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Optimizing the Inventory Control, Asset

and Stores Management & Distribution


in the Context of the PPADA 2015.

Facilitator: Erick Adem


BSC(STATs),MCIPS(UK), MBA(UON),MKIM,MKISM & CIA

Learning Outcomes
Discussion Areas:
Routine stores operations- Inspections,
receiving, issuing & returns of goods( works &
services).
Inventory Control(stores & other non stock items
& its objectives
The concept of Inventory Management and the
relevant systems.
Optimizing the Inventory management process

Certification of goods,works &


services
Inspection and Acceptance of Goods, Works,
Services marks the final step of the Procurement
Cycle.
At this point the Procuring Entity should ensure
that the contracts is duly enforced by the two
entities,
It important to ensure that the deliveries
correspond to the contracts terms, especially
with respect to: time, standards, quantity,
place,cost,sample(where applicable)

Receiving Process(Goods)
Receive the goods the delivery notes,
parking list & the invoice;
Marshal the goods to the receiving &
inspection bay & record/post the receipts in
a transit location;
Arrange for the inspection of the receipts;
Upon inspection receive the inspection
report and act on the recommendations;

Receiving Process(Goods)
If accepted create a GRN: forward the
GRN, inspection report, delivery note and
invoice for payment processing.
If rejected in part/whole: write a letter to
the supplier to collect the defective goods
within a stipulated period.

The PPADA 2015 on Receiving


The PPDA 2015 on receiving of goods,
works and services
159(1) An accounting officer of a procuring entity shall
only receipt goods, works and services which have been
certified in accordance with this section and section
152

Certification in this case is an outcome of


the inspection process.

Recording of goods
Recording of inventory is the responsibility
of the procurement function.
The records of inventory should be
maintained in the inventory master for
stock items.
The records of non-stock items can be
maintained in a ledger, asset register or a
bin card.

Recording of Inventory
All the inventory records should be
updated.
Discrepancies must be investigated;
where necessary approvals sought for
adjustment.
Tools, equipments and other assets
issued to staff should be recorded in their
personal a/c.

Recording of Inventory
Staffs to whom any asset is issued should
annually report on their condition.
Incase of the need to replace an asset
issued to staff, where possible the
old/damaged asset should surrendered.
The cost of missing/lost/damaged assets
in the hand of any staff should be
recovered.
The asset ledger should stored under lock.

PPADA 2015 on Recording of


stores
The PPDA 2015 on recording of goods,
works and services
159(2) An accounting officer of a procuring entity shall
record goods, works and services received under
subsection in an inventory of the procuring entity as shall
be prescribed.
The record will take the form of an inventory
register/ ledger(manual entity), or an electronic
inventory management system. (The procedure is
intended to allow a clear audit trail of the receipt).

Receiving & Recording of Stores


The essence of the receiving and recording is
provide in the section 162 (1) as:
An accounting officer of a procuring entity shall ensure
that all inventory, stores and assets purchased are
received, but shall not be used until taken on charge
and as a basis for ensuring that all procured items are
properly accounted for and put in proper use as
intended by the procuring entity.
This section avoids delivery of materials to usage
sites then formalizing the receipts afterwards.

Open Forum
Discussion on the receipt of:
a) Partial delivery of goods
b) Works with part progress payment made
c) Consultancy service
d) Receipt of other Assets(Non stock items)
How to explain the receipt of goods in the
store the end up in disposal?
How do explain payment of hot air

Inventory Control & Management


Inventory is the raw materials, component
parts, work-in-process, or finished products
that are held at a location in the supply
chain.
Inventory control refers to the techniques
used to ensure that stocks are kept at
levels that provide maximum service levels
at minimum cost.

Inventory Management
Inventory management encompasses the
activities of forecasting and product
replenishment.
It is concerned with:
a) When to order products,
b) How much to order
c) The most effective source of supply for
each item in the warehouse

Approaches to Inventory
Management

Fixed order point method


Periodic review system method
Economic order quantity method
Material requirement planning
Just in time method
Vendor managed inventory

Inventory Mgt. enabling


Technology

Electronic data interchange(EDI)


Enterprise resource planning(ERP)
Radio frequency identification (RFID)
Barcode technology
Electronic point of sale

Economics of Inventory
Management
Cost of acquisition: pre-order placement
costs, order placement & post order
placement costs.
Holding costs: cost of insurance, losses
in value, alternative cost of capital held in
stock, storage, labour cost & record mgt.
Cost of stock out: lost production, cost of
idle time, cost of action taken to manage
stock out & loss of customer goodwill

Inventory Metrics
Cash-to cash cycle time: The cash
conversion cycle (CCC) is a metric that
expresses the length of time, in days, that
it takes for a company to convert resource
inputs into cash flows.
Average inventory: An average of
beginning and ending inventory. Formula:
{Inventory (current period) + Inventory
(prior period)} 2.

Inventory Metrics
Inventory turns(Inventory turnover
ratio) is calculated by dividing the cost of
goods sold for a period by the average
inventory for that period.
Fill rate: The fill rate is the fraction of
customer demand that is met through
immediate stock availability, without
backorders or lost sales

Inventory Metrics
Obsolete inventory: The value/proportion
of inventory rendered obsolete(over a
period)
Damaged inventory: The value/ proportion
of inventory rendered unusable as a result
of damage/deterioration(over a period)
Average stock out period: The average
reference period in which a given material
remains out of stock(Months,weeks,days)

Objectives of Inventory Mgt. &


Control
The Act in section 160(1) & (2) outlines the
objectives of inventory control(Assets & stocks) as:
a)To preventing wastage and loss, and continuing
utilization of supplies due to obsolescence,
deterioration, theft & shrinkage.
b)To avoid unprofitable lock-up of funds(Tying up
of capital)- overstocking, accumulation of dormant
stocks

Inventory Management System


The Act in section 160(3) recognizes that the
objectives of inventory controls can be effectively
met through the application of the inventory
management and control software.
This part of the act encourages best practice in
inventory management.
The spirit being that public sector organizations
are expected to fully automate and integrate their
supply chain to enhance their competitiveness.
Automated inventory enhances effectivetrail &
controls.

Inventory Management System


Section 161(1) of the Act gives the role of setting
up of the inventory management system to the
accounting officer while the day to day
management of the system to the head of the
procurement entity.
Section (2) of the Act provides that the
responsibilities for the control and management
of a procuring entity's inventories, stores and
assets management shall be as prescribed.

Management of Inventory
Responsibilities of the Accounting Officer:
a)To ensure that all inventory, stores and assets
purchased are properly accounted for.
b)To ensure that all inventory are put to proper use
as intended by the procuring entity.(section 162(1))
c)To enforce policy issues set out by the Cabinet
Secretary specifying the life span of each category
of items before boarding for disposal. (section
162(5)).

Management of Inventory
Responsibilities of the Head of
Procurement:
a)Shall arrange for occasional visits of inspection to
the stores, at least quarterly in each calendar year.
b)Shall conduct quarterly and annual inventory and
stock taking in order to ensure compliance with all
respective governing laws and submit the report to
the accounting officer.

Management of Inventory
Responsibilities of the Head of
Procurement
c) Shall ensure that the stores, inventory and assets
that are procured by a public entity does not suffer
deterioration from any preventable cause and
overstocking of any particular item shall be
avoided.
d) Shall receive requisitions for assets or stores
from users

Management of Inventory
Responsibilities of the Head of Procurement
e) Authorize material issues to the requisitioners
NB: The position of the inventory management
roles at the top level of the organization signifies
the importance attached to the function.

Open Forum
What inventory management systems do
we have in place?
What risks are associated with inventory
management in your organization.
How can the PPADA 2015 be useful in
optimizing the inventory control &
management function.

Optimizing Inventory control &


Management
Streamlining of the receipt process.
Automation of the inventory control and
management process.
Assignment of the inventory control &
management at the strategic organizational
level.
Emphasis on the key objectives of inventory
management as waste management &
overstocking- These two are a common feature
of public sector entities.

QAC

Questions & Clarifications?

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