Table of Contents
- Advantages of the Combined Materials (Stores) and Purchase Department
- 1. Procurement at the right time
- 2. Lead time and stock levels
- 3. Cost reduction and productivity
- 4. Price and Quantity
- 5. Inventory reduction
- 6. Unutilised Materials
- 7. Classification and Codification
- 8. Knowledge of Materials
- 9. Handling Receipts
- 10. Ensuring Receipt of Materials
- 11. Quicker issue after Arrival
- 12. Return of Rejections
- 13. Bulk purchase and Storage space
- 14. Common Records
- 15. Reduction of Correspondence
- 16. Queries from Accounts
Advantages of the Combined Materials (Stores) and Purchase Department
The following are some of the advantages of combining materials and purchase departments in an organization.
1. Procurement at the right time
The principal objective of Materials Management is to obtain raw materials, tools, general supplies, etc., at the appropriate time. This involves
- recoupment on time by Stock control;
- processing the purchase order and the follow-up by Purchase section;
- sending shortage reports by stock control as well as stores at different stages;
- clearing the goods from docks, railways or road transport offices in case of purchases from distant sources; and
- verifying and taking materials into stock by stores, etc.
The combined set up in an organisation brings about greater co-ordination and increased sense of responsibility with regard to procuring materials at the right time. Separate functioning of these two sections may result in divided responsibility. In practice, the store keeper and the purchase officer may often indulge in mutual criticism for any delay in procurement and other short-comings, etc.
2. Lead time and stock levels
Variations may occur in delivery time, its effect on stocks and production, the necessity of adjusting the minimum and maximum levels on stock control cards, etc., will be better appreciated and more effectively tackled by a common department head than by a separate purchase officer.
3. Cost reduction and productivity
Another objective of materials management is to increase productivity of materials. The ratio between Input and Output is Productivity. In materials management, it implies reduction of costs and increase in profit. The scope for its achievement other than in competitive bidding and negotiations lies in value analysis, standardization, simplification, reduction of procurement cost by placing bulk orders, reduction of investment and carrying cost by low rate of delivery, avoiding obsolescence, control over consumption of materials, etc.
Apart from the difficulties of coordinating all these, some factors like procurement cost and carrying cost pull in opposite directions and vitiate the issue. Therefore, a decision which will satisfy all the conflicting interests can be taken better by a common department head.
4. Price and Quantity
To a great extent, the price depends upon the quantity. If a decision regarding the quantity to be bought rests with a separate department, the work of the purchase officer is handicapped. In a combined department, the department head is in a position to negotiate the price effectively on the basis of the present and future requirements.
5. Inventory reduction
One of the objectives of materials management is to keep inventory at a low level. This can be achieved mainly by staggering deliveries and reduction, if not elimination of minimum stock (safety stock). For this purpose, there should be close co-ordination between Stock Control and Purchase.
Delay in recoupment will create stock-outs. In a combined stock Control and Purchase, the head of the department is in a position to ensure that recoupment indents and shortage reports are prepared on time.
6. Unutilised Materials
Unutilised Materials purchased against special indents will often come to the notice of a common department head during his visits to the stores which facilitates action with the original indentors. Where stores and Purchase sections are divided, such co-ordination is difficult. Also it is far easier for a common department head to sort out surplus materials and arrange for their disposal.
7. Classification and Codification
The classification and codification work requires a thorough knowledge of the materials and their application or use. Often this calls for actual examination of the materials in the stores and scrutiny of the requisition letters received in the Purchase Section from the indentors of materials. If Stock Control, Stores and Purchase departments are separate, there will be inconvenience regarding classification work.
8. Knowledge of Materials
In a combined stores and purchase department, the head of the department pays regular visits to stores and gets more opportunities to see the actual use of materials in the factory. Thus, he gains more knowledge about them and their applications which assist him considerably in his interaction with various departments as well as suppliers. It also enables him to make suggestions regarding standardisation, quality of materials to be bought, alternatives that can be used, etc., unlike the Purchase Officer whose knowledge is derived only through paper work.
9. Handling Receipts
Handling receipt of materials, especially heavy loads, is smoothened when Stores and Purchase Sections are combined, when separated, the stores often gets advice regarding unloading at very short notice which will create problems and cause annoyance.
10. Ensuring Receipt of Materials
In the combined set up, the department head gets an opportunity to verify what is being supplied against his order and to ensure that he receives the correct material for which payment was made.
11. Quicker issue after Arrival
In a combined set up, a single executive is the head of both the stores and purchase. This enables him to realise the relative urgency or importance of various purchases. During his daily rounds of the Receiving section and the Stores or from daily reports, he gets first hand information regarding arrival of materials and therefore he effects quicker issue of the materials required urgently to the concerned.
12. Return of Rejections
The combined set up realises the necessity of quicker return and replacement of rejected materials and takes action accordingly.
13. Bulk purchase and Storage space
In determining the minimum stock and reorder quantities, the storage space is a factor to be taken into account. Although bulk purchases may be an advantage for a better price, they may create storage problems. If stores and purchase are separate, very often such a factor is likely to be overlooked.
14. Common Records
In a combined set up, the stock control will be adjacent to the purchase section. This enables the purchase section to utilise the information available on the stock control cards for the purchase work. In a separate set up, the stock control invariably goes with the stores. This means maintaining of separate records (Purchase Record Cards) by the purchase section and incurring more expenditure.
15. Reduction of Correspondence
Correspondence between Stores, Purchase and Stock Control is reduced in a combined set up.
16. Queries from Accounts
The work of account section is made easier in the combined set up. When separate, very often, the accounts section has to run between the stores, purchase, etc., for clarification.