Cyril Potter College of EducationTechnical Education Teacher Training

2014 - 2015

MODULE:Workshop Organisation & Management

Ardith Conway

Inventory

Inventory or stock refers to the goods and materials that an organization holds for the

ultimate purpose of use (or repair). Inventory management is a science

primarily about specifying the shape and percentage of stocked goods.

Essential Elements of Inventory

1.Maintaining Enough InventoryYour Institution’s basic stock should provide a reasonable

assortment of products and should be big enough to cover the normal demands of your organization.

When calculating basic stock, you must also factor in lead time -- the length of time between reordering and receiving a

product. For instance, if your lead time is four weeks and a particular product line sells 10 units a week, then you must

reorder before the basic inventory level falls below 40 units. If you do not reorder until you actually need the stock, you'll

have to wait four weeks without the product.

Essential Elements of Inventory

2. Avoid Excess InventoryThis reduces the lost that may be incurred by the

organization due to some f the items not being used and may pass their shelf life leading to them having to be

disposed.

3. Tracking InventoryA good inventory tracking system will tell you what

merchandise is in stock, what is on order, when it will arrive and what you've used.

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Areas in Inventory

1. Replacement costs2. Stock taking3. Insurance4. Fixed and moveable assets5. Legal accountability6. Stock control documentation

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Replacement Cost

Replacement cost is the cost to replace the assets of a company or a property of the same or equal value. The replacement cost asset of a company could be a building, stocks or accounts receivable. This cost can change depending on changes in market value. It may also be referred to as the price that will have to be paid to replace an existing asset with a similar asset.

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Facts of Replacement Cost

The replacement cost of an item is the amount your business will spend to restock it after it has been sold. As many business items are sold in bulk at wholesale prices, the replacement cost may vary over time depending upon your supplier pricing, any deals your business can negotiate and the size of your orders. The market value is the value of these same items at your retail pricing, and will fluctuate as you change your pricing or offer special deals to your customers.

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Significance of Replacement Cost

Replacement cost is used to calculate the amount your business will spend to restock an item after it has been sold, or if it has been rendered unsalable while in inventory.

In any profitable business, the replacement cost will be lower than the market value, preferably much lower. The replacement cost of your inventory represents actual money spent, and now tied up in your goods in stock. The market value is a notional value--until the goods have been sold at retail, you cannot realize this value from your inventory.

Identification of Replacement Cost

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Considerations of Replacement Cost

Most businesses can cut costs significantly by reducing the amount of inventory they must keep in stock; the faster you turn around your goods between the time of purchase and their retail sale, the less of your business capital is tied up in existing inventory. Keep track of both replacement cost and market value of your goods in stock, to ensure that you are making best use of your capital on hand, and that you are maximizing your sales.

There are a lot of implementation issues that should be addressed. Perhaps the most persistent and fundamental criticism of replacement cost measures is the lack of relevance when there is little or no prospect that the existing assets will be replaced with identical, or even similar, assets.

"Replacement Cost" in the Inventory

STOCKTAKINGStock-taking or inventory checking is the

physical verification of the quantities and condition of items held in an inventory or

warehouse. This may be done to provide an audit of existing stock.

Regular stocktaking is an essential element of a loss minimization strategy. The process helps you

to compare actual stock levels with the stock levels based on your ordering records

Inaccurate Stock TakingOften the effectiveness of the stocktaking process can

influence the accuracy of information it produces. This may lead to a situation where it appears that there are stock losses when actually the missing stock has simply been overlooked.

This type of problem would indicate either:•the need for staff training or

•the current stock tracking method needs to be reviewed

The first step in this process is to examine the current stocktaking procedure used in your workplace.

Of particular importance are these two questions:•how accurate is the information that is collected?

•how strictly is it followed by staff?

Stocktaking and Security

INSURANCEInsurance is an arrangement by which a company or

the state undertakes to provide a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a specified premium.

Insurance can help you manage the risks of relatively rare, but expensive events, throughout your life such

as car accident, theft or fire. Without the protection of an insurance policy, you would be responsible for

covering the loss you experienced.

Purpose of insurance

What should inventory insurance cover?

This inventory insurance policy should cover direct physical loss or damage from external causes while tools and

equipment are in the care of the institution. Some of the causes of loss covered are:

•Damage during handling of tools and equipment,•Theft and/or pilferage of tools and equipment.•Damage caused by Acts of God or Natural Disasters

NB. The New Amsterdam Technical Institute does not have an insurance policy covering tools and equipment, but since it has been purchasing/ acquiring a lot of very expensive equipment and machinery. It is vital that a relevant insurance plan be established .

FIXED AND MOVEABLE ASSETS

Maintaining accurate and timely data of fixed and moveable assets is important to the maintenance of a TVET Workshop or Laboratory since the information it

provides will be beneficial to all parties involved.The inventory system should have two components – a

physical system of inventory and an electronic system to “back-up” the information gathered and to protect the

integrity of the inventory system.

FIXED AND MOVEABLE ASSETS

Fixed and moveable assets comprises of furniture, tools and equipment. It is the responsibility of Laboratory Technicians and Senior Lecturers to ensure that each laboratory has an accurate inventory of all the items under their control. Accountability is a key element to having an

efficient inventory system. Apart from ensuring that all items used at the start of every session is accounted for upon completion of the student’s

activities, the following systems should be followed rigidly to maintain if an accurate

inventory system is to be maintained.

Coding of items:All items belonging to a section should be appropriately coded

so as to make the item easily identifiable. For example, equipment in the carpentry workshop should bear a code which

will comprise of the initials of the workshop and possibly the date of the acquisition of the item.

Loan of tools and equipmentItems which were loaned to another section should be properly accounted for. These items should be recorded in a book where

the borrower sign to uplift and the Technician sign when the item is returned.

Writing off broken or defective itemsItems which are broken or has become defective should be identified

as such on the inventory and should be made to have them repaired. If this is not possible, then the prescribed system should be followed to

have the items written off the inventory. Similarly, obsolete items should be taken off the inventory in order to maintain clear and

accurate information.

Acquisition of new items Items which were recently acquired should be immediately

coded and added to the laboratory’s inventory.

Change of location/transfer of itemsWhen items change location or are transferred to another for

example items from the electrical workshop transferred to the automotive workshop, this should be clearly reflected on

the inventories so the item can be properly accounted for.It is also important for periodical inspections to be carried out to test the validity of the information on the inventory. These can be scheduled either quarterly or annually by stores personnel.

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STOCK CONTROL DOCUMENTATION (SCD)

Stock control, otherwise known as inventory control, is used to show how much stock you have at any one time, and how you keep track (i.e, document) it. The following practices may be employed:

Identify stock control documentation (SCD) terms, principles, and objectives Because clear and precise definitions of terms, principles, and

objectives are necessary for effective communication, a glossary should be prepared that concisely defines the terms, principles, and objectives used by an institution.

Principles should be established that promote accurate, complete, and timely data and records

  Objectives should be identified that detect and deter the loss, theft,

and diversion of material or equipment, and meet agreed safeguards and standards

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STOCK CONTROL DOCUMENTATION (SCD)

Establish an effective stock control documentation (SCD) organization.

The roles, responsibilities, and authorities of the SCD manager and organization should be well defined and communicated, and should include the authority to cease operation in the event of an anomaly in daily schedule or happenings

Develop, implement, and validate measurement methods capable of providing the required levels of accuracy and

precision.Sources of measurement errors should be identified and, to the extent possible, reduced or mitigated. Examples of this include effects of external factors such as humans, humidity, and heat. Measurement systems and people operating them should be qualified and benchmarked (for example, blind samples and external sample exchange programs).

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STOCK CONTROL DOCUMENTATION (SCD)

Establish a complete, accurate, and timely record of the entire inventory.

It should be able to provide a complete audit trail for all equipment and materials from receipt through disposition, including documentation of all movements or transactions. Measures should be established and checks implemented to ensure data accuracy and detect any unauthorized access to data and/or equipment. Accountancy is the responsibility of each workshop or site.

Establish a system for materials and equipment control using well defined geographical areas within the workshop/laboratory/site.

Each workshop and laboratory should implement appropriate physical security and administrative controls to permit controlled access to the area by personnel and prevent any unauthorized access. Alarms and procedures to assess anomalies should be established.

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LEGAL ACCOUNTABILITYStock or Inventory Control is a process all institutions perform to ensure they

manage all items owned and used by various departments. These operations are often decided by policies of Central Ministry and those governing the management of TVET Institutions. All forms of policy are legally approved and accountable within the parameters of the Education Act of Guyana.

 Schools are a common user of inventory control because they typically have

limited capital resources to replace items. Capital is disbursed from government coffers through approved institution budgets.

 Inventory items include school supplies, janitorial items, audio/visual

equipment and extra furniture, among other items. In addition to students and employees, educational institutions have outsiders on campus---such as parents, vendors and maintenance personnel---who may have access to school items. Developing a strong inventory control system can is imperative and legally binding to limit or prohibit unauthorized use or abuse of these items.

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References

•Retrieved from http://www.researchgate.net/publication/223583837_Assessing_replacement_cost_of_conservation_areas_How_does_habitat_loss_influence_priorities•http://www.investopedia.com/terms/r/replacementcost.asp•http://smallbusiness.chron.com/replacement-cost-vs-market-value-4126.html