CHAPTER FIVE

5. STORAGE
5.1. Storage Functions and Responsibilities
Stores play a vital role in the operations of a company. It is indirect touch
with the user departments in its day-to-day activities. The most important
function served by the store is to provide uninterrupted services and
support mainly to operating functions or to the manufacturing divisions.
The functions of stores can be classified as follows:

 To receive raw materials, components, tools, equipments and other

items and account for them.
 To provide adequate and proper storage and preservation to the
various items.
 To meet the demands of the consuming departments by proper issues
and account for the consumption
 To minimize obsolescence, surplus and scrap through proper
codification, preservation and handling.
 To ensure proper control over inventories in order to minimize
investment and waste of funds.
 To highlight stock accumulation, discrepancies and abnormal
consumption and effect control measures.
 To ensure good housekeeping so that materials handling, materials
preservation, stocking, receipt and issue can be done adequately.
 To assist in verification and provide supporting information for
effective purchase action
These are sought to be achieved in the following manner:
Purchasing and procurement: Materials are purchased in required
quality, quantity to be made available in time. Sometimes, there are also
inter-plant transfers, which require inter-plant transfer of book values and
physical quantities.

Receipt and Inspection: it is the process of accepting materials from all

sources; including suppliers, operating processes, plant maintenance etc,
and each incoming consignment has to be checked for quality. Most often,
the inspection department will do this job. Stores personnel will see to it
that quantity received is according to the purchase order and invoices are
correctly made with regard to price, quantity and description of the stores
and as per stated quality.

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Issue and Dispatch: on receiving demands from user departments, the
required item is selected and handed over with issue notes and vouchers.
Whenever the necessity arises, it also supervises packaging and loading
with goods and delivery notes.

Store Housing, Storage and Storekeeping: the actual storage

function entails management of a storehouse and stockyards, handling
and movement operations, sage custody, protection, preservation and
maintenance of stores and materials.

Stock Records and Store Accounting: Documents relating to particular

receipts, issues and balances on hand have also to be kept. Accounting
function is the process of recording stores movement and balances in
quantity and value.

Physical Verification: stocktaking is done in order to verify the

quantities and physical conditions at certain time intervals. Often, audit
staff is deployed to certify the ground balances. If there is any
discrepancy, this is immediately reported to the top management for
proper investigation and action. Pilferage, breakage, normal wear and
tear, natural deterioration and wastage are among the causes for which
book balance may differ with actual balance on hand.

Identification and Coding: it is a process of systematically defining and

describing all items held in stock. In entails the preparation of a store code
and stores catalogue, after adoption of a specification for each material
and introduction of some degree of standardization. Design, planning,
purchasing as well as standards and quality control departments generally
help in this task. Production planning and control departments, however,
generally supply frequency data.

A manager for stores should maintain, therefore, good relations with other
departments, as he/she is primary responsible for a smooth flow of
materials, which is essential for smooth production.

Responsibility of Stores: it is necessary to remember that a store

under materials management department is a service provider unit. It has
therefore to be emphasized that service is the prime objective of stores
function. Hence, it is important that it must provide this service with
efficiency and effectiveness. While it must ensure timely supply, it must
also keep the value of stores (the total inventory value) low in order to
effect economy in the use of working capital and also minimize the cost of

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storage and other materials’ related costs. Often, there is a conflict
between the need to give better service and the need to economize in
holding total inventory. In general, organizing these functions will require
proper guidance, regulation and control so that materials are so arranged
as to enable easy storage. Pilferages are minimized and proper
identification and quick retrieval are made possible with minimum waste of
time and effort. For this purpose, stores location and lay out must be
considered and the job analysis must be done for the personal involved to
discharge their duties in an effective manner.

5.2. Locations and Layout

Good warehouse layout attempts to achieve five objectives:
 A straight –line flow of activity through the storage areas with
minimum backtracking
 Minimum handling and transportation of materials
 Minimum travel and waste motion for personnel
 Efficient use of space
 Provision for flexibility and expansion of layout
It is practically impossible to attain all objectives completely. However a
carefully planned compromise solution can usually satisfy most layout
objectives reasonably well.
Storage system has to accommodate the inflow of inputs of materials and
bought-out components from outside sources and the in-process
inventories and also the outflow of finished goods to customers. The
systems’ efficiency may be compared and assessed in terms of unit cost of
moving goods through storage sites or storage area over a given period. It
usually takes in to account the elements of labor, space and equipment
needs and costs. More often than not in the matter of locating the stores,
materials management is rarely consulted. The normal practice is,
however, to locate the stores near the consuming departments. This
definitely minimizes handling costs and ensures timely dispatch of the
necessary materials, good stores layout, the governing criteria are easy
movement of materials, good house holding, sufficient space for men and
material handling equipments, optimum utilization of storage space,
judicious use of storage equipments, such as shelves, racks, pallets and
proper preservation from rain, light and other such elements. These
problems are more important in the case of items that have a limited shelf
life. Other important factors governing the location are the number of end
users and their location, the volume and the variety of goods to be

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handled, the location of the central receiving section and accessibility to
modes of transportation.

Since stores have to be nearest to the user, large organizations usually

have stores attached to each consuming department, whereas receiving is
den centrally. Items of common usage are stocked in the central stores so
that inventory is kept at an optimum level. These factors are considered at
the planning level of layout. In the case of warehouses stocking finished
goods, factors such as proximity to ports, railway lines, quality of roads,
availability of power, etc. become quite important. It is also important that
the stores are constructed with an innovative orientation, so that sufficient
flexibility for expansion needs is inbuilt. The activities of receiving the
goods, stocking in appropriate locations, material handling and issue must
be done swiftly and economically. He stores building must have adequate
facilities for preservation of stores. Sometimes facilities, such as cold
storage, heating equipments, air-conditioning, and similar facilities may be
required. These should be panned in advance. Comfortable working
conditions must be provided to the stores personnel to get maximum
efficiency and morale. The most important factors in the design of stores
building can be summarized as follows:

1. Lighting: - clear and adequate lighting is a must for a proper work

environment. Lighting effects can be accentuated through a
judicious choice of colors for the walls. For stores personnel who
work day in and day out in the stores receiving, checking, stocking,
handling and issuing goods, a pleasing environment goes a long way
in reducing monotony.

2. Safety: - this factor is perhaps the most important aspect. In stores

a large volume of a goods are handled every day. Accidents
considerably reduce the morale and effectiveness of the system. The
following measures are necessary if accidents arte to be checked.

o Safety consciousness should be instilled in the minds of stores

personnel through training programs, visual aids, and literature.

o Safety appliances, such as goggles, etc, must be provided and

their user must be encouraged

o Good housekeeping is essential. This means that gangways must

be clean, adequately wide so that movement of forklifts, trolleys

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 and industrial tractors is smooth. Stocking must be in
appropriate locations so that handling is minimum.

o All stores equipment must be kept in good order. This includes

adequate maintenance practices with regard to forklifts,
overhead cranes, trolleys, conveyors, etc. Operators must be
trained in safety aspects so that safety precautions are not
overlooked.

o Healthy competition can be stimulated by installing “safety

awards’ and cash prizes which being recognition to the
concerned stores personnel for safety practices. This also
motivates others to practice safety.

o Provision of fire fighting facilities is necessary especially where

inflammable materials are stored and handled. Large
organizations have a well – maintained firefighting equipment
with the stores in preparedness, which has in the long run
reduced looses and reduced insurance expenses. Fire
extinguishers, fire escapes, alarms, and sprinklers must be
available and personnel should be familiar in handling them.

o Other factors, which merit attention, include provision of toilets,

routine maintenance equipments, sage electrical wirings etc.

5.3. Stores systems and procedures

The systems in stores can be studied under three areas, namely receipt,
stocking and issue. Well-designed store systems and procedures ensure
timely information for decision-making, particularly because a store is the
starting point of all activities of control.

 The Receipt System: - the receipt system can be divided into

receipts from outside suppliers and receipts from internal divisions.
Systems for receipt start even before the time which the material
actual reaches the plant. When a purchase order is placed, copy is
sent to the stores, indicating quantity and delivery date. These
should be arranged in a chronological sequence so that the store
manager can at any time estimate the volume of receipt. This also
helps in planning labor contrast when unloading activities exceed a
particular limit. This is the first step in the stores systems. Secondly,
suppliers once they dispatch the goods, normally send an advice

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 note to the stores. This provides information on the date of dispatch,
carrier details, description of the consignment and value. This is sent
in advance so that quick and easy clearance may be done. The third
stage is the document prepared by the transport carrier. These
transport organizations usually send consignment notes to the stores
concerned. These three documents, namely, copy of the purchase
order, supplier’s advice document and the consignment note, enable
the store’s manager to organize and plan for expeditious clearance
of material and minimize costly demurrages. In some cases,
suppliers send a packing slip detailing the contents in the package.
Once the consignment is cleared, then the inspection stage follows.
A good amount of materials await and/or undergo inspection and as
such are not available readily for issue to production. A Provisional
Goods Inward Note (PGI) is prepared as soon as the materials are
cleared from the receiving section and sent for inspection. Once the
inspection is completed then the inspection department either
endorses the PGI indicating quantity accepted and quantity rejected
OR sends an inspection report to the stores, which forms the basis
for the preparation of a Final Goods Inward note, referred to as FGI
that indicates quantity accepted and quantity received in addition to
the information provided by the PGI. As payment to suppliers can be
made only after FGIs are available, the system helps in estimating
the fund requirement for goods received not paid for FGIs also help
in preparing shortage reports and claims documents, which are sent
to suppliers. It will be very advantageous, therefore, if the inspection
department works in close coordination with the stores
management. When, however, materials are received from internal
divisions or returned from, user departments usually transfer notes
and return to stores are being utilized. Sometimes the scrap is also
handed over to the stores department.

 The Stocking System: - next to the receipt and inspection

stage, stocking follows. This is the most under-rated function in
stores management. Stocking involves routine activities like sourcing
out materials coming at the end o f inspection process and storing
them in their locations. In big organizations, the volume and variety
of materials to be stoked are so high that areas within the stores are
demarcated as follows:

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  Area where materials are to be stocked for inspection-usually
earmarked near testing laboratories and inspection outfits.

 Area where materials coming out of inspection and accepted for

use within the plant are to be stocked; and

 Area where materials rejected are to be stocked so that they

could be dispatched to the suppliers concerned.

Stocking is very important for easy location, proper identification, and

speedy issue can be further divided into issues to consuming departments.
This process is very crucial in warehouses where thousands of parts are
stocked for meeting consumer needs.

 The Issues System: we now come to the final stage, namely the
issuing system. Issues can be further divided into issues to consuming
departments and issues to outside suppliers for processing or
conversion. In both cases there are certain common system
requirements. The first aspect is the control of issues. Issues are
based on production programs. Based on this and bill of materials work
orders are printed, listing for each material, quantity to be issued
against each component requiring that material. This automatically
controls consumption because the work order gives details on quantity
of materials to be issued and the corresponding quantity of component
to be manufactured. So any materials requirement over and above that
indicated in the work order quantity means exercise wastage and
scraping. Normally, stores personnel at junior levels are not authorized
to issue beyond work order quantity. This automatically focuses top
management’s attention. Thus there is as inbuilt control. Sometimes
materials are issued on loan basis. Proper control through stores
registers must be ensured in such cases.

The second aspect is delegation of authority. Direct materials for which

consumptions norms can be established are controlled by work orders. For
direct materials, such as fuel oil, electrodes, oxygen and tools, it is obvious
that control should be based on past experience and suitable delegation.
The store assistant may authorize issues up to a limited certain dollar
value, say $ 1,000.00. The stores officer’s limit may be $ 5,000.00 and
soon on. This establishes responsibility in controlling consumption. The
need for updating the records cannot be overemphasized, as the stores
record is the starting point of inventory management in all organizations.
Goods stores systems can greatly assist the store’s manager the store’s

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manager in accurate stock status reports, timely detection of
discrepancies, and swift clearance of goods Inward Notes (GIN) to expedite
bill payment, reduction in demurrages and losses in claims.

5.4. Stock Receipt, Issue and Dispatch

A typical receiving procedure consists of four steps:

1. Unloading and checking the shipment. The number of containers

unloaded from the carrier’s vehicle is checked against the carrier’s
manifest (Fright Bill) to make certain the full consignment has been
delivered. All containers are also inspected for external damage; any
damage found is inspected by the carrier’s representative and noted
on the receipt which the receiving clerk signs. Failure to follow this
procedure before accepting a shipment can relieve the carrier of all
liability, except liability for concealed damage not evident until the
container is unpacked.

2. Unpacking and inspecting the material. A receiving clerk is held

responsible for three verifications.

 First, check the materials received against the seller’s packing

slip and against a copy of the firms purchase order to verify
that the correct items have been shipped.

 Second, the quantity of the shipment is verified in the same

manner

 Finally, the clerk inspects the general condition of the material

to determine whether any external damage was incurred
during shipment.

3. Completion of the Receiving Report. The paperwork system used

varies significantly from organization to organization. Regardless of
the system used, four operating groups generally require notification
that the material has been received. The requisitioned, the
purchasing department, the accounting department, and the
inspection department if technical inspection is required.

4. Delivery of the material. For non-stock materials, the receiving

department is usually responsible for delivery-directly or via an

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 internal delivery service. In the case of inventory materials, the
practice varies. In some firms the receiving department is
responsible for internal deliveries, while in others this function is
performed by an internal transportation service. In still others, stores
clerks are responsible for picking up their own materials; however,
not all delivered materials go through the receiving operation. Some
JIT purchasing shipments, some materials purchased from certified
suppliers, and most credit card purchases are delivered directly to
the point of use, by passing receiving.

Typical receiving activities have the following chain of

flows:
 Unloading materials that refer to off-loading of materials from carrier
vehicles such as truck, freight, etc.

 Verifying items and quantities refers to freight bill and purchase

order and also consider number of containers, description, and
weight, volume that are prepared by carries.

 Check for container damage refers visual observation and liability

claim

 Check for hot list items to priority items and urgency items

 Input and sort refers to using of units of packages

 Verify items and quantities refer to verifying against packing list,

purchase order with all details quantity received and quantity order.

 Check for discrepancy that has been resulted either due to damage
or shortage and if the happen prepare claim report.

Documentation
1. Store Log Book (Register or Goods Inwards Book): this involves brief
details of the consignments that are used for following- up purposes
until receiving report prepared. This RR includes Date, consignor;
Methods of transportation, date of delivery, truck plate No. Name of
driver purchase reference No. brief description of the RR.

2. Goods Receiving Note (GRN)

Distribution of copies of GRN

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 1st copy to finance department for checking of invoices

2nd copy to purchasing section to close purchase order

3rd copy to inventory control section to provide inventory related

information

4th copy retained in the pad to provide information for use

3. Damage (shortage or overage) report this report must be prepared and

transmitted to purchasing section for requesting claims and to fiancé
department to effect final payment after claim deduction

4. Bin cards: this document is prepared for two reasons. One is to identify
locations, type and place of materials, second it helps to show store
transactions.

Issue and Dispatch

The term issue refers to supply of materials from stores to the various
workshops or departments of an organization. Generally, tools are issued
to workmen at the stores counter. Raw materials and finished components
are delivered to the work point either by the progress department or
stores. Items issued on requisition are briefly discussed below:

Requisition: a requisition is a written authority for the stores to issue

materials to any person or section of the organization entitled to draw
materials from the stores. No issue shall be made from the stores without
a proper requisition. The requisition should have columns for class and
code numbers, description, quantity required, quantity issued, date of
issue; works order number, signature of the authorizing person, Signature
of the issuing storekeeper and signature of the receiver of materials. A
requisition shall be valid for drawing materials only against one works
order and from only one store. The number of copies in use varies from
organization to organization, but generally copies are provided for
accounts, stores and the department drawing the materials. All
requisitions must be posted daily on the bin cards and at least by the
following day ion the stock control cards.

Authorizing Requisition: in order to prevent malpractice the authority

for signing requisitions should be delegated only to selected persons.
While section heads may sign for general requirements, it is important that
only senior persons should sign requisitions for expensive raw materials,

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which could be misused. In certain placers production requisitions are
prepared and authorized in the production control of planning department.
However the stores must be notified of the person authorized to sign
requisitions together with their specimen signatures and the limitation.
Stores should ensure that materials are issued only against appropriate
authority.

Store efficiency is measured in terms of its ability to meet user’s demand.

It is evaluated by the standard of service it renders to users usually
production or operation. Materials should be protected from
misappropriation for miss-utilization. Thus, issue should be made to the
right person’s materials should therefore be issued upon valid request and
authorization. Issue is made through valid and authorized signed
documents. Thus, the storekeeper should have name, designation, and
specimen signature of persons authorized to approve and issue materials.

Dispatch of materials: when materials are to travel a long distances,

shipping document or dispatch note is used.

5.5. Cost Aspects and Productivity

It is erroneously stated that stocks for high efficiency must every cubic
meter of space very often such stocking may drastically cut down the
speed of material movement and create bottlenecks apart from affecting
overall safety. Therefore manipulation needs for handling equipments and
for minimizing the time required for receipt, stocking and issue, must be
borne in mind at the planning stage on order to ensure real efficiency.
Costly involved in stores can be analyzed under two heads, vis-à-vis, fixed
and variable. Fixed costs are to be incurred irrespective of the utilization of
the space of the stores. They include money spent on land and buildings,
rent, interest, repairs, maintenance, insurance, etc.

Variable costs vary with the volume of goods handled in the stores. They
consist of handling costs, damages, deterioration, obsolescence, etc,
obviously, when the throughput of the volume of goods handled is high,
the total cost per tone is low. This should be the aim of the store’s
manager in order to optimize the costs in stores.

5.6. Stores Security

Stores Security With Respect To Insurance of Goods in Storage:
this presents relatively minor problems to the materials manager. During

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storage, goods are generally insured against fire, explosion, riot and strike,
flood and earth quake under a fire policy, and occasionally for burglary and
theft under a burglary policy. The following are some important
considerations which insurance decisions:

 A fidelity guarantee policy for the key personnel in charge of stores

controlling and physically handling them for theft and pilferage, etc
often turns out to be a wise investment since the cost of such an
insurance policy is relatively low.

 Where the stock fluctuate in value during the course of a year, the
insurer can fix up a declaration policy for fire and allied risks, under
premium rate for warehouse is dependent upon the nature of
storage in each non-communicating part of the building and,
therefore, it is possible to economize the premium amount if one can
ensure the hazardous and non-hazardous materials are stored
separately and the storage warehouses do not communicate with
the manufacturing sections.

 Where new machinery is purchased, it is advisable to cover the risk

or transit, storage and erection under a single policy known as
marine-cum-erection policy.

In general, the nature of packing, the mode of transport and the extent of
care exercised in materials movement have a bearing on the probability of
losses. Wherever there is an improvement in any of these, the insurer
should be persuaded to consider a reduction in premium rates. It is
sometimes profitable to discuss risk and loss minimization measures
themselves, who may come out with suggestions based on their
experiences over a wide range of clients.

5.7. Stores Accounting and Stock Verification

 Stores Accounting

In relation to the estimation of the cost of the product for pricing decisions,
stores accounting assumes a key role. Material costing is very important in
terms of the valuation of the cost of materials consumed by the production
department as well as in terms of the estimation of the value of materials
held in stock

 Costing of the Receipt of Materials

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The factors that are to be included in the building up of the cost of
materials received are materials price, freight charges, insurance and
taxes. Price quoted and accepted in the purchase orders. Price may often
be stated in various ways, such as net prices, prices with discount terms,
free on board, cost insurance and freight, etc. for costing purposes we
have to work out the actual cost incurred by taking price quoted by
supplier as the basis, subtracting the discounts and adding any other
expenses not covered. The freight costs incurred in transporting the goods
are usually considered separately. Sometimes price may include this
element. Hence care should be taken to avoid double counting. Goods in
transit are mostly covered by insurance. All such insurance expenses
should be calculated and added to the base cost and transportation cost.
In general, we can say that cost of the materials received is equal to the
price quoted less discounts, plus freight, insurance, duties, taxes and
package charges.

 Costing of the Issues to Production

FIFO (First—In- First -Out), last LIFO (Last-In-First-Out). Average cost

standard cost, market price at the time of issue (market value) and costing
the closing stock are some of the methods used in costing he issues to
production. These methods of costing are briefly discussed as follows:

1. FIFO: the assumption made here is that the oldest stock is depleted
first. Therefore at the time of issue, the rate pertaining to that will be
applied, which is of course logical for items, which deteriorate with
time. Since actual prices are used, there cannot be any “profit” or
“loss” in the pricing arrangements. In FIFO process, the value of the
stocks held on hand is the money that has been paid for the amount
of stock at latest price levels and hence can straightaway be used in
balance sheet, truly reflecting the value. The limitations of FIFO
process are that the process becomes unwieldy when too many
changes in price levels are encountered and the fact that this
method does not provide a satisfactory answer to costing returns
from stores.

2. LIFO: the basic assumption here is that the most recent receipts are
issued first. Under LIFO system, in a period of rising prices, latest
prices are charged to the issues, thereby leading to lower reported
profits and hence saving in taxes. When there are wide fluctuation in
price levels, LIFO tends to minimize unrealized gains or losses in

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 inventory. However, LIFO systems have the same disadvantages as
that of FIFO system.

3. Average Cost: in this method, the issues to production department

are split into equal batches from each shipment at stock. It is a
realistic method reflecting the price levels and stabilizing the cost
figures. Here, the rate is arrived at by dividing the total cost by the
number of items. Then, this rate is applied to the issues to
production. However, LIFO purchases are made, a new average is
computed and this average is applied to the subsequent issues.

4. Market Value: this method is also known as replacement rate

costing. Here the materials that are issued would have cost of the
market rate prevailing at the time of issue. It, therefore, follows that
when prices increases the stocks on hand is continuously under
estimated, because receipts have costs of actual price and issues at
higher rates. Conversely, when the prices are falling,. The stock on is
grossly overestimated. This may in turn lead to writing off huge
amounts to make it realistic besides, this system requires continuous
monitoring of market rates for all materials and hence is very
unwieldy.

5. Standard Costs: here, a standard rate is determined based on

detailed analysis of market prices and trends. This standard rate is
kept fixed for a definite period of six months or more. During this
period, costing is done on the basis of this standard rate,
irrespective of the actual rate. At the end of the period, a review is
done and fresh standards are set for a further period of six months.
Efficient use of materials is truly reflected by adopting this method,
as the accounting is divorced from fluctuations in rates. Further it is
not necessary to obtain fresh rates at every point of time. This
means greater clerical efficiency and quicker estimation of costs.
However, in this method also at the time if rising prices, the stock on
hand is underestimated and at the time falling prices, the stock on
hand is overestimated.

6. Costing the Closing Stock: generally, the guideline used here is

that either the market price or stock at cost whichever is less is to be
used. The main factors, which determine the cost of closing stock,
are price levels, obsolescence and deterioration. When prices
fluctuate, the kind of system used for evaluating the cost of issues to

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 production affects the costing of closing stock. As we saw earlier,
each system of costing tends to undervalue the stocks during
periods for such variations from the actual of the stocks. While
evaluating the closing stock costs, some stock items, such as
machinery, spares, tools, etc. tend to become obsolete earlier than
others. So, in evaluating the cost of stock, at the close, a provision
must be made to account for such obsolescence. This is based on
past experience and is usually worked out as a percentage of the
total stock value. Many stock items deteriorate with time due to
limited shelf life or inadequate precautions while strong. When the
bulk of the items belong to this category, then losses due to
deterioration can be very high, provision must be made for this
factor also in evaluating the stock at the end of the period.

 Stock Verification Stock verification is the process of physically

counting, measuring or weighing the entire range of items in the
stores and recording the results in a systematic manner. The
purposes served by stock verification are as follows:

 To reconcile the stock records and documents for their accuracy

and usefulness

 To identify areas, which require more disciplined document control

 To back up the balance sheet stock figures

 To minimize pilferage and fraudulent practices.

Stock verification is usually carried out by the materials audit department,

which reports to either the materials manager of the internal audit. One
person is usually given exclusive responsibility with adequate facilities and
authority. Physical verification can be carried out periodically or on
continuous basis.

 Periodic Verification

Under this system, the entire cross-section is verified at the end of one
period, which is usually the accounting period. In big organizations this is
not achieved in a day and usually several days are taken to complete this
task. As no transactions can take place during the verification, this could
pose some problems. Physical verification requires careful planning and
execution.

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  Continuous Verification

Under this stem, verification is done throughout the year as per a

predetermined plan of action. A – Items may be verified three times a
year, B-Item twice a year and C-Items once a year. It therefore,
presupposes that a perpetual inventory record for each item is maintained
showing all transactions so that reconciliation can be done. Here, there is
no need to “freeze” the entire operations of the stores as verification is
done throughout the year based on perpetual inventory records. Nay time,
stock records are more up-to-date when compare with the periodic
verification system.

 Process of Verification:

Items are verified by counting in the case of bearings, by weight in the

case of sheets, by measuring in the case of lubricants and so on. However,
when large stocks of items such as sand, scrap, and ore fuel need to be
verified, it is based only on estimates as the question of exact
measurement is ruled out. In the actual process of stock verification, the
stores personnel should be involved, as they intimately know the locations
of various items, which result in quicker identification of items.
Discrepancies must be discussed with stores so that any omissions may be
rectified and then only should be reported to top management. Major
discrepancies may require a re-verification. Such discrepancies may be
due to pilferage on a large scale, wrong posting of records and loose
document control. They require careful analysis and immediate corrective
measures. After discrepancies have been noted, stock adjustments must
be made using standard stock adjustments duly signed by the appropriate
authority. Surprise checks and verifications are made by materials audit
department to detect any fraudulent acts. Material audit plays the role of
watchdog of stores, pointing out weak areas and remedying them. It
assists in accurate records keeping and smooth’s finalization of annual
accounts.

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