Treatment of Discrepancies and Disposals of Obsolete, Redundant and Damaged Stock

Control of surplus: This is a quantity or amount that is excess of what is required. Ideally the stores personnel should come up with modalities of addressing excess items from the suppliers. This can be achieved through communicating clearly with suppliers about the items which the company expects to purchase. The company should come up with a policy of returning all the items which suppliers deliver without an order from the purchasing function.

Control of Redundant: Refers to all usable materials stocked in excess of current requirements. Redundant can be caused by:

  • Over ordering i.e. excess or surplus stock.
  • Failure to relate stock levels to declining production of certain lines.
  • Unexpected changes in demand patterns
  • Minimizing or controlling redundancy
  • Stock levels should be kept low
  • Informing stock controllers and buyers of changes in marketing policy, production programs and specifications.
  • Monitoring consumption patterns to detect the signs early
  • Application of First in first out (FIFO) tactics: Using old materials first before using the new items introduced to replace them.
  • Proper control of materials in production through material requirement planning (MRP).
  • Application of Just in time (JIT) technique

How to dispose redundant materials
The following measures can be used to deal with redundancy:

  1. Circulation to other potential users
  2. Negotiate for a return of materials to suppliers at a price
  3. Advertise or invite offers or bids for them (tendering).
  4. Sell by auction
  5. Sell them to merchants or dealers
  6. Sell the materials to the employees
  7. Recycle to remake a new item to be used for a new purpose
  8.  Give to deserving charitable institution

Obsolete and scrap stock: These are stocks that have become out-dated and of no further use to the organisation. Obsolescence is more common in some stock categories e.g. spare parts which need to be replaced by more efficient ones. The control of obsolete stock requires a provision for latent obsolescence. Latent obsolescence is a situation which affects most of the items in the stock range. It refers to items that have not been identified as obsolete but passes the potential of becoming so. Provisioning for obsolescence can reflect the stores situation but the control of the phenomenon requires timely planning, running down of stock in anticipation of obsolescence.

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