Inventory Management and Control in Business

Definition of

Inventory

1.

Inventories means 

the stock of the 

product 

of 

a

company and components thereof that makes 

up the

product. It includes the raw materials, work in progress

and 

finished

goods.

2.

It is 

the 

physical stock 

of 

items 

a 

business or

production 

organization 

kept in hand for 

the 

efficient

running of business or 

its

production.

Inventories 

are

:-

1.

Items in

 stock.

2.

Usable but 

idle

resources.

Inventory

control

P

r

o

c

e

ss

o

f

m

aintai

n

i

ng

opti

m

u

m

nee

d

ed

qu

an

t

ity

of

inventories 

for the 

smooth operation 

of

organization.

Classification of

inventories

Inventory

Indirect

i

n

v

e

n

t

o

r

y

In

process

inventory

Raw

material

inventory

Objectives 

of

inventory

control

The basic managerial objectives are 2

 fold:-

1.

Avoid 

over/under investment in

inventories.

2.

To 

provide right 

quantity and quality goods 

at 

right 

time 

at

proper value.

Objecti

v

es

of

inventory

control

Operating

objecti

v

es

Financial

objecti

v

es

Operating

objectives

1.

Availability 

of 

Materials

: All type 

of 

material available

at 

all 

time 

so that production 

may 

not be 

held 

up for

want 

of 

supply 

of

 materials.

2.

Minimizing the wastage 

: permit only uncontrollable

wastage. 

Avoid 

wastage 

by 

leakage theft,

embezzlement, 

spoilage( rust, dust 

,

dirt)

3

.

P

r

o

m

o

t

i

o

n

o

f

m

a

n

u

facturing

e

f

fici

e

nc

y

:

Wh

e

n

ri

g

ht

type 

of raw material is available 

at 

the 

right

time.

4. 

Better service to 

the 

customers

: Maintain proper

production 

flow 

to produce 

sufficient 

finished goods 

to

meet 

the 

demand 

of of the

customers

5. 

Control 

of 

production 

level

: 

To 

increase 

or 

decrease 

the

production 

as 

per 

the 

demand as well 

as 

to maintain proper

buffer 

stock 

to 

meet 

any eventuality in 

difficult

times.

6. 

Optimal level 

of 

inventories

: It is done in view 

as 

per 

the

operational requirements.it 

also 

avoids the 

out of stock

danger.

Financial

objectives

1.

Economy in purchasing: 

management 

makes every

attempt to purchase the raw materials in 

bulk 

quantity

and to take advantage 

of 

favorable market

condition.

2.

Optimum investment and 

efficient 

use 

of 

capital: 

The

finance management should set 

up 

maximum and

minimum levels 

of 

stocks 

to avoid deficiency 

or 

surplus

of 

stock

position.

3. 

Reasonable price

: Management should ensure supply

of 

raw materials 

at 

a reasonable low price without

sacrificing 

the 

quality 

of 

it thereby helping the cost 

of

production 

and 

quality 

of 

finished

goods.

Advantages 

of

inventory

1.

Delivery in 

time: 

as inventory stored 

aids 

smooth production,

the 

manufacturing company 

can 

earn reputation 

as a 

reliable

supply.

-

our finished goods can be raw 

materials 

for

buyers.

-

reputation 

can get 

more

customers

2.

Possibility of discount on bulk

purchase

3.

Efficiently 

handle unforeseen circumstances

: harthal, bandh 

or

other transportation 

difficulties 

do not hinder

production.

4.

No 

idling of 

workers 

and

machineries

.

Disadvantages of

inventory

1.

W

ork

i

ng

c

a

p

i

tal

t

i

ed

up

:

c

ant

u

t

i

li

z

e

t

h

e

a

m

ount

for

o

t

her

purposes 

nor 

it yield any

interest.

2.

More space 

required

: more inventories more 

is

the

space 

needed

and space accounts for

rent.

3.

Increase

i

n

sur

an

c

e

c

h

a

r

ge

s

:

Incr

e

ased

cost

of

handl

i

ng

and

manufacturing.

4.

Increased

o

ver

he

a

d

e

xpenses

:

S

e

curity

p

e

rs

o

nnel

requ

i

red

to

guard

 inventory.

5.

Chances of 

damage

: 

Pilferage, 

replacement, 

etc

more.

6.

Increased chance 

of

obsolesce

.

•

Inventories constitute a significant part 

of the 

working

capital.

•

I

n

ventory

con

t

rol

purchase

and

p

ro

du

c

t

i

o

n

u

n

i

t)

and

val

u

e

u

s

ed

i

n

u

n

i

t/physical

c

o

n

t

r

o

l(

c

o

n

trol

(Accounts

unit)

•

When

a

fi

r

m

f

e

e

l

s

h

o

r

tage

o

f

fi

n

ance

it

s

h

ould

t

ake

more 

care 

in its inventories rather than anything

else.

Ordering 

cost or procurement

cost or purchasing

cost

•

The cost that 

has 

to be spent in 

making 

purchase

order.

•

Includes all the expenditure 

associated 

on placing an

order.

-

postal service

expense

-

expenditure on stationary and

consumables.

-

travelling

expense.

-

ti

m

e

spent

by

purc

h

ase

depar

t

m

ent

for

o

rd

e

r

and

its

equivalence in

terms

of

money.

-

expenses on

supplies.

-

rent for 

premises 

occupied by purchase

department

-

legal fee for lawyers in case such situations

arises.

Inventory 

carrying

cost

Cost 

of 

blocking material 

as 

inventory 

. This

includes:-

1.

Cost 

of 

interest 

for the 

value 

of 

items 

stored 

as 

inventory.

2.

Salaries

o

f

per

s

onnel

m

anaging

v

a

ri

o

us

position

including security

personnel.

3.

Rent 

for the 

space occupied 

by the

inventories.

4.

The potential scope 

of 

loss , pilferage, obsolescence,

etc.

5.

Cost 

involved 

in 

the 

insurance 

of

inventories.

6.

Stationeries 

and consumables used by the 

store

people.

Under 

stocking 

or

shortages.

It is the 

cost 

of not having 

an 

item when it is 

needed, thus

affecting 

the 

sales 

of the

 company.

This 

may 

lead to 2

situations:-

1.

Back

logging

2.

Cancellation 

of orders.

Backlogging

: 

work is 

delayed beyond 

its 

schedule 

and 

eats 

away

the schedule 

time 

of next order thereby delaying the next

order.

Cancellation 

of 

order

: 

When 

buyer is 

not 

in a position to wait

.

Both the above results

in:

1.

Penality cost

: 

Purchase order 

will have 

an in 

built provision 

for

penality 

eg, 20% payment 

reduced 

for 

2 days 

delay,

etc

2.

Emergency 

replenishment: 

In an 

urgent 

situation 

if you 

want

good 

quality we 

may 

have to 

spent extra amount 

eg. 

Emergency

transportation

cost,etc.

3.

loss 

of good

 will

Over stocking

cost

This results when stock is left on hand when the demand

for the 

item has

ended.

The left over 

inventory 

may

be

-

Utilized 

at 

a later

stage.

-

Thrown 

out 

as

scrap.

1.

ABC

analysis

2.

VED

analysis

3.

SDE

analysis

4.

FSN

analysis

5.

HML

analysis

ABC

analysis

•

Process 

of 

classifying items 

using 

values 

as

measure.

•

Process of excursing selective 

control over

inventories.

Objectives 

of the

analysis

1.

Frame 

policy guidelines 

regarding 

control 

of

items.

2.

This policy enables material managers to exercise

selective control when 

he 

is confronted with 

large

number of

items.

3.

Expensive items are branded 

as 

A items(10%) 

the 

in

between 

as 

B(20%) and least 

expensive 

as

 C(70%)

The

method.

1.

All 

the 

item that are used in 

the industry 

are

identified.

2.

Items are listed as per 

the 

value.

3.

The number of 

high 

valued 

items 

, medium valued and

low valued items are

counted.

4.

Their percentage is 

found out.

The

concept

It is practically not feasible to exercise tight control

over 

all items 

in 

a 

large 

or in medium sized

organization. 

Hence 

we 

resort to classify 

the 

items

according to their

importance.

VED

analysis

•

Based 

on 

the critical values 

and 

shortage cost 

of the 

item.

Thus helps focus 

on 

vital

items.

•

Based 

on 

criticality 

the 

item 

can 

be 

classified into 3

categories viz; 

Vital, 

Essential and

Desirable.

•

Vital 

items are critically 

needed 

in a manufacturing unit.

The items with lower criticality included in E and lowest

in D.

•

The status 

of 

each  

item will 

be 

discussed with

justification 

by the 

material manager in consultation with

other 

departments of the manufacturing 

unit.

SDE

analysis

Classification based on lead time/

availability

•

S( 

Scarce) 

those 

item 

which are imported 

or 

which need

a lead 

time 

more than 6

months.

•

D(Difficult): The 

items 

which require 

less 

than 6 months

but 

more than a fort

night.

•

E

(

e

a

si

l

y

availa

b

le

)

:

It

e

m

s

which

are

a

v

ailable

e

a

sily

in

less than a fort

night.

•

Helps 

bring down 

lead time and out of 

stock

cost.

FSN

analysis

Classification based 

on 

frequency 

of 

issue 

or

 use.

•

F

=

Fast

m

o

v

i

n

g

it

em

s

t

h

at

a

r

e

f

r

equen

t

ly

i

s

s

ued

in

a

manufacturing

unit.

•

S = 

Slow 

moving items in a manufacturing

unit.

•

N = Non moving

item

This classification helps 

in 

establishing most suitable

layout 

by 

locating all fast moving items near 

the

dispensing 

window to reduce 

the 

handling

efforts.

HML

analysis

Classification based on 

unit

value.

H = high cost

M= 

medium

cost

L= Low

cost

This type 

of 

analysis helps in exercising control 

at 

the 

use

point 

. 

Proper 

authorization should be there for replacing

a high value

item

Definition 

of

EOQ

It

is

t

h

e

p

a

rt

i

cular

quantity

a

t

wh

i

ch

t

h

e

s

u

m

o

f

c

o

st

of

both 

the ordering 

and 

inventory 

carrying cost is

minimum.

Total

cost

= carrying cost + procurement cost

Consumption

rate

It is 

the 

rate 

at 

which 

the 

raw materials are

consumed.

If 

we 

plot a graph 

between 

time and level 

of 

inventory 

the

slope of the 

graph gives 

the 

consumption

rate

Constant consumption

rate.

If 

the 

raw material is consumed at same rate over 

the 

same

period 

of

time.

Actual / irregular 

consumption

rate

There will 

be 

variation in 

the 

production which leads to

different 

consumption rates 

at different time 

intervals.

Also influenced 

by 

factors like power

failure.

Replenishment.

The process of 

refilling 

the material 

as 

and when it is

consumed so 

that 

the 

inventory level 

is 

maintained within a

range

.

Types:-

1.

Instantaneous

replenishment

2.

Replenishment at constant

rate

3.

Replenishment at irregular

rate.

1.

Instantaneous replenishment

: refilling 

is 

done 

at 

one

time, 

at 

one 

instant 

for the one 

full 

lot

size.

2.

Replenishment 

at 

constant rate

: If 

we 

replenish the

used inventory 

at 

a constant rate . Usually practiced 

in

industries especially 

the 

ones which manufacture its

own raw

material.

3.

Replacement 

at 

irregular interval: 

The inventory is not

refilled 

at 

regular interval 

of

time.

Lead

time

Lead 

time 

is the time gap 

between 

starting 

or 

initiating

the 

process 

of 

ordering 

and 

receiving the ordered

quantity 

in

stores.

This is estimated 

by the 

past experience.

Lead 

time 

includes 

the

following:-

1.

Time 

taken to prepare purchase requisition and placing

the

order.

2.

Time 

taken to 

deliver 

purchase 

order 

to

vendor.

3.

Time 

taken 

for the 

vendor to

manufacture.

4.

T

i

m

e

tak

e

n

f

o

r

transp

o

rt

a

tion

f

r

om

ven

d

o

r

s

pl

a

ce

to

the

stores.

Reorder

point

This is 

the point 

which indicate that it is 

high 

time 

we place

the 

order 

failing which the 

stokes 

may 

get

exhausted.

Reorder 

point 

= 

lead time 

– predicted 

point 

of

exhaustion.

Eg. 

If 

we order once in every 

10 

days and 

the 

lead 

time 

is 3

days then 

ROP 

= 10 – 3 = 7

days.

Lead 

time

analysis.

Lead 

time depends on

:-

1.

T

h

e

u

r

gency

o

r

i

m

p

o

r

tance

o

f

t

h

e

comp

o

nents

in

t

h

e

manufacturing

process.

2.

Reliability 

of the

vendors.

Reserve stock(O-RS)/

Safety 

stock/Buffer

stock

•

To 

guard against disturbances 

of 

production process

either 

due 

to uncertainties in consumption rates 

or 

lead

time some extra 

stock 

is

maintained.

•

It serve the purpose 

of 

minimizing the 

chances 

of 

running

out of

stock.

•

It should 

not be 

very less 

or

excess.

Safety 

stock 

come 

to play when there is

:-

1

.

A

n

e

x

c

e

ss

reje

c

ti

o

n

o

r

wastage

in

process than

normal.

production

2. Rejection 

at 

the time of receipt due

to

-Poor 

production quality 

by

vendor.

- 

Damage 

to raw

material.

Factor of

uncertainty

Uncertainty is 

the 

main 

reason 

for 

having safety 

stock.

It 

may 

be due

to:-

1.

Uncertainty of demand

2.

Uncertainty 

of

delivery.

3.

Uncertainty 

of

quantity.

•

Uncertainty 

of 

demand: 

there will 

be 

a 

difference

between 

the 

expected demand and 

the 

actual 

demand

which is known 

as 

the 

forecast 

error. 

It is mainly

dependent on the 

buyers

side.

•

Uncertainty 

of 

delivery: 

depends 

on 

how long the 

lead

time 

is going to be. If something goes wrong with 

the

suppliers production 

the lead time 

may

prolong.

•

Uncertainty 

of quantity: 

this 

depends on how 

many

scrap or imperfect items the 

ordered 

quantity 

is 

going 

to

contain.

Determination 

of 

safety

stock

The

level

of

safety

stock

to

be

maintained

depends 

on

various factors

like:-

-Cost of item in

question

-Uncertainties in

demand

-Negative fall 

out of stock of 

this

item

-Spoilage 

due 

to 

long 

storage ,

etc

Optimum safety stock = maximum lead 

time 

in 

amount-

normal lead 

time 

in

amount.

Max.

lead

occurred.

ti

m

e

=

t

h

e

wor

s

t

possible

scenario

Foun

d

ou

t

in

co

n

sul

t

a

tion

with

t

h

e

purchase department or past

records.

Normal lead 

time 

= most expected lead 

time 

or the

average lead

time.

e.g.. If 

the 

maximum 

lead 

time 

is 

13 

days and the

average lead 

time 

is 

11.5 

days then 

13-11.5= 

1.5, a

stock 

that last 

for 

1.5 days is 

the 

optimum safety

stock.

Disposal of obsolete and

surplus

material

.

Obsolete material: 

Those materials 

or 

equipments which

are 

not 

damaged 

and 

which have economic work 

but 

are

no 

longer useful 

for the 

company’s 

operation 

due 

to

change in 

production

line.

The 

term 

can 

be 

associated with equipments, materials,

stocks, techniques,

etc.

It is very 

difficult 

to predict when 

the 

technology will

change leading to obsolescence. The company should

have sharp eye on the competition so that it 

can 

have

more

Causes 

for

Obsolescence

1.

Adoption of 

standardization

: 

lead to 

elimination 

of non standard

varieties.

2.

Adoption of 

new

 technology.

3.

Changes in production

design

4.

Cannibalization

: 

when a 

machine breaks 

down, it 

is, sometimes

rectified 

by using 

components 

of an 

identical machine 

which 

is

already not

functional.

5.

Faulty purchases 

: 

it the purchases 

are 

made 

in bulk 

so 

that 

they

can last for a very long

time.

Can be controlled by 

FSN

analysis

Surplus

material

Equipments which have 

no 

immediate use 

but 

had

accumulated 

due 

to faulty planning , forecasting and

purchasing. 

They have usage value in

future.

•

They are merely excess 

of 

what is in

need.

•

Easy to control compared to

obsolete.

•

Both

s

u

rplus

and

o

b

solete

m

aterials

condition.

are

in

good

Common causes 

for 

surplus

and

obsolete

materials

1.

Over

 ordering

2.

Faulty 

planning, 

purchasing and

forecasting.

3.

Reduced 

production.

4.

Drastic reduction in

wastage.

5.

Modification of

processes.

6.

Faults in 

store 

keeping 

and 

record

keeping.

They 

need to be disposed

?

1.

Keeping them is a costly

 affair.

2.

They need space.

3.

More 

security

personnel

4.

Separate 

store for 

maintaining

them.

5.

More chances 

of 

pilferage, damage

etc.

Stages 

of 

disposal

of

obsolete and

surplus.

1.

Finding: 

Periodic study must 

be 

carried 

out of 

all

items stocked 

or 

staying 

as 

inventory.

2.

R

e

cri

m

i

n

a

t

io

n

:

Alternati

v

e

ways

o

f

using

t

h

e

se

items must 

be 

explored within 

the

 industry.

3.

If they cannot be used any where then disposal 

act

is carried

 out.

Priorities 

in the 

process

of

disposal.

1.

Explore 

possibility of sending in

bulk.

2.

Dispose to 

original 

supplier if they show

interest.

3.

P

r

eference

m

ay

b

e

g

i

ven

to

b

u

yers

o

r

ven

d

o

r

s

who

have long term relation with 

the

company.

4.

Then

t

h

ink

o

f

others

who

m

ay

bu

y

a

t

best

poss

i

b

l

e

price.

5.

If it cannot 

be pushed 

off 

at 

best 

possible price, sell 

at

scrap

value.

6.

If

it

is

not

p

o

ssible

d

i

s

p

ose

t

hem

o

f

f

f

ree

o

f

co

s

t

to

someone who 

can 

use

them.

( sometimes when distribute to employers it 

may 

lead to

a

negative

si

d

e

e

f

fe

c

t

–

ethic

a

l

iss

u

e,

p

u

r

p

os

e

f

u

l

Process 

of 

disposal

of

obsolete 

and surplus

material.

•

B

y

nego

t

i

ation

by

which

b

u

y

e

rs

appr

o

a

c

hes

for

the

purchase 

of 

such

materials.

•

Auction.

•

Tenders.

Material

handling

Moving physical objects from 

one 

place 

to another 

as

parts, components, sub –assemblies, 

raw 

materials, 

or

finished goods 

ready 

for

shipment.

Defined 

as 

the function dealing with 

the 

preparation,

placing and positioning 

of 

materials to facilitate their

movement 

or

storage.

The moving of materials from 

raw 

material store to

through production to ultimate consumer with least

expenditure 

of 

time, 

effort 

so as to produce maximum

productive 

efficiency 

and lowest handling cost

Salient 

principles of material

handling

1. 

Principles related to

planning.

-

Planning 

principle: 

All 

handling activities 

must 

be 

properly

planned. 

Eg, 

use 

of 

same container throughout 

a 

handling

process.

-

System

principle:

Plan

a

system

integrating

as

many

handling

activities as 

is 

practical 

and coordinate full scope of

operation.

-

Material flow principle

: 

Plan an 

operation sequence and

equipment arrangement optimizing material 

flow. 

e.g plan

related work areas

together.

-

Simplification principle: 

Reduce 

or 

eliminate 

unnecessary

movements.

-

Gravity 

principle: 

wherever practicable 

utilize 

gravity 

to 

move

material

-Space 

utilization principle

: 

Avoid  

keeping 

too 

much 

of

inventory at 

temporary

store.

-Unit size 

principle: 

Increase 

the 

size 

, weight, 

quantity 

of 

the

load handled at a

time.

-Safety 

principle: 

provide 

safe 

handling method. Highlight

handling hazards or danger zones in a 

manufacturing

unit.

-Equipment selection principle: 

consider all the aspects 

of of the

material 

to be handled and the 

method 

to be 

utilized 

in 

terms 

of

the 

lowest 

overall cost. 

Eg. 

Select versatile

equipments.

-Standardization principle. 

Standardize methods, as well as type

and size of handling

equipment.

-Motion 

principle: 

fix 

minimum 

period 

for loading, 

unloading 

and

other

idleness.

-Idle 

time 

principle

: reduce 

the 

unproductive 

time 

of both 

handling

of equipment 

anf

manpower

-Maintenance principle: 

Set up regular 

maintanance

schedule

-Obsolescence principle: 

Identify and replace obsolete

matrrials.

-Fle

x

ibi

l

ity

pr

i

n

cip

l

e

:

p

urc

ha

s

e

eq

u

ip

m

ents

that

c

an

p

e

rform

a

variety of

tasks.

Lig

h

t

wei

g

ht

prin

c

i

p

l

e

:

o

p

t

for

e

quip

m

ent

t

h

at

h

ave

less

dead

weight.

Principles related to

operations.

-

Control principle: 

use martial handling principles 

to

improve production and inventory control. Materials 

may

be 

moved 

as 

per

schedule.

-Capacity principle: 

Production capacity should 

be 

fully

achieved.

-

Performance 

efficiency 

principle

: Determine 

efficiency 

of

handling performance in terms of expense per 

unit

handled.

Kindly 

refer 

material 

handling 

and

modern

material

Store

keeping

Store 

keeping: custody 

of 

all materials stocked in stores

for 

which 

store 

keeper is 

the

trustee.

St

o

res

ma

n

age

m

ent

res

p

o

n

sible

f

o

r

p

r

o

per

recei

p

t

,

custody and issue 

of

materials.

Function of stores

department

1.

To 

receive 

materials 

and check them 

for

identification

2.

To 

correctly 

position all 

materials 

and supplies within

the

stores

3.

Maintain 

stock safely 

in good

condition.

4.

Is

s

u

e

m

a

t

er

i

al

on

l

y

on

r

e

q

u

is

i

tion

b

y

auth

o

r

i

z

ed

person.

5.

Maintain 

up 

to 

date

record

6.

Ma

k

e

s

u

r

e

the

s

t

o

r

e

i

s

clean

a

n

d

i

n

g

oo

d

w

orking

condition.

7.

Optimum 

utilization 

of 

store

space

8.

Initiate 

process 

of 

purchasing 

at 

the 

right

time.

9.

Coo

r

din

a

t

e

and

c

o

o

pe

r

a

t

e

wi

t

h

v

arious

departme

n

t

s

like 

purchase, 

production,

etc.

Location 

of

store

- Minimize total handling costs and other costs related

store

operation.

-Location should 

be 

according 

to 

the 

nature and value

of 

materials to 

be

stored.

-Raw materials are 

stored 

need to 

the 

first

operation.

-In process material close to 

the 

next

operation.

-Finished goods 

near 

the shipping

area

-All departments should have 

easy

assess.

List of available store

space

1.

Platform

2.

Floor

space

3.

Rack

4.

Shelves

5.

Bins

6.

Trays

7.

Drums

8.

Barrels

they 

can 

be stored 

as 

a unit, a 

tier, 

a row 

or 

a

section

Stock

verification

1. 

Annual physical

verification:

-

Verification 

officer 

individually 

or 

in team verifies

stocks 

in 

the 

stores once 

in 

a year checking all

relevant documents 

like 

bin cards, 

stores 

ledger,

etc.

-

After verification a list consisting 

of 

shortages,

damages, 

surplus 

is given to 

the

management.

-

During verification 

the stores 

wont 

be

functioning.

2. 

Perpetual 

inventory

control

-Continuous check through 

out the 

year 

in 

such a way

that 

each 

item is checked 

at 

least 

once 

in a

year.

-‘A method 

of recording 

stores balances after every

receipt and issue to facilitate regular checking 

and 

to

obviate closing down 

for 

stock

taking”

-Priority 

given to A items then B and least to

C.

-Incidentally help continuous 

stock

taking.

Errors 

in

stores

1.

Clerical

mistakes.

2.

Improper 

storage e.g, 

camphor 

–

volatile.

3.

Pilferage 

( steal items that are not that

valuable)

4.

Leakage.

5.

Careless

handling

6.

Handling

loss.

Store

layout

1.

Section 

adjacent 

to 

store 

should be 

kept reserved 

for 

receipt 

of

materials 

and 

for 

its inspection 

before

storage.

2.

Minimize 

handling and transportation of

materials.

3.

Optimum utilization of floor 

space and

height.

4.

Shelves, 

racks 

etc should be 

situated 

in 

clearly 

defined 

leaves

so 

that he 

items 

are 

quickly stored 

and 

located 

for 

physical

counting and

issuing.

5.

Min lines 

should be between 

1.5 to 3 m wide 

depending 

on 

the

type of 

material 

and 

amount 

of 

traffic

involved.

6.

Storage space should 

be 

clearly marked to ensure 

easy

and 

quick

identification.

7.

Storage 

space should 

be 

protected against waste

damages, pilferage,

etc.

8.

Place 

for storing 

material based 

on 

material

characteristics.

9.

Lay 

out 

should 

be 

such hat it 

can 

make use 

of 

modern

material handling equipments like fork lifts, trucks,

conveyors,

etc

10.

Store 

keeper is 

not 

compelled to 

put 

newly arrived

material on the top of the 

old.

11.

20 

to 

25% due 

space in 

each 

portion 

of the store for

further

expansion.

Records

Store

r

e

c

o

r

d

s

.

Store

ledger

BIN

card

Bin

card

•

The

d

o

cu

m

ent

t

h

at

recor

d

s

t

h

e

exa

c

t

qu

anti

t

y

of

material available in the 

store 

at 

a 

give

time.

•

For 

each 

material a separate 

bin 

card 

is

maintained.

•

prepared by 

store

keeper.

•

Record 

of 

quantity only

•

Entry 

made 

immediately after 

each

transaction

•

Kept 

inside

store.

Stores 

ledger/

perpetual

inventory

cards

•

Identical 

to 

bin 

card 

but 

here the money value is 

also

shown.

•

Entries are 

made

periodically.

•

Prepared 

by 

Accounts

department

•

Outside

store.

Advantages 

of

record.

1.

Efficiency 

of

economy.

2.

Settlements 

of 

disputes with credits, debits, insurance

etc.

3.

Check against under 

stocking/ 

over

stocking.