A CORNER IN THE GENERAL OFFICES OF THE DOBIE FOUNDRY & MACHINE CO., NIAGARA FALLS, N. Y.
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.
INSTALLING A STORES SYSTEM
20. When the inventory has been completed, the next important step in the organization of a stores department is to provide the necessary storage places for all materials and supplies and see that these are properly stored.
The question, as to what is a proper storage place is one which must be worked out to fit conditions as found in the individual establishment. Generally speaking, in a manufacturing business, materials should be located as closely as possible to the departments in which they will be used. In a large plant it is usually necessary to have several storerooms to accommodate the various classes of material, and in order that they may be located conveniently. The question of proper storage is a vitally important one in every business, and especially so in a manufacturing plant. Ideal conditions are impossible to obtain in all plants, but the first consideration should be to have a definite storage place for every class of material, and to always keep the material in that especial place. Go into a plant having no well-defined system of storage, and you will find workmen spending more time looking for materials needed than would have been required to take the same material to a stockroom and withdraw it as needed. In trading businesses the necessity for systematic stock keeping has long been recognized. Wholesale houses have their stock arranged in departments and stored on different floors of the warehouse with special men in charge of stock keeping. A retailer, no matter whether he is operating a department store or dealing exclusively in one class of merchandise, has his goods arranged by departments. But in too many manufacturing plants the question of storage for raw material and supplies has received little consideration. A manufacturer will invest dollars in raw material and keep no record of it; yet the same man would regard as preposterous the suggestion that he should keep no record of cash. As a matter of fact, the material should be as well cared for, and as strictly accounted for, as cash. Every dollar's worth of material should be regarded in the same light as a dollar in gold.