inventory control,asset and store management and distibution - erick

8/18/2019 Inventory Control,Asset and Store Management and Distibution - Erick

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Learning Outcomes

Discussion Areas:

Routine stores operations- Inspections,

receiving, issuing & returns of goods( works &

services). Inventory Control(stores & other non stock items

& its objectives

The concept of Inventory Management and therelevant systems.

Optimizing the Inventory management process


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Certification of goods,works &

services

Inspection and Acceptance of Goods, Works,

Services marks the final step of the Procurement

Cycle.

At this point the Procuring Entity should ensurethat the contracts is duly enforced by the two

entities,

It important to ensure that the deliveries

correspond to the contracts terms, especially

with respect to: time, standards, quantity,

place,cost,sample(where applicable)


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Receiving Process(Goods)

Receive the goods the delivery notes,

parking list & the invoice;

Marshal the goods to the receiving &

inspection bay & record/post the receipts in

a transit location;

Arrange for the inspection of the receipts;

Upon inspection receive the inspection

report and act on the recommendations;


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Receiving Process(Goods)

If accepted create a GRN: forward the

GRN, inspection report, delivery note and

invoice for payment processing.

If rejected in part/whole: write a letter to

the supplier to collect the defective goods

within a stipulated period.


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The PPADA 2015 on Receiving

The PPDA 2015 on receiving of goods,

works and services

159(1) An accounting officer of a procuring entity shallonly receipt goods, works and services which have beencertified in accordance with this section and section152

Certification in this case is an outcome ofthe inspection process.


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Recording of goods

Recording of inventory is the responsibility

of the procurement function.

The records of inventory should be

maintained in the inventory master for

stock items.

The records of non-stock items can be

maintained in a ledger, asset register or a

bin card.


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Recording of Inventory

All the inventory records should be

updated.

Discrepancies must be investigated;

where necessary approvals sought for

adjustment.

Tools, equipments and other assets

issued to staff should be recorded in their

personal a/c.


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Recording of Inventory

Staffs to whom any asset is issued should

annually report on their condition.

Incase of the need to replace an asset

issued to staff, where possible the

old/damaged asset should surrendered.

The cost of missing/lost/damaged assets

in the hand of any staff should be

recovered.

The asset ledger should stored under lock.


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PPADA 2015 on Recording of

stores

The PPDA 2015 on recording of goods,

works and services

159(2) An accounting officer of a procuring entity shall

record goods, works and services received undersubsection in an inventory of the procuring entity as shallbe prescribed.

The record will take the form of an inventoryregister/ ledger(manual entity), or an electronicinventory management system. (The procedure isintended to allow a clear audit trail of the receipt).


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Receiving & Recording of Stores

The essence of the receiving and recording isprovide in the section 162 (1) as:

An accounting officer of a procuring entity shall ensure

that all inventory, stores and assets purchased arereceived, but shall not be used until taken on chargeand as a basis for ensuring that all procured items are

properly accounted for and put in proper use as

intended by the procuring entity.

This section avoids delivery of materials to usagesites then formalizing the receipts afterwards.


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Open Forum

Discussion on the receipt of:

a) Partial delivery of goods

b) Works with part progress payment madec) Consultancy service

d) Receipt of other Assets(Non stock items)

How to explain the receipt of goods in thestore the end up in disposal?

How do explain payment of ‘hot air’


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Inventory Control & Management

Inventory is the raw materials, componentparts, work-in-process, or finished products

that are held at a location in the supply

chain. Inventory control refers to the techniques

used to ensure that stocks are kept at

levels that provide maximum service levelsat minimum cost.


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Inventory Management

Inventory management encompasses theactivities of forecasting and product

replenishment.

It is concerned with:a) When to order products,

b) How much to order

c) The most effective source of supply for

each item in the warehouse


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Approaches to Inventory

Management

Fixed order point method

Periodic review system method

Economic order quantity method Material requirement planning

Just in time method

Vendor managed inventory


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Inventory Mgt. enabling

Technology

Electronic data interchange(EDI)

Enterprise resource planning(ERP)

Radio frequency identification (RFID) Barcode technology

Electronic point of sale


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Economics of Inventory

Management

Cost of acquisition: pre-order placement

costs, order placement & post order

placement costs.

Holding costs: cost of insurance, lossesin value, alternative cost of capital held in

stock, storage, labour cost & record mgt.

Cost of stock out: lost production, cost ofidle time, cost of action taken to manage

stock out & loss of customer goodwill


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Inventory Metrics

Cash-to cash cycle time: The cash

conversion cycle (CCC) is a metric that

expresses the length of time, in days, that

it takes for a company to convert resourceinputs into cash flows.

Average inventory: An average of

beginning and ending inventory. Formula:{Inventory (current period) + Inventory

(prior period)} ‚ 2.


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Inventory Metrics

Inventory turns(Inventory turnover

ratio) is calculated by dividing the cost of

goods sold for a period by the average

inventory for that period.

Fill rate: The fill rate is the fraction of

customer demand that is met through

immediate stock availability, withoutbackorders or lost sales


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Inventory Metrics

Obsolete inventory: The value/proportionof inventory rendered obsolete(over a

period)

Damaged inventory: The value/ proportionof inventory rendered unusable as a result

of damage/deterioration(over a period)

Average stock out period: The averagereference period in which a given material

remains out of stock(Months,weeks,days)


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Objectives of Inventory Mgt. &

Control

The Act in section 160(1) & (2) outlines theobjectives of inventory control(Assets & stocks) as:

a)To preventing wastage and loss, and continuing

utilization of supplies due to obsolescence,deterioration, theft & shrinkage.

b)To avoid unprofitable lock-up of funds(Tying upof capital)- overstocking, accumulation of dormantstocks


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Inventory Management System

The Act in section 160(3) recognizes that theobjectives of inventory controls can be effectivelymet through the application of the inventory

management and control software. This part of the act encourages best practice in

inventory management.

The spirit being that public sector organizationsare expected to fully automate and integrate theirsupply chain to enhance their competitiveness.

Automated inventory enhances effectivetrail &

controls.


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Inventory Management System

Section 161(1) of the Act gives the role of setting

up of the inventory management system to the

accounting officer while the day to day

management of the system to the head of theprocurement entity.

Section (2) of the Act provides that the

responsibilities for the control and management

of a procuring entity's inventories, stores and

assets management shall be as prescribed.


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Management of Inventory

Responsibilities of the Accounting Officer :

a)To ensure that all inventory, stores and assets

purchased are properly accounted for .

b)To ensure that all inventory are put to proper useas intended by the procuring entity.(section 162(1))

c)To enforce policy issues set out by the Cabinet

Secretary specifying the life span of each categoryof items before boarding for disposal. (section

162(5)).


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Responsibilities of the Head ofProcurement:

a)Shall arrange for occasional visits of inspection to

the stores, at least quarterly in each calendar year.b)Shall conduct quarterly and annual inventory andstock taking in order to ensure compliance with all

respective governing laws and submit the report tothe accounting officer.


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Responsibilities of the Head of Procurement

c) Shall ensure that the stores, inventory and assets

that are procured by a public entity does not sufferdeterioration from any preventable cause andoverstocking of any particular item shall beavoided.

d) Shall receive requisitions for assets or storesfrom users


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Responsibilities of the Head of Procurement

e) Authorize material issues to the requisitioners

NB: The position of the inventory management

roles at the top level of the organization signifiesthe importance attached to the function.


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Open Forum

What inventory management systems do

we have in place?

What risks are associated with inventory

management in your organization.

How can the PPADA 2015 be useful in

optimizing the inventory control &

management function.


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Optimizing Inventory control &

Management

Streamlining of the receipt process.

Automation of the inventory control and

management process.

Assignment of the inventory control &management at the strategic organizational

level.

Emphasis on the key objectives of inventorymanagement as waste management &

overstocking- These two are a common feature

of public sector entities.


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QAC

Questions & Clarifications?

inventory control,asset and store management and distibution - erick

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