Storage of Material; stores location and layout

Cost/Management Accounting notes

Stores should be strategically located to minimize production costs. They should be located closest to the factory as possible and where possible. In some instances, materials in the same store may be needed at different locations, either in the same factory building or at different plants. This calls for a more strategic planning on the location of the store where a new one has to be constructed or looking for an alternative to minimize the costs e.g. contracting an external third party. This may be through renting a warehouse or hiring transporters. Instances such as hiring of transporters would only be economical where special storage equipment which necessitates an enormous initial capital outlay are used, for instance freezers.

The layout of stores should ensure:

– Ease of access for movement of material in and out of stores

– The issue of perishable materials on a first in first out (FIFO)basis

– The segregation of toxic and dangerous materials in a separate location

– Security of materials by restriction of access to authorized personnel only

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