignee can then break the seal.

Goods can be transported as Full Container Load (F.C.L.) or as Less Than Contain Load (L.C.L.). Full container loads applies where the container is filled with goods belonging to one person. On the hand, less than container load applies where single consignor does not have enough goods to fill a container. When such a container reaches the destination, it is opened and various consignees take their goods.

Inland container deports are referred to as dry ports. Dry ports are established to relieve congestion at the sea port. It also aims at making handling of cargo easier and efficient for inland importers and exporters.

When the containers are off loaded from ships, they are loaded into special container trains called railtainer which transports them railway to the inland container depot. Containers can also be transported specially designed trucks between the ports or from the port to customer’s destination.

Advantages of containerization

  1. Minimizes the risks of loss or damage of goods as containers are sealed  at source
  2. Containers are fitted with devices which make movement and handling easy
  • Saves time and labour in loading and off loading due to use of machines
  1. Containers are sealed at source in the presence of customs officials may not be opened until they reach their final destination. This reduces delay
  2. Special containers are available for goods requiring special attention
  3. Insurance costs are relatively low as risks are less
  • Space is saved when containers are used as opposed to when individual items are packed in the carrier
  • Simplifies the process of customs clearance and documentation
  1. Ensures irregular goods are smoothed into regular shapes for transportation and storage

Disadvantages of containerization

  1. Containers are expensive and this increase the cost of transporting goods
  2. Contributes to unemployment since it is capital intensive
  • Not suitable for transporting small quantities
  1. Requires special handling equipment which may be expensive
  2. May not be suitable for goods with irregular shapes
  3. Requires a big space for packaging and offloading

FACTORS THAT INFLUENCE CHOICE OF APPROPRIATE MEANS OF TRANSPORT

There are a number of means transport that one may choose from. A choice of means of transport depends largely on its efficiency and convenience. It should be noted that no single means of transport will have all the qualities desired; therefore one should select the most appropriate means.  The following are some of the factors to consider in choosing a means of transport:

  1. Cost

The costs of transport vary from one means to another. If the cost is the only factor to be considered, the cheapest means should be chosen.

  1. Nature of goods

The nature of goods should be considered when choosing a means of transport. For example, perishable goods require a fast means. Similarly, heavy and bulky goods require a means of transport of convenient for such goods e.g. trains.

 

  1. Reliability

Reliability refers to assurance that goods will reach the intended destination at the right time and in the right form. The means chosen should ensure reliability.

  1. Urgency

For goods that are urgently required, the fastest means available should be chosen.

  1. Security

The means chosen that goods on transit are secure against loss, theft or physical damage

  1. Distance

Some means of transport are suitable for long distances while others are suitable for short distance. If goods are to be transported for long distances, air or railway transport would be appropriate, otherwise roads would be suitable for short distances.

  1. Availability of means

The means of transport to be selected should be based on its availability. For example where there is only one means of transport, it would be the only one to be chosen

  1. Flexibility

Flexibility is the ability of means of transport to be manipulated to suit the convenience of the transporter

  1. Terminals

Some means of transport may have their terminal near the transporter than others. In this case, the transporter should choose the means whose terminals are conveniently accessible.

 

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