Reason for ordering of office forms
A right quantity of forms should be ordered at one time because of the following reasons.
1. The flow of forms should be ensured to avoid delay and interruption in the performance of office work.
2. The bulk procurement of office forms at regular intervals leads to economy of operation.
3. The wastage of forms can be avoided due to obsolescence and changes made in the form.
Factors affecting ordering of office forms
There is a need of considering a number of factors, which are affecting the ordering of forms at one time. These factors are briefly explained below.
1. Quantity of forms to be used in a specified period.
2. The lead-time required to receive the form.
3. Amount of capital to be invested on placing an order.
4. Cost of savings expected on placing an order.
5. Cost of storage.
6. Possibilities of changes to be made in the form.
7. Interest on the amount of capital invested on the forms.
The cost benefit analysis is also made while fixing the quantity of forms to be ordered. The savings or benefits of large scale purchasing should be equal or more than the loss of interest on capital invested and storage cost of the office forms. For example if the interest on capital invested and storage, cost is 10 per cent, the savings affected through the large scale purchasing should be more than 10 per cent.
The following formula can be applied to fix the right quantity of forms to be ordered at one time.
EOQ = √(2UB/CS)
Where EOQ is Economic Order Quantity.
U – is usage of forms in a specified period.
B – is Buying cost per order.
C – is cost of forms
S – is storage cost of forms.
An ordering level can be fixed to decide the time of placing an order. This type of order is known as reorder level. The reorder level can be fixed with the help of the following formula.
Reorder Level = (Maximum consumption in a specified period) x (Maximum reorder Period)