CLASSIFY AND CODE PROCURED GOODS STUDY NOTES
STORE KEEPING
In the process of material control, after any purchased materials are received and checked, the next step is the storage of materials,
also known as storekeeping.
Store keeping is the task of maintaining safe custody of all items of supplies, raw materials, finished parts, purchased parts, and other
items.
These items are held in a storeroom for which a storekeeper acts as a trustee. As such, storekeeping can be defined as process of receiving
and distributing stores or supplies.
According to Alford and Beatty, "storekeeping is that aspect of material control concerned with the physical storage of goods."
In the words of Wheldon, "storekeeping is the physical storage of materials carried into the store-room in a scientific and systematic
manner with a view to (i) saving them from all kinds of damages and losses, and (ii) exercising overall control over their movement."
In short, storekeeping refers to the art of preserving raw materials, work-in-progress, and finished parts in the stores in the best possible
manner.
Generally, in small businesses, storekeeping is a minor task. However, it is always worth remembering that careless handling of materials,
material pilferage, and deterioration of materials can lead to reduced profits and even losses.
Therefore, to ensure maximum efficiency, it is important to maintain a well-equipped storekeeping department.
Spriegel and Lansburgh rightly remarked: "Poor control of materials is frequently accompanied by poor store-room administration in a
way that may easily throw out of balance any operation programs which have been adopted."
Objectives of Store keeping
An efficient system of storekeeping has the following objectives:
To ensure uninterrupted supply of materials and stores without delay to various production and service departments of the
organization.
To prevent over-stocking and under-stocking of materials.
To check all materials in terms of quality and quantity.
To minimize storage costs.
To ensure effective and continuous control over materials.
To ensure optimal utilization of available storage space and workers engaged in storekeeping processes.
To protect materials from loss and wastage due to defective storage.
To identify and locate materials in storerooms without delay.
To protect and safeguard material items from pilferage, theft, fire, and others.
To develop a system that provides complete and up-to-date information about all stored items.
Store Keeping Functions
The main functions of storekeeping are performed in an organization's Stores Department. They include:
Issuing purchase requisitions when material is required.
Receiving purchased stores from the Receiving Department and verifying that every lot of stores is supported by an indent, a
purchase order, and an inspection note.
Preparing Goods Received Note in accordance with the different stores lots received.
Ensuring that all the Goods Received Notes are regularly posted to the Bin Card.
Placing and arranging stores received in suitable places and adhering to the golden principle of storekeeping: "A place for
everything in its place."
Minimizing storage, handling, and maintaining costs by preserving and handling materials in the most economical and efficient
manner.
Issuing stores to various business departments and ensuring that all issues are properly authenticated and accounted for.
Ensuring adherence to issuing procedures and organizational systems and guidelines.
Periodically reviewing the inventory by initiating inventory control systems (e.g., perpetual inventory control
system and ABC system of inventory control).
Disclosing fullest and up-to-date information about the availability of stores whenever required. This depends on maintaining
proper stores records with the help of Bin Cards and a Stores Ledger.
Safeguarding materials from theft, pilferage, fire, and others.
Supervising and coordinating the duties of different staff working under the direction of the storekeeper.
Preventing the entry of unauthorized persons in the stores.
Maintaining proper stock levels, which are fixed in respect of every item of stores, and replenishing them when necessary.
Classify and Code Procured Goods Notes Prepared by Mr Antony Ambia Page 1
,Store Keeper's Duties
In a manufacturing setting, stores or materials represent an equivalent amount of cash. For this reason, there should be a well thought out
system of storekeeping.
The storekeeping system should be designed to ensure the safe custody of materials, easy access to items, economic usage of storage
space, regular and efficient flow of materials, maintenance of reliable stores records, and an efficient assessment of stock position.
For efficient storekeeping, a separate Stores Department under the direction of a storekeeper is set up. The storekeeper is an individual of
broad experience in the area of stores routines.
To carry out their duties, the storekeeper receives assistance from several staff members. The storekeeper is responsible for the safe
performance of his duties.
In addition, the storekeeper's main duties and responsibilities are:
To issue requisitions on the purchase department to ensure materials are purchased in a timely way.
To accept into stores any materials received from suppliers or returned by the production department.
To check in all materials in terms of quality and quantity.
To hold all materials in a safe and convenient manner in appropriate bins and containers.
To issue materials against proper authorization.
To maintain records of receipts, issues and balance of materials.
To watch levels of stock and replenish materials when necessary.
To prevent the entry of unauthorized persons into the stores.
To advise management on the day-to-day affairs of the stores department.
To dispose of scrap or obsolete materials.
Location of Stores
Here, location refers to the site for a particular store. The location of stores should be carefully planned.
An important factor to consider when establishing a store setup is the question of where to locate it for an optimal effect.
It is crucial to set up stores in a convenient and safe place near to the Receiving Department. It should also be accessible from all parts of
the factory and be free from the risk of fire, theft, and other hazards.
The general principle used to determine the location of a Stores Department is to minimize the total cost (i.e., in terms of kg/km) of
transporting materials.
Determinants of the Location of Stores
The main factors that determine the location of stores in a manufacturing operation are outlined as follows:
1. Minimization of Material Handling Efforts: The raw material store should be near the production shops, and the finished goods and
packing materials stores should be near the assembly shop. The stores should be easily accessible by transport.
2. Nature of the Materials: The nature of the materials to be stored influences location. Weather-resistant materials can be stored
outdoors, while materials such as cement and plaster must not only be protected from the weather but also be stored in a dry place.
3. Quantity, Weight, etc., of Materials: The quantity of each of the goods to be stored must be considered to choose the location. When
the quantities are known, adequate provision may be made for immediate and future storage needs.
4. Flow of Materials: The location of stores should be convenient, enabling the steady and regular flow of store items without
obstruction.
5. Free from Risk of Loss: Stores must be set up in a safe location that is free from the risk of loss due to fire, theft, moisture, and other
hazards.
6. Flexibility: The location of stores must leave open the potential for future expansion.
Layout of Stores
The layout of stores refers to the physical arrangement of storage facilities or the internal arrangement or placement of materials inside the
stores.
Layout of stores aims at the effective utilization of available space for storage of materials. It seeks to make the receipt and issue of stores
convenient, improve the appearance of the stores, and minimize the chance of damage, wastage, pilferage, and accidents.
When designing the layout of stores, another important aim is to reduce the operating cost of storage.
The layout of stores should be chosen based on the class and quantity of the materials to be stored, as well as the general nature of the
business.
Different materials should be separately stored, paying due attention to the viewpoints of space economy, effective supervision, minimum
wastage, and convenience.
The materials should be kept in bins, racks, shelves, drawers, drums, packages, and containers.
Factors to Consider to Decide Stores Layout
1. Similarity: Items of a similar nature should be stored in one place for the sake of convenience and easy identification.
2. Popularity: The turnover of each item should be considered to enable fast-moving items to be stored near the point of issue/usage.
3. Size of Item: Items that are large or bulky in nature should be stored near the point of use.
4. Nature of Materials: The nature of the materials to be stored is important in determining the layout of stores. Hazardous, sensitive, and
perishable goods should be stored separately in safe places.
Classify and Code Procured Goods Notes Prepared by Mr Antony Ambia Page 2
, 5. Physical Movement of Materials: Strictly adhere to the principle of 'first in, first out' in the matter of physical movement of materials.
6. Physical Facilities: To create an efficient layout, it is important to consider physical facilities such as lighting arrangements,
ventilation, wall paint, availability of cranes, and other handling equipment.
Store Keeping
What is storekeeping?
Refers to the art of preserving raw materials, work-in-progress, and finished parts in the stores in the best possible manner.
What is the important factor to consider when establishing a store setup?
Location, it is crucial to set up stores in a convenient and safe place near the receiving department. It should also be accessible from all
parts of the factory and be free from the risk of fire, theft, and other hazards.
What are the main factors that determine the location of stores?
Minimization of material handling efforts, nature of the materials, quantity, weight, etc., of materials, flow of materials, free from risk of
loss, flexibility
What are the factors to consider when deciding stores layout?
Similarity, popularity, size of item, nature of materials, physical movement of materials, physical facilities
CLASSIFY AND CODE PROCURED GOODS,
To classify and code procured goods, first, use classification criteria like the nature of the goods (raw materials, components, finished
goods, services) or strategic importance (direct vs. indirect procurement) to categorize items. Next, use coding systems such as Stock
Keeping Units (SKUs), Universal Product Codes (UPCs), or custom internal codes to assign unique identifiers for effective inventory
management, supply chain tracking, and informed decision-making.
Steps to Classify and Code Procured Goods
1. Establish Classification Criteria
Nature of Goods: Categorize items as raw materials, components, semi-manufactured products, finished products, or services.
Strategic Importance: Distinguish between direct procurement (essential for end-products) and indirect procurement (essential for
operations but not directly for the product).
Value: Group items based on their monetary value to prioritize procurement efforts.
Risk: Classify goods by potential supply chain or quality risks to manage them effectively.
Lead Time: Group items by the time it takes to receive them after placing an order.
2. Select a Coding System
Internal/Custom Codes: Create a system specific to your organization, often using Universal Decimal System (UDS) or similar
approaches.
Standardized Codes: Utilize existing codes like SKUs, which are unique to each product, or GTINs for wider supply chain use.
Industry-Specific Codes: Employ codes relevant to your industry, such as ISBNs for books.
3. Implement the Coding System
Assign Unique Codes: Assign a unique code to each type of procured good, following the structure of your chosen system.
Link Codes to Classifications: Ensure that the assigned codes accurately reflect the established classification for each item.
Integrate with Systems: Incorporate the codes into your inventory management, accounting, and supply chain systems for tracking
and reporting.
4. Utilize the Data
Strategic Decision-Making: Use the classified and coded data to make informed decisions about purchasing, inventory levels, and
supplier relationships.
Performance Improvement: Track procurement performance and identify opportunities for cost reduction and efficiency gains.
Supply Chain Visibility: Improve visibility and control over the entire procurement process.
Classification of Materials
Classification is the systematic division, grouping, or categorization of materials or items based on some common characteristic.
Classification of materials can be performed on different bases (e.g., nature, manufacturing process, value, and purpose).
To identify materials that are purchased and stored for commercial purposes, they should be properly classified.
The department in charge of storage should closely study and monitor the materials, ensuring their safe custody, meticulous handling, and
protection from damage, fire, pilferage, and spoilage.
A broad classification of materials is shown below, based on their nature, use, and service.
Raw Materials
Classify and Code Procured Goods Notes Prepared by Mr Antony Ambia Page 3
STORE KEEPING
In the process of material control, after any purchased materials are received and checked, the next step is the storage of materials,
also known as storekeeping.
Store keeping is the task of maintaining safe custody of all items of supplies, raw materials, finished parts, purchased parts, and other
items.
These items are held in a storeroom for which a storekeeper acts as a trustee. As such, storekeeping can be defined as process of receiving
and distributing stores or supplies.
According to Alford and Beatty, "storekeeping is that aspect of material control concerned with the physical storage of goods."
In the words of Wheldon, "storekeeping is the physical storage of materials carried into the store-room in a scientific and systematic
manner with a view to (i) saving them from all kinds of damages and losses, and (ii) exercising overall control over their movement."
In short, storekeeping refers to the art of preserving raw materials, work-in-progress, and finished parts in the stores in the best possible
manner.
Generally, in small businesses, storekeeping is a minor task. However, it is always worth remembering that careless handling of materials,
material pilferage, and deterioration of materials can lead to reduced profits and even losses.
Therefore, to ensure maximum efficiency, it is important to maintain a well-equipped storekeeping department.
Spriegel and Lansburgh rightly remarked: "Poor control of materials is frequently accompanied by poor store-room administration in a
way that may easily throw out of balance any operation programs which have been adopted."
Objectives of Store keeping
An efficient system of storekeeping has the following objectives:
To ensure uninterrupted supply of materials and stores without delay to various production and service departments of the
organization.
To prevent over-stocking and under-stocking of materials.
To check all materials in terms of quality and quantity.
To minimize storage costs.
To ensure effective and continuous control over materials.
To ensure optimal utilization of available storage space and workers engaged in storekeeping processes.
To protect materials from loss and wastage due to defective storage.
To identify and locate materials in storerooms without delay.
To protect and safeguard material items from pilferage, theft, fire, and others.
To develop a system that provides complete and up-to-date information about all stored items.
Store Keeping Functions
The main functions of storekeeping are performed in an organization's Stores Department. They include:
Issuing purchase requisitions when material is required.
Receiving purchased stores from the Receiving Department and verifying that every lot of stores is supported by an indent, a
purchase order, and an inspection note.
Preparing Goods Received Note in accordance with the different stores lots received.
Ensuring that all the Goods Received Notes are regularly posted to the Bin Card.
Placing and arranging stores received in suitable places and adhering to the golden principle of storekeeping: "A place for
everything in its place."
Minimizing storage, handling, and maintaining costs by preserving and handling materials in the most economical and efficient
manner.
Issuing stores to various business departments and ensuring that all issues are properly authenticated and accounted for.
Ensuring adherence to issuing procedures and organizational systems and guidelines.
Periodically reviewing the inventory by initiating inventory control systems (e.g., perpetual inventory control
system and ABC system of inventory control).
Disclosing fullest and up-to-date information about the availability of stores whenever required. This depends on maintaining
proper stores records with the help of Bin Cards and a Stores Ledger.
Safeguarding materials from theft, pilferage, fire, and others.
Supervising and coordinating the duties of different staff working under the direction of the storekeeper.
Preventing the entry of unauthorized persons in the stores.
Maintaining proper stock levels, which are fixed in respect of every item of stores, and replenishing them when necessary.
Classify and Code Procured Goods Notes Prepared by Mr Antony Ambia Page 1
,Store Keeper's Duties
In a manufacturing setting, stores or materials represent an equivalent amount of cash. For this reason, there should be a well thought out
system of storekeeping.
The storekeeping system should be designed to ensure the safe custody of materials, easy access to items, economic usage of storage
space, regular and efficient flow of materials, maintenance of reliable stores records, and an efficient assessment of stock position.
For efficient storekeeping, a separate Stores Department under the direction of a storekeeper is set up. The storekeeper is an individual of
broad experience in the area of stores routines.
To carry out their duties, the storekeeper receives assistance from several staff members. The storekeeper is responsible for the safe
performance of his duties.
In addition, the storekeeper's main duties and responsibilities are:
To issue requisitions on the purchase department to ensure materials are purchased in a timely way.
To accept into stores any materials received from suppliers or returned by the production department.
To check in all materials in terms of quality and quantity.
To hold all materials in a safe and convenient manner in appropriate bins and containers.
To issue materials against proper authorization.
To maintain records of receipts, issues and balance of materials.
To watch levels of stock and replenish materials when necessary.
To prevent the entry of unauthorized persons into the stores.
To advise management on the day-to-day affairs of the stores department.
To dispose of scrap or obsolete materials.
Location of Stores
Here, location refers to the site for a particular store. The location of stores should be carefully planned.
An important factor to consider when establishing a store setup is the question of where to locate it for an optimal effect.
It is crucial to set up stores in a convenient and safe place near to the Receiving Department. It should also be accessible from all parts of
the factory and be free from the risk of fire, theft, and other hazards.
The general principle used to determine the location of a Stores Department is to minimize the total cost (i.e., in terms of kg/km) of
transporting materials.
Determinants of the Location of Stores
The main factors that determine the location of stores in a manufacturing operation are outlined as follows:
1. Minimization of Material Handling Efforts: The raw material store should be near the production shops, and the finished goods and
packing materials stores should be near the assembly shop. The stores should be easily accessible by transport.
2. Nature of the Materials: The nature of the materials to be stored influences location. Weather-resistant materials can be stored
outdoors, while materials such as cement and plaster must not only be protected from the weather but also be stored in a dry place.
3. Quantity, Weight, etc., of Materials: The quantity of each of the goods to be stored must be considered to choose the location. When
the quantities are known, adequate provision may be made for immediate and future storage needs.
4. Flow of Materials: The location of stores should be convenient, enabling the steady and regular flow of store items without
obstruction.
5. Free from Risk of Loss: Stores must be set up in a safe location that is free from the risk of loss due to fire, theft, moisture, and other
hazards.
6. Flexibility: The location of stores must leave open the potential for future expansion.
Layout of Stores
The layout of stores refers to the physical arrangement of storage facilities or the internal arrangement or placement of materials inside the
stores.
Layout of stores aims at the effective utilization of available space for storage of materials. It seeks to make the receipt and issue of stores
convenient, improve the appearance of the stores, and minimize the chance of damage, wastage, pilferage, and accidents.
When designing the layout of stores, another important aim is to reduce the operating cost of storage.
The layout of stores should be chosen based on the class and quantity of the materials to be stored, as well as the general nature of the
business.
Different materials should be separately stored, paying due attention to the viewpoints of space economy, effective supervision, minimum
wastage, and convenience.
The materials should be kept in bins, racks, shelves, drawers, drums, packages, and containers.
Factors to Consider to Decide Stores Layout
1. Similarity: Items of a similar nature should be stored in one place for the sake of convenience and easy identification.
2. Popularity: The turnover of each item should be considered to enable fast-moving items to be stored near the point of issue/usage.
3. Size of Item: Items that are large or bulky in nature should be stored near the point of use.
4. Nature of Materials: The nature of the materials to be stored is important in determining the layout of stores. Hazardous, sensitive, and
perishable goods should be stored separately in safe places.
Classify and Code Procured Goods Notes Prepared by Mr Antony Ambia Page 2
, 5. Physical Movement of Materials: Strictly adhere to the principle of 'first in, first out' in the matter of physical movement of materials.
6. Physical Facilities: To create an efficient layout, it is important to consider physical facilities such as lighting arrangements,
ventilation, wall paint, availability of cranes, and other handling equipment.
Store Keeping
What is storekeeping?
Refers to the art of preserving raw materials, work-in-progress, and finished parts in the stores in the best possible manner.
What is the important factor to consider when establishing a store setup?
Location, it is crucial to set up stores in a convenient and safe place near the receiving department. It should also be accessible from all
parts of the factory and be free from the risk of fire, theft, and other hazards.
What are the main factors that determine the location of stores?
Minimization of material handling efforts, nature of the materials, quantity, weight, etc., of materials, flow of materials, free from risk of
loss, flexibility
What are the factors to consider when deciding stores layout?
Similarity, popularity, size of item, nature of materials, physical movement of materials, physical facilities
CLASSIFY AND CODE PROCURED GOODS,
To classify and code procured goods, first, use classification criteria like the nature of the goods (raw materials, components, finished
goods, services) or strategic importance (direct vs. indirect procurement) to categorize items. Next, use coding systems such as Stock
Keeping Units (SKUs), Universal Product Codes (UPCs), or custom internal codes to assign unique identifiers for effective inventory
management, supply chain tracking, and informed decision-making.
Steps to Classify and Code Procured Goods
1. Establish Classification Criteria
Nature of Goods: Categorize items as raw materials, components, semi-manufactured products, finished products, or services.
Strategic Importance: Distinguish between direct procurement (essential for end-products) and indirect procurement (essential for
operations but not directly for the product).
Value: Group items based on their monetary value to prioritize procurement efforts.
Risk: Classify goods by potential supply chain or quality risks to manage them effectively.
Lead Time: Group items by the time it takes to receive them after placing an order.
2. Select a Coding System
Internal/Custom Codes: Create a system specific to your organization, often using Universal Decimal System (UDS) or similar
approaches.
Standardized Codes: Utilize existing codes like SKUs, which are unique to each product, or GTINs for wider supply chain use.
Industry-Specific Codes: Employ codes relevant to your industry, such as ISBNs for books.
3. Implement the Coding System
Assign Unique Codes: Assign a unique code to each type of procured good, following the structure of your chosen system.
Link Codes to Classifications: Ensure that the assigned codes accurately reflect the established classification for each item.
Integrate with Systems: Incorporate the codes into your inventory management, accounting, and supply chain systems for tracking
and reporting.
4. Utilize the Data
Strategic Decision-Making: Use the classified and coded data to make informed decisions about purchasing, inventory levels, and
supplier relationships.
Performance Improvement: Track procurement performance and identify opportunities for cost reduction and efficiency gains.
Supply Chain Visibility: Improve visibility and control over the entire procurement process.
Classification of Materials
Classification is the systematic division, grouping, or categorization of materials or items based on some common characteristic.
Classification of materials can be performed on different bases (e.g., nature, manufacturing process, value, and purpose).
To identify materials that are purchased and stored for commercial purposes, they should be properly classified.
The department in charge of storage should closely study and monitor the materials, ensuring their safe custody, meticulous handling, and
protection from damage, fire, pilferage, and spoilage.
A broad classification of materials is shown below, based on their nature, use, and service.
Raw Materials
Classify and Code Procured Goods Notes Prepared by Mr Antony Ambia Page 3
