Page 173 - DMGT525_MATERIALS_MANAGEMENT

Materials Management

Notes 27 depots or storage points from where supply is made to the stockists who sell the
company’s products. Its current stock holding is:
18 days All India sales at Central store

37 days All India sales at 7 regional stores
50 days All India sales at its 27 depots
The company was making very good profit on its sales and the marketing manager who
was in charge of the entire distribution system was least concerned about the huge
inventory.
The top management was, however, not very happy with the situation and hired a
professional materials manager to conduct a diagnostic study. The study revealed that out
of the total stock held, a considerable volume, representing about 25 days annual sales
was slow moving and 72 non-moving items valuing more than ` 4.1 crore had not moved
for over two years. 354 items that were slow moving valued at ` 6.1 crore could last for
about 5 years based on the present rate of consumption.
The area salesman attached to the depots indented for the new stocks and not the depot
incharge.
Questions
The area salesman attached to the depots indented for the new stocks and not the depot
incharge. As a professional materials manager, you are asked to:
1. Comment on the shortcomings of the present state of affairs.
2. Comment on the current system of controlling finished goods inventories.
3. Suggest area of improvement in the present system.

Source: Narayan.P, Subramanian.Jaya(2008). “Inventory Management: Principles and Practices”.Excel Books Pvt. Ltd.
12.6 Summary

1. As all the activities in any organization cannot be carried out at one point of time, storage
is an inevitable process.
2. The cost of capital blocked in inventories is substantial. If this part of working capital is
not properly managed the subsequent losses may be enormous.
3. Stores management is concerned with carrying the right kind of materials in right quantity,
neither in excess nor in short supply, providing it quickly as and when required, keeping
it safe against any kind of deterioration, pilferage or theft, and to carry out the efficient
performance of all these functions at lowest possible cost.
4. The key objective of the stores is to provide non-stop service to the manufacturing divisions.
5. Verifying the bin card balances with the physical quantities in the bins and initiating the
purchasing cycle at appropriate time so as to avoid the out of stock situations.
6. The optimal location of stores minimizes the total transportation, handling and other
costs related to stores operation and at the same time provide the needed protection for
stores items.
7. The models of facilities planning can be applied to determine the optimal storage location
in large size organizations.
8. Costs involved in stores can be analysed under two heads, vis., fixed and variable.

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