In manufacturing concerns, stores may be managed as:
(a) Centralized Stores,
(b) Decentralized Stores, and
(c) Centralized Stores with sub-stores.
Centralized Stores Management
Centralized storing refers to the setting up of a single store-house for the whole organization. It caters to the needs of all the departments working in the organization. Such stores are advocated from the point of view of the economy and proper control to be exercised over the receipt and issue of materials.
Benefits of Centralized Stores Management
Centralized stores offer the following benefits:
- Economy in space, storage cost and labour cost can be ensured.
- Better supervision and effective control over materials and stores can be possible.
- Capital investment in stock is minimized.
- Obsolete items in stores are considerably reduced.
- Appointment of experts can be ensured who can effectively handle intricacies involved in the process of inventory control.
- Effective forecasting of material requirements can be made.
- Better layout and effective inventory checks on stores are the other important benefits derived from centralized stores.
Limitations of Centralized Store Management
However, centralized stores suffer from the following limitations:
1. Increased material handling and transportation costs become unavoidable.
2. Such stores are exposed to a greater risk of loss by fire due to the concentration of all material items at one central place.
3. Inconvenience and delays are caused in supplying materials to the various departments situated at a distance from the central stores.
4. Accumulation of materials at one place will create problems of storage space and effective control may not be exercised over materials and stores.
5. Break-down in internal transportation system employed for carrying materials from the stores to different departments may cause interruptions in production.
Decentralized Stores Management
It is the department-wise arrangement of stores whereby store-rooms are located adjacent to the departments they are to serve. The store-keeper of each such department handles the receipt and issue of materials to respective department independently.
Advantages of Decentralized Stores Management
Decentralized stores offer the following advantages:
1. Decentralized stores involve lesser internal transportation costs.
2. Undue delays involved in getting the materials issued from centralized stores are avoided.
3. Interruptions in work due to failure of the internal transportation system are minimized.
Disadvantages of Decentralized Stores Management
But decentralized stores suffer from the following disadvantages:
1. Lack of specialization in initiating proper stores control and material handling operations is the most serious drawback of decentralized stores.
2. Setting up a separate store for each department leads to increased labour cost and occupation of more space for storage purposes.
3. Establishment of decentralized stores usually leads to duplication of clerical work, stores recording and establishment expenses.
Centralized Stores Management with Sub-Stores
In practice, a combination of the above two types of store management is usually followed which is known as ‘Centralized stores management with sub-stores’. This system functions on the principle of ‘Imprest System’. Under this system, all materials are held in bulk in a centralized store and sub-stores or decentralized stores are set up with each production department. The sub-stores draw their requirements from the centralized or main stores for a specific period (say a month).
The sub-store then issues the materials to the department with which it is attached in accordance with the requirements of the department. At the end of the period (say a month), the quantity actually consumed is replenished from the main or centralized stores in order to bring the stock up to the imprest i. e., pre-determined quantity. Thus, the imprest system of stores operates exactly like the imprest system of petty cash.
Centralized stores management with sub-stores have the following advantages:
1. They facilitate easy accessibility to the consuming departments or the department for which such stores are established.
2. Interruptions in production are lesser as the items of materials which are immediately required for production are kept in the sub-stores.
3. Specialized control and supervision can be undertaken as limited number of activities are carried out by the store-keeper incharge of the SUb-stores.
4. Risks of fire and accidents are diversified.
But these stores suffer from the following disadvantages:
1. Cost of the establishment of the centralized store and sub-stores is quite high as there is a need for more storage equipment and additional personnel for controlling such stores.
2. This system lacks uniformity in organizing and maintaining the stores.