How can the efficiency of the stores function be measured?

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krishna-agrawala | College Teacher | (Level 3) Valedictorian

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The term store is applied to a warehouse as well as a retail stores. I will answer this question for stores in the sense of a warehouse. The main activities of the a store include receipt, storage, and issue. Thus the main output of a store are volume of receipt and issue transactions, and the volume of material stored. The major inputs that go into producing these outputs include manpower, storage space and facilities, and the stock maintained in the store.

The efficiency of store is measured in terms of ratios of of different combinations of outputs per unit of inputs. For this purpose outputs may me measured in units like value or quantity of material received, issued or stocked. This quantity may be the  quantity of material measured in term of values, numbers, weight, or volume. It is also common to measure in terms of number of transactions such as number of issues or receipt transactions.

Measurement of inputs depends on the nature of inputs. The stock maintained is usually measured using the same units as for measuring output quantity. The quantity storage facilities used are measured in terms of investment in such facilities, and storage space in terms of total storage area or volume available. Manpower is measured in terms of total number of employees, man-hours worked , or wages paid. Other inputs are generally clubbed together and measured in terms of the corresponding operating cost incurred.

With this kind of different combination of input and output measures it is possible to design scores of different measures of stores efficiency. No store needs to use such a large number of different measures. In most of the cases about half a dozen different type of measures are adequate. Each store need to use a set of such selected measure, depending on the nature of their operations, environment and objectives. One of the most commonly used of such measures is the turnover ratio. IT is defined as the ratio of stocks issued in a year divided by the average inventory held. Total cost of stores operation expressed a percentage of turnover or stocks maintained is a commonly used measure of store performance.


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