will be assisted by the foremen and as many helpers as may be required.
Each clerk is given a supply of tags, ruled as shown in Fig. 14. These
are made in the form of shipping tags, but larger than the usual sizes
used for that purpose. It will be noted that the tag is perforated near
the top. The portion above the perforation shows the season and date of
inventory, the card number, and the department. The card number and the
department are repeated on the lower part of the card, which is also
divided into two parts. The upper half is for an inventory of material,
finished stores, and work in process, divided as to _description_,
_name of last operation_, the _quantity_, and the _unit_. The lower
half is for an inventory of tools, machinery, equipment, and supplies,
with provision for the _description_, _quantity_, _unit_, _numbers_,
and _location_. By _unit_ is meant the unit in which the material or
supplies are priced, as pounds, yards, dozen, gross, etc.
The first operation is to attach one of these cards, which are
consecutively numbered, to each machine, tool, bin, rack, or pile of
material. Then the clerk and his assistants will go through the shop
and weigh and count the material represented by each tag, recording
the items on the tag itself. As this is done, the lower half of the
tag is torn off. Since a record is kept of the card numbers given to
each clerk, it will be necessary for him to turn in every one, and if
care is used in placing the tag on every article before the count
has begun, there is no possibility of material being overlooked. As
a further precaution against the loss of cards, the remaining part
of the tag is afterward removed and sent to the office for checking
against the main record. As the tag is used merely to insure a record
of quantities of all property, it is unnecessary to include prices.
[Illustration: Fig. 14. Labor─Saving Inventory Tag]
With this method an inventory can be taken in a very short time. There
are cases on record where an inventory in the largest industrial
enterprises has been taken by this method without shutting down the
plant in any department for a longer period than two days.
=18. Inventory Records.= When the physical inventory has been taken,
the next step is to record quantities and prices, and make the
extensions that the record may show total values. The records of the
inventory should be classified; that is, all material or equipment of
a certain class should be recorded on the same form, so that the total
value of each class can be ascertained.
For a manufacturing business, the inventory is subdivided as follows:
Machinery and Equipment.
Machine Tools.
Small Tools.
Drawings and Patterns.
Materials and Supplies.
Parts and Finished Stores.
Work in Process.
Manufactured Goods.
One form might be made to answer the purpose for all these inventories,
but as certain special information is needed in each case, it is
considered the better plan to use special forms. We, accordingly,
illustrate forms for each of these classes.
_Machinery and Equipment._ Under this heading is listed all
_machinery_, _furniture_, _office appliances_, and _equipment_ of all
classes required in the operation of the business. The form for the
inventory is shown in Fig. 15, this being a loose─leaf form, about 10 x
12 inches in size.
For this section, a sheet is used for each specific class of equipment,
and, where the same class of equipment is required in different
buildings or departments, a sheet is used for each department.
For instance, all typewriters used in a given department will be
inventoried on one sheet, and no other equipment will be inventoried on
the same sheet.
The information given at the head of the sheet includes the _location_,
_cost_, _estimated life_, _name_, _series number_, _our number_, and
_from whom purchased_. The form provides for a record of date (meaning
date purchased), and description of the equipment, original cost, cost
of additions and repairs, per cent and amount of depreciation, and the
net value. Reference to this record shows the exact number of machines
of a given class in use and just where they are being used.
_Machine Tools._ Under the head of machine tools, an inventory covers
all tools of this character, whether purchased or manufactured in
the plant. Since large plants usually manufacture their own machine
tools, this form is used to show _date of manufacture or purchase_,
_description_, _cost of material and labor_, _per cent_, and amount
added to cover the _factory burden_, and the _total cost_. Like the
form used for machinery and equipment, all machine tools of a given
class should be inventoried on the same sheet, Fig. 16.
[Illustration: Fig. 15. Loose─Leaf Form for an Inventory of Machinery
and Equipment]
[Illustration: Fig. 16. Inventory Form for Machine Tools]
[Illustration: Fig. 17. Inventory Record of Small Tools]
[Illustration: Fig. 18. Form of Inventory Sheet for Drawings and
Patterns]
[Illustration: Fig. 19. Form of Inventory Sheet for Materials and
Supplies]
[Illustration: Fig. 20. An Inventory of Parts and Finished Stores]
[Illustration: Fig. 21. Special Form for Inventory of Work in Process]
[Illustration: Fig. 22. Sheet for an Inventory of Manufactured Goods]
_Small Tools._ Most small tools are purchased, but some of them may be
made in the plant. These tools may be purchased singly, or in lots of
one dozen, or in other quantities. To meet these conditions the form,
Fig. 17, provides for a record of _date of purchase_, _description_,
_quantity_, _unit_, _material and labor costs_, _per cent and amount of
burden_, and _total cost_. When the tools are purchased ready for use,
only the last money column is used.
_Drawings_ and _Patterns_. This inventory includes all drawings and
patterns that are in use or of value to the business. In placing a
value on this property, conservatism is necessary. A new pattern is
supposedly worth what it cost to manufacture it. But a pattern may
become obsolete in a very short time. It is necessary, therefore,
when taking the inventory, to estimate the probable life of all
patterns, basing this estimate not only on wear and tear, but on
the probability of their being replaced by later models. The cost
of drawings and patterns should be entirely absorbed in the cost of
the goods manufactured, and to cover this a very liberal rate of
depreciation must be provided. In the inventory form we do not show the
depreciation, as we consider it more practicable to take a complete
inventory, and make a new appraisal of drawings and patterns at the
end of each fiscal period. The form given for this inventory, Fig. 18,
shows _date put in stock_, the _number_, _description_, and _details of
cost_.
_Material_ and _Supplies_. The inventory of material and supplies
includes all material which goes into the construction of the goods and
all supplies required in the operation of the plant.
In recording this inventory, supplies and material should be kept
separate, and each should be thoroughly classified. One sheet should
show but one special class; that is, if one of the items is hardware,
nothing but the hardware inventory should be included on the same
sheet. This form, shown in Fig. 19, gives the _description_, the
_purpose for which the material is used_, _quantity in stock_, _unit of
measure_, _unit value_, and _total value_.
_Parts_ and _Finished Stores_. This section is intended to include all
finished parts in a plant manufacturing parts to be later assembled
into complete machines, also any finished stores or semi─completed
parts. Under the latter head would come such items as castings, which
are made in advance, to be used as needed. This inventory is recorded
on the form shown in Fig. 20, giving the _description_, _for what
used_, _the number of the part_, _quantity_, _unit_, _unit value_, and
_total value_.
_Work in Process._ Under the head of _work in process_ is included all
partially completed orders in the plant at the time of inventory. If an
efficient cost system has been maintained, it will not be a difficult
matter to arrive at accurate costs of all such material. Without a cost
system it is necessary to use extreme care in estimating the cost of
material and labor to date.
One of the most important items of information in this inventory is
the last operation, which means the last completed operation. It is
necessary to have this information before we can figure the actual
cost. The form for this inventory, Fig. 21, includes _description_,
_name of last operation_, _cost of material_, _cost of labor_, _per
cent and amount of burden_, and _total value_.
_Manufactured Goods._ The inventory of manufactured goods includes
all goods completed ready for the market. In a trading business this
would include the regular stock in trade. Fig. 22 shows a form for the
inventory of manufactured goods, which, with slight changes, would
answer the purpose for the stock in a trading business. The form shows
the _order number_ (meaning the shop order number on which the goods
were manufactured), the _description_, the _quantity_, the _material
and labor costs_, the _burden_, and _total value_.
When these inventories are completed, and the extensions made, it will
be seen that a complete record of values of all physical property is
provided. From these records the ledger accounts should be adjusted
so that all records will correspond. The records also furnish the
necessary information from which to make the stores record, which is
necessary when installing the system.
These inventory sheets may be filed either in the drawers of a vertical
file or in a loose─leaf binder, though the latter is preferred. The
sheets for each class should be kept by themselves and classified as
explained above. The index may be alphabetical, or blank indexes, on
which the names of the classes are written, may be used. The sheets
in each class should be numbered consecutively and kept in numerical
sequence.
[Illustration: 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.
Next in importance to the location of the storerooms is the question
of the storage of the material itself. The storerooms should be
equipped with such bins, racks, shelves, boxes, and drawers as may be
required for the proper care of the material. In storing the material
the question of its size and weight, and the frequency with which it
will be needed, should be considered. Extremely heavy articles should
not be stored on the floor, but should be raised to about the height
of a truck, thus saving labor both in unloading and loading. Material
which is constantly being called for should be kept on shelves that
are within easy reach. The top shelves and inaccessible corners can
be reserved for articles seldom called for. As far as possible, all
articles of the same class should be kept in the same section of the
storeroom. Above all, a given article should always be kept in the same
place. In some storerooms it is not uncommon to find, hidden away in
some dark corner, articles which are not supposed to be in stock, all
because no definite storage place has been provided. The record system
can be of little value unless the articles are to be found in the
sections allotted to them.
All of this but emphasizes the importance of having the storeroom and
stores system under the exclusive control of one man. No one should
be allowed to interfere with the work of the chief stores clerk. If
there is any cause for criticism it should be taken to his superior.
Suggestions from foremen and others who are obliged to make use of the
storeroom, should, and probably will, be welcomed by the average stores
clerk, but no foreman should instruct one of his men to place material
in the storeroom except as instructed by its head.
Aside from the storeroom proper, the stores clerk will have charge
of material stored outside of the plant. Lumber, fuel, and heavy
castings are examples of material coming under this head. Nevertheless,
his records should include all of this material, and he should have
general supervision over its storage in order that he may more readily
determine, or more closely estimate, quantities in stock.
=21. Receiving.= In the organization of the _stores department_, it
is necessary to provide for a record of the _receipt_ of all material
and supplies. The system must be so constructed that it will not only
insure a record of all goods coming into the establishment, but prevent
the acceptance of goods which should not be received.
All receiving should, therefore, be in charge of one man. In the larger
industrial enterprises, a receiving clerk is employed, whose duty is to
receive and receipt for all goods coming into the establishment, and to
deliver them to the storeroom or the department in which they are to
be used. The stores clerk may, in a small concern, perform all of the
functions of the receiving clerk.
When goods come in, the receiving clerk will refer to his file of
purchase order copies to find if the goods have been ordered. It will
be remembered that an alphabetical file has been recommended for these
orders, which are to be filed under the name of the shipper. The reason
for this is that the package does not always show the nature of its
contents, while the name of the shipper is almost invariably shown
somewhere on the package or on the shipping tag.
Goods should not be accepted by the receiving clerk unless he has an
order. To do so is liable to cause trouble. As an illustration, we will
suppose that the concern has made a contract for material on which
deliveries are to be made at stated intervals. The first shipment
received shows that the material is not up to specifications and the
contract is cancelled. Pending an adjustment, the receiving clerk is
instructed to accept no more material on the contract. If he does so,
the concern will very likely be obliged to pay for it, and it may even
have a bearing on the entire contract.
Another class of shipments which must be carefully watched is the
return of goods by customers of the concern. In some businesses, this
question is not important; in others, great care must be exercised to
insure proper credit. In a manufacturing or a trading business other
than retail, the customer will usually notify the house that he is
returning goods. When such a notice is received, instructions should be
given to the receiving clerk whether to accept or refuse them.
One class of business in which the receipt of returned goods must be
handled with extreme care is the installment business. Most installment
contracts vest title to the goods in the seller until all payments are
made. To avoid payment, a customer may return goods without notice.
Acceptance by the seller cancels the contract at once. A safe rule to
follow, therefore, is to accept no returned goods until authorized to
do so by one in authority.
The receiving slip, Fig. 13, Page 16, is to be filled out by the
receiving clerk. One copy will go to the purchasing agent and the
other to the stores clerk. From these reports the stores clerk makes
his record of material received. In some cases material ordered for the
use of a particular department is to be sent direct to the department
and not to the storeroom. A third copy of the report should be made
which will be sent to the department, from whence it will go to the
stores clerk, properly receipted.
=22. Deliveries.= The stores clerk, being in custody of all stock, is
responsible not alone for its safe keeping but for deliveries. He must
be in a position to show what stock has been delivered, to whom, and
for what purpose.
There is but one method that will insure an accurate record of
deliveries and that is, to deliver no goods without a written order or
requisition, signed by one having authority to authorize withdrawals.
Each department, or shop, should be supplied with storeroom
requisitions, numbered consecutively with the department number or
letter; that is, a requisition from one shop might be numbered _B_ 100,
another _C_ 100. These requisitions should be made in duplicate or
triplicate. When the duplicate form is used, the original is sent to
the stores clerk and the duplicate retained by the foreman. When the
stores clerk has completed his records and the foreman has received the
material, both copies are to be sent to the cost department. One copy
acts as a check against the other, making it impossible for either the
stores clerk or foreman to make false returns. To make identification
easy, the two blanks should be printed on paper of contrasting colors.
In the cost department one copy should be filed according to the
department in which the requisition originated, keeping the numbers
consecutive, and the other under the production or job order number. On
completion of the order, the latter copy can be destroyed as it will no
longer be needed. The departmental copies may also be destroyed, say at
the end of a three months' period.
Sometimes it will be found advisable for the stores clerk to retain a
copy of the requisition, in which event the triplicate form will be
used, two copies being sent to him. He will file his copy by production
order numbers, if for material, or by departmental numbers, if for
supplies.
All requisitions should provide for a record of prices and values,
these to be entered in the cost department. If this is omitted it
will be necessary for the cost clerk to enter the items and extend
cost on another blank; when included, he can post values direct from
the requisition to the permanent cost records. Place should also be
provided on the requisition for the signature of the one who receives
the material.
[Illustration: Fig. 23. Requisition for Material to be Used on a
Production Order]
A form of requisition adapted to the use of the average manufacturing
enterprise is shown in Fig. 23. This form shows the _department
number_, the _date_, the _production order number_, _quantity_,
_description_, _cost_, and _value_. At the bottom the necessary _form
of receipt_ is provided. Usually this form will be found adequate for
both material and supplies. When used for supplies, the purpose for
which they are intended is to be inserted in place of the production
order number. Special forms for supplies and repair material are used
in some plants. These should differ in color from the _material_
requisitions. A form of this character is illustrated in Fig. 24.
STORES RECORDS
=23.= The installation of a stores─record system calls for the exercise
of judgment of the highest order, for the record of material and
supplies is of no less importance than the record of cash. As has
already been stated, material should be accounted for with the same
fidelity as cash; a dollar's worth of material should be regarded as a
dollar in gold.
The stores record system should be an integral part of the accounting
system of a business; it should be checked as carefully as any
account in the ledger. Only by making the stores record a part of the
accounting system can it be operated successfully.
[Illustration: Fig. 24. Special Departmental Requisition for Material]