STORES DEPARTMENT A MONEY SAVER
19. Although a stores department is the first essential in the operation of a cost accounting system, manufacturers sometimes hesitate to install such a department on the ground of expense. Without considering its valuable features, the claim is made that the operation of this department involves a larger expenditure than is warranted by the results. But such claims are not borne out by the experience of manufacturers who have tested the efficiency of the department. Where results are found which appear to support this claim, investigation will invariably reveal faulty installation or faulty operation, or both.
Opposed to this claim, the experiences of many manufacturers show that the stores department is an actual money saver. If anything like an efficient cost-accounting system is to be maintained, a stores department is an absolute necessity; but even if there is no cost system, a stores department can be made profitable. An adequate system of records in a well-organized stores department will show at all times the exact condition of the stock, and this alone should justify the maintenance of such a department. Slow moving stocks are pointed out, so that a greater effort may be made to move them; if a stock is running low, the records give warning before the danger point is reached. All this applies with the same force to a trading business as to a manufacturing enterprise. By showing the volume of stock on hand, by pointing out its movements, a stores-record system prevents the accumulation of dead stock, yet makes it possible to maintain active stocks at the lowest volume consistent with safety, and thereby saves money by keeping the investment at the lowest possible point.
Surprising results in money saving through stores-record systems have been shown by some manufacturers. In one case which came within the writer's observation, a reduction of more than $10,000.00 in the average investment was made. A certain manufacturer of machinery, who had an inadequate stores system, found that his stock of material averaged $30,000.00, while the business required a stock of not more than $20,000.00. He engaged a competent man to install and operate the system, paid him a liberal salary, and at the end of a year found that his stock averaged less than $20,000.00. Moreover, the stock was clean—there being nothing in it that was not needed—was well arranged, and in every respect in a more satisfactory condition than before. That meant a saving of the earnings of $10,000.00, and by using it in extending his business, the money was worth 20% to him.