Stores management explained: objectives, functions, store types and layout, codification, receipt and issue procedures, bin card vs stores ledger, FIFO and weighted average pricing, and stock level formulas.
Updated 13 min read
Stores management is the function of receiving, storing, protecting, recording and issuing materials in a systematic way, so that the organisation always has the items it needs, in usable condition, at the right place and time. A simple way to put it: purchase management brings materials into the organisation; stores management looks after them from the moment they arrive until they are used.
It matters because materials are money in physical form. A company may buy exactly the right item, yet if it is stored badly it can be damaged, stolen, misplaced or forgotten, and production may stop even though the item is somewhere in the building. Good stores management protects this investment, keeps production running and gives reliable stock figures for purchasing and accounting.
A store is a controlled area where materials are kept until they are required. It may hold raw materials, components, spare parts, tools, consumables, packing materials, maintenance items, office supplies, work-in-progress and, in some organisations, finished goods. A store is not just a room; it is a managed space with procedures, records and security.
A home kitchen is a useful comparison. If groceries are not arranged, sugar may be mistaken for salt, items expire, ingredients run out unnoticed and duplicates get bought. Arranged properly, everything is easy to find and waste is low. An organisation's store works the same way on a much larger scale.
Poor storage leads to damaged materials, misplaced items, production stoppages, theft and wastage, piles of excess stock and wrong items being issued. Good stores management helps in:
smooth, uninterrupted production;
proper material control and accurate stock records;
reduced wastage, damage and pilferage;
lower storage and handling cost;
quick identification and issue of materials;
timely information for purchase and inventory decisions.
Long distances to users, delays, higher handling
Decentralised (sub-) stores
Separate stores near each department
Quick issue, less handling, suits large or spread-out plants
Duplication of stock and staff, harder control
Central store with sub-stores
Main store feeds small sub-stores
Combines control with convenience
Needs good coordination and records
Stores may also be classified by what they hold: raw material stores, general stores, tool rooms, finished goods stores, and special stores such as cold storage or bonded warehouses.
Store layout is the arrangement of racks, bins, shelves, aisles, the receiving bay, the inspection area and the issue counter. A good layout saves movement time, makes items easy to locate, allows safe handling, separates categories and supports quick receipt and issue. Store layout is to a store what plant layout is to a factory.
A simple store layout in which material moves one way, from receipt through inspection and storage to the issue counter.
Items may be grouped by nature, department, usage, value, size or frequency of issue: for example, electrical items in one section, hardware in another, consumables in a third and fragile items separately. Classification makes identification, storage, issue, stock control and record keeping easier. Value-based classification using ABC analysis, first described by Dickie, lets the store give its tightest control to the few high-value items.
Codification gives each item a unique code, such as RM-101 for a raw material, SP-205 for a spare part or TL-310 for a tool. Codes avoid confusion between similar items, speed up record keeping, support computerisation and barcoding, help stock checking and prevent the same item being recorded under two names. Codes may be alphabetical, numerical or alphanumeric; many firms use a structured numeric code where each group of digits stands for class, sub-class and item.
Each item's address is recorded, for example "Rack A, Shelf 2, Bin 5". Without a location system, time is wasted searching, wrong items are issued and the store becomes disorganised.
Identify the material and check availability.
Issue the correct quantity, normally oldest stock first.
Record the issue and update the balance.
Uncontrolled issue leads to excess use, theft and unreliable records. Unused material returned by a department is received back on a material return note.
Different items need different care: cement must be kept dry; chemicals may need sealed containers and ventilation; rubber items need cool, dark storage; metal items need anti-rust treatment; fragile items need careful handling; perishables need controlled temperature and strict FIFO. Good preservation reduces deterioration, spoilage, corrosion, breakage and financial loss.
Store accounting records the movement and value of materials. It tells management about usage, stock levels, stock value, losses and reorder needs, and supports inventory control, cost control, audit, purchase planning and production continuity. When the same item has been bought at different prices, the store must decide which price to charge on issue. Two common methods are FIFO and weighted average.
Check: total value available is ₹2,000 + ₹3,600 + ₹2,600 = ₹8,200 under both methods. With rising prices, FIFO charges lower costs to production and shows a higher closing stock; the weighted average smooths out price changes.
Suppose the same factory uses bolts at a minimum of 100, a normal rate of 150 and a maximum of 200 units a week. Lead time is 4 weeks at best, 5 weeks normally and 6 weeks at worst. The re-order quantity is 1,000 units, and an emergency purchase takes 2 weeks.
With normal usage, stock ordered at the re-order level of 1,200 falls to exactly the minimum level of 450 when the 1,000-unit delivery arrives five weeks later.
The chart confirms the logic: starting from 1,800, stock reaches 1,200 after 4 weeks, an order is placed, and during the normal 5-week lead time another 750 units are used, so stock touches 450 just as the delivery arrives. If stock ever falls to the danger level of 300, the store should arrange an emergency purchase.
Physical stock must be counted and compared with book stock. Periodic verification counts everything at set intervals, often at year end, usually with the store closed. Perpetual inventory with continuous stock-taking keeps records up to date after every movement and counts a few items every day, so that the whole store is covered during the year without stopping work. Differences may come from counting or posting errors, breakage, evaporation, theft or wrong issues; they must be investigated, approved and adjusted.
Storekeeping is the day-to-day running of the store by the storekeeper, who is both custodian and controller of materials. The storekeeper's duties include receiving and checking incoming material, arranging and labelling items, issuing only against authorisation, updating records, protecting material from damage, keeping the store clean and safe, reporting shortages, excess or damage, cooperating with purchase and production, and helping in stock verification. A careless storekeeper creates stock confusion, production delays, losses, wrong issues and record mismatches.
A good storekeeper needs honesty, care, record-keeping skill, knowledge of materials, discipline, alertness, communication skill and a sense of responsibility. A good store, in turn, is clean, well arranged, safe, secure, clearly labelled, easy to access, ventilated where needed and backed by good records.
Stores management, inventory control and purchasing#
Basis
Stores management
Inventory control
Purchase management
Focus
Physical handling and custody
How much stock to keep
Buying the material
Typical tasks
Receive, store, preserve, issue, record
Set reorder levels, order quantities, ABC classes
Find suppliers, negotiate, order, follow up
Key question
Is the material safe, findable and recorded?
Is the stock level right?
Is the right material coming from the right source?
All three must coordinate. If purchasing buys well but stores manages badly, operations still suffer.
A well-run store reduces cost by preventing damage and theft, avoiding duplicate purchases, reducing idle stock, ensuring timely issue so production does not stop, and identifying slow-moving and obsolete items early. It is a contributor to cost efficiency, not merely a support function.
Stores management is the function of receiving, storing, preserving and issuing materials systematically so that they are available when needed. Its objectives are safe custody, uninterrupted supply, proper classification and codification, correct stock levels, accurate records and economy in storage. Its functions include receiving and inspecting materials, storing and preserving them, issuing against authorised requisitions, maintaining bin cards and the stores ledger, pricing issues, verifying stock and disposing of surplus. Good stores management reduces waste and cost, supports inventory control and keeps production running.
What is the difference between a bin card and a stores ledger?#
A bin card is kept by the storekeeper near the material and records quantities only; the stores ledger is kept by the accounts or costing office and records both quantity and value.
How are the re-order, minimum and maximum levels calculated?#
Re-order level = maximum usage × maximum lead time; minimum level = re-order level − normal usage × normal lead time; maximum level = re-order level + re-order quantity − minimum usage × minimum lead time. With the example data these give 1,200, 450 and 1,800 units.
What are the advantages of a centralised store?#
Better control, lower total stock, fewer staff, easier stock-taking and better use of space; its drawback is distance from users and slower issue.
It gives every item one unambiguous identity, prevents duplicate names, speeds up records and makes computerised and barcoded stock control possible.
What is the difference between stores management and inventory control?#
Stores management deals with physical receipt, custody and issue of materials; inventory control decides how much stock to hold and when to reorder.
Why does FIFO give a different closing stock value from weighted average?#
FIFO leaves the latest prices in closing stock, while weighted average blends old and new prices. When prices rise, FIFO shows a higher closing stock, as in the example (₹1,950 against ₹1,800).
