THE STOCKROOM-DOES IT PAY? BY E. L. MILLIKEN A stockroom may be an asset or it may be a liability to a public utility. It may help to reduce operating expenses and yet cost more to maintain than the saving it effects. To a utility in a remote locality it may be a liability and yet be necessary in order to maintain continuous service. By this is meant that a utility situated far from supply centres must keep on hand, perhaps for long periods, materials and spare parts necessary for its business, even at a loss, in order to have these on hand at a moment's notice when needed. From the above it can be seen that it may be very difficult to decide whether a stockroom is an assistance or a hindrance in the operation of a public utility. The exact benefits which may be derived from a stockroom will depend largely on the judgment which is used in placing or maintaining stock on shelves or in bins. The immediate advantages of a stockroom would appear to be as follows: (1) It enables purchases to be made in larger quantities, thereby eliminating jobbers' and retailers' profits, and effecting a saving in the clerical and other work involved in intermittent purchasing of small quantities. (2) Material and parts are on hand if stock is properly kept up, and are thus always available as and when needed. This is of particular value to public utilities, which use innumerable materials kept only by the manufacturers of the machinery, apparatus and devices peculiar to their business. (3) In times such as the present it enables purchasing when prices are most favorable, and, if such purchases are made with judgment, ensure sufficient supply in spite of freight embargoes or poor deliveries. With freight movements as slow as they have been in the past few months, it may save heavy expense for express shipments which would otherwise be necessary in order to have material on hand when needed. As against the foregoing advantages there are the following items of expense and possibilities to be considered: stock. (1) The interest on the money tied up in supplies kept in (2) The interest on the stockroom building and fixtures necessary to house and handle the supplies. (3) The labor cost and other expenses of maintaining and operating a stockroom. (4) There is sometimes a tendency to overstock. Not only does this increase the interest charges, but in some cases the stock of any particular item may not be used up before it or the apparatus on which it is used becomes obsolescent. Such items as are on hand at the time obsolescence occurs are a dead loss except perhaps for their scrap value, unless, as happens in rare cases, it can be sold for its original purpose. (5) Material on hand in a stockroom is liable to be used more freely than material ordered as required. Frequently if it is not possible immediately to secure a piece of material or repair part to replace a similar defective piece, the old one is repaired and gives considerably longer service. With such items in stock, the easiest way out of the trouble is frequently taken-new material is secured from the stockroom instead of an effort being made to repair the old. (6) The cost of the system of records necessary to keep track of a stock of articles of comparatively small value may be more than the material is worth. If such small articles, as for example screws of a size and kind used infrequently, are stocked by and obtainable from local merchants at all times, it is probably cheaper to buy as required and charge direct to job. (7) The purchasing in quantities direct from the manufacturers of supplies of hardware and other articles carried in stock by local merchants is frequently looked upon by the latter with disfavor, to the detriment of the operating company. (8) Some materials, such as flashlight batteries, deteriorate with age. Others, such as volatile oils, suffer loss through evaporation. Liquids unless stored in special containers may be lost through leakage. All of such materials if stocked unwisely may prove a source of expense, the loss through different causes sometimes offsetting saving in cost through purchase in quantity. (9) It may not be profitable to stock an article which requires undue space for storage. This is particularly true where the size of the stockroom is necessarily limited and building costs are high. Heavy iron castings and materials not affected by weather that are transported with difficulty can frequently be stored out of doors. In some such cases, however, land is so valuable that it may cost more for such storage than to buy in smaller lots at a higher price. Let us take a concrete example of a stockroom housed in a building costing $4,000 on land valued at $1,000. The value of the average stock on hand throughout the year is $40,000 and the annual turn-over, that is the amount of stock charged out per year, is $30,000. In charge of the stockroom is a storekeeper receiving a salary of $75 per month, and a clerk at a salary of $60 per month who spends one-half of his time on stock records. The actual annual cost of maintaining such a stockroom would then be as follows: Obviously the stockroom in question must save the company operating the same, $6,490 per year on purchases totalling $30,000, or an average of nearly 18 per cent on each purchase. Unless this saving is made, the stockroom will not pay its own way from a dollar and cent standpoint. As previously mentioned, the actual overall saving is difficult to estimate. The utilities of time and convenience in having stock on hand when it is wanted are so great and enter so largely and in such a variety of ways into the different operations of a public utility that no reasonable monetary value can be assigned to them. Those charged with the operation of public utilities know full well that it costs money if they have not at hand the materials and parts in times of emergency. When they are at hand, however, less thought is given to the savings thus affected, but the costs nevertheless do exist. It might seem that the intent of this article was to discourage the maintaining of a stockroom. Such is far from the case. An endeavor has been made merely to point out some cases in which a stockroom may defeat its purpose. If purchases are made with good judgment and in such quantities as admit of the material being turned over within a reasonable period; if the items carried are not such that the cost of records is too great or the storage space required is not unreasonable; if care is taken not to stock up with articles or parts of machines or apparatus in excess of the number required during the life of such machines or apparatus; if items liable to shrinkage while being stocked are not purchased in undue quantities and are kept in proper receptacles to reduce shrinkage; if purchases are made from local merchants or agents where good policy dictates; then a stockroom for a public utility will prove a convenience, a means of maintaining a higher service standard, and a factor in keeping down operating expenses. |