The store is to facilitate receipt, storage, retrieval and issue.
Return on investment (ROI): The major corporate objective in any organization is to improve ROI.
The return on investment is return divided by investment.
Investment consists of fixed capital and working capital.
Improving ROI is possible by increasing the return or by decreasing the investment (fixed capital and working capital).
Fixed capital is not possible to reduce but return increase is possible by increasing the capacity utilization.
Approximately seventy to ninety per cent of the working capital gets block in inventories.
One important method of increasing the return is to reduce all kinds of inventories stocked in warehouses.
Material enters in to organization as raw material, components, spares or consumables. These materials converted in to finished goods and sold.
Input materials contribute to over sixty per cent of the value of finished goods.
These percentages are approximate and vary depending on the industry.
Any reduction in the inventory and its associated costs will increase the profitability substantially.
This shows the importance of economy in warehousing and the interrelated areas of purchasing, planning, logistics and inventory control.
Proper identification of how the materials have been consumed and an accurate updating of warehouse records on receipt, issue, price, balance, wastage, rejection losses, etc., are the initial steps involved in effecting economy in stores.
Reducations in obsolescence, waste minimization, reduction in queuing etc are some of the areas where stores personnel will play a major role in increasing the profitability.