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Selection of Supplier, Depends upon, • Quantity, •Price, •Quality, •Terms of delivery, •Terms of payment, •Past performance, •Reputation of supplier

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Purchase Order, Purchase order is a request to the supplier made by purchaser, Prepare carefully, A legal obligation for accepting material and payment, On this basis, stores department receives material, On this basis Account department make payment, 5 copies= supplier, goods receiving department, accounts, department, indented department, Purchases department, • Follow up required about acceptance, promise of delivery,, delivery promise kept, •, •, •, •, •, •

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Contents of Purchase order, PO number,, Date, Code, Number of, Material, Name and, address of, supplier, , Price, Terms of, Payment, , Name and, address of, purchaser, , Full description, of materials, , Mode of, Transport,, estimated, delivery time, , Signatures of, authorised, persons

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Receipt of materials, Receiving department needs to, Take delivery, Open packages, Check quantity with order, Notify discrepancy, Prepare Goods Received Note (GRN) and send to, respective departments, • Signs duplicate copy of delivery memo of supplier., • Delivery memo is evidence of goods received and not, of goods accepted, •, •, •, •, •

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Inspection, • Inspection officer’s duty, • Check according to specifications, • Prepare Material Inspection Note with remark, of accepted or rejected, • Copy sent to supplier, receiving department,, office

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• After inspection Goods Received Note is prepared by, receiving official, • Accounts department verifies all documents and, makes payment to the supplier., • Material is issued to the production department on, the basis of material requisition., • Material requisition is a document used to authorise, and record the issue of materials from the stores., • Bill of Materials is prepared by planning department, in prescribed form.

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Bill of Materials : Planning department, Production department, Stores department, Entry in bin card, Issue material to production department, Costing department enters into store ledger

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MAIN TECHNIQUES OF INVENTORY, CONTROL, A), B), C), D), E), F), G), H), , Determination of stock levels., Economic order quantity., Ved analysis., Material turnover ratio., Abc analysis., Perpetual inventory system., Simplification and standardization., Classification and codification.

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Fixation of Stock levels, Funds, , Storage space, , Storage loss, , Cost of storage, , Regularity in availing, material, , Rate of consumption, of material, , Time lag, , Price fluctuations, , Economic order or, reorder quantity

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DETERMINATION OF STOCK LEVELS, REORDERING LEVEL, AVERAGE STOCK, LEVEL, Minimum stock level, Stock, levels, , DANGER LEVEL, , MAXIMUM STOCK LEVEL

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2) MINIMUM STOCK LEVEL:, Minimum Stock level = Reordering level +, (Normal Consumption × Normal Reorder, Period

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1) REORDERING LEVEL:, Reordering level= minimum level +( normal, consumption ×Normal Reorder Period), OR, , • maximum consumption × maximum, reorder period

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• 3) MAXIMUM STOCK LEVEL:, Maxi. Stock level = (Reorder level +, Reorder quantity) – (Minimum, consumption × Minimum reorder, period)

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• 4) DANGER LEVEL:, Danger level = (Normal consumption ×, Maximum reorder period for emergency, purchases)

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• 5) AVERAGE STOCK LEVEL:, Avg. stock level: ½ (Maximum stock, level + Minimum stock level), OR, Minimum stock level + ½ (Reorder Qty)

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B) ECONOMIC ORDER QUANTITY, EOQ, , CARRYING, COST, , ORDERING, COST

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E.O.Q = 2AO, C, Where, A = Annual consumption, O= Cost of placing an order, C= Inventory Carrying Cost, , •

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•Number of orders placed during the year, , = Annual Consumption, EOQ, •Total Cost of placing orders in a year, , = No. of orders × Cost of placing an order, •Annual Storage Cost = EOQ × Carrying cost per unit, 2

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MATERIAL TURNOVER RATIO, • M.T.R = Cost of material consumed, during the period, Cost of average stock held, during the period, Average stock = op. stock + cl. Stock, 2

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A.B.C Analysis, • Abc stands for always better control system. In, this technique basically important material is, controlled keenly and unimportant material is, left out.

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ADVANTAGES OF ABC ANALYSIS, •, •, •, •, •, , Reduction in purchase cost, Proper control, Best utilisation of resources, Minimum investment, Reduction in control cost

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PERPETUAL INVENTORY SYSTEM, It is a system of records maintained by the, controlling department, which reflects the, physical movement of stocks and their current, balance., Bincard and stores ledger are maintained which, show goods received, issued.

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CLASSIFICATION AND CODIFICATION:, • Classification and codification of materials are, essential for a good system of store keeping., • Codification is next stage of classification of, stores.

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INVENTORY RECORDS, • Two important records of material received &, issued are generally kept., , BINCARD, , STORES, LEDGER

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BINCARD: Bin means a place, rack, almirah or, that place where materials are stored. A, bincard is usually kept in bin. It provides, quantitative record of receipts, issues &, balances of stock., It is maintained by store keeper.

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STORES LEDGER: This ledger is kept in costing, dept. This ledger provides the information, for pricing if materials issued and the money, value at any time of each item of stores.