Part 2

One of these cards is used for each article or class of material on which special quotations are received. Every quotation is recorded, no matter from whom, and when the card is filled a new one is added. Whenever records on any one card become obsolete, the card can be destroyed, keeping the file up to date.

The cards are filed according to the names of the articles or classes of material. When the number of classes is limited, it will be satisfactory to index the cards by means of a straight alphabetical index. In this case quotations on bolts and all other articles, the names of which commence with _b_, would be filed back of the _B_ index. If the number of articles is large, it is advisable to use blank index guides and write the names of classes of material. As an illustration, in some lines of manufacture, bolts will be used in all sizes. On the index would be written the word _Bolts_, and back of this the cards would be filed according to sizes, one card being used for each size of bolt. The same plan can be carried out for each class of material. It is also advisable, in a manufacturing business, to subdivide the file as, between materials──representing materials which actually enter into the construction of the product manufactured──and supplies──representing all classes of factory supplies.

A card especially designed for a record of quotations on articles which are listed in several sizes is shown in Fig. 4. The special feature of this form is the inclusion of several columns in which to record prices on a number of different sizes of the same article. This form would be especially applicable in recording prices on such articles as bolts, mentioned in the preceding paragraph.

[Illustration: Fig. 4. Quotation Card for Records of Prices of Several Sizes]

ORDERS PLACED

=7.= Of equal importance is a record of orders placed. A purchasing agent needs to know where orders for a given article have been placed in the past, prices paid, promptness of delivery, and general character of goods received. A convenient method of recording this information is to use a card similar to the illustration, Fig. 5, which shows a form used for recording purchases of a given article between specified dates. The record itself shows the order number, quantity, name of vendor, and full information about prices, including total cost per unit. These cards are filed alphabetically, according to the name of the article, exactly as described for the records of special quotations.

Fig. 6 omits some of the details, but provides for notations relative to quantities, etc., under the heading, _description_. This form also shows total amount, thus furnishing a record of the gross investment in material of a given class.

[Illustration: Fig. 5. Detailed Record of Orders Placed]

[Illustration: Fig. 6. Record of Orders, Including Price and Amount]

Fig. 7 is used in a manufacturing business, and is intended to provide a record of orders placed which will prevent a duplication of orders. At the extreme right of this form is a column headed _purpose_. In many manufacturing businesses, orders for certain materials are placed after contracts have been received, and the material is specified for use on a certain contract or order. In other establishments several lines of goods are manufactured, but certain materials enter into the manufacture of all lines. The purchasing agent may receive requisitions from different sources for material required in these various lines, and his records should show for what lines or departments orders have been placed. Both of these contingencies are provided for in this form, as the purpose of each order is plainly stated.

[Illustration: Fig. 7. Order Record of a Manufacturer, Showing Purpose for Which the Goods are Required]

[Illustration: Fig. 8. Record of Orders Providing for Details of Each Order]

Fig. 8 is another special form, designed for use where certain

## particulars are required. In devising a form, it should be made as

simple as possible, but, at the same time, provision should be made for recording all particulars that may be of especial value in the business in which it is to be used. The forms shown are presented, not as being ideal for use in all cases, but for their suggestive value.

It is immaterial whether these forms be on cards or in loose─leaf form. That is a question of individual preference, and can only be decided by the person who is to make use of the system.

A good example of a form designed especially for use in a loose─leaf system is shown in Fig. 9. This gives full information about both orders and receipts, furnishing complete information relative to quantities of any particular line handled.

[Illustration: Fig. 9. A Loose─Leaf Record of Goods Ordered and Received]

The manner of filing is the same as with the card system, except that these sheets are arranged between suitable indexes in a loose─leaf binder. If desired, the order records and special quotations can be filed together. By using forms of different colors the two can be filed in the same index. This is a very convenient arrangement, for then all records of both quotations and orders are found together. In some cases all of the information required will be found on the order records. When special quotations are received they can be filed in front of, or immediately back of, this record.

While in some offices other special records may be advisable, all necessary information for the average office relative to sources of supply, prices, etc., are provided by catalogues and records of quotations and prices described. Any other information required can be provided for by a modification of the forms referred to.

DEPARTMENT ROUTINE

=8.= Any discussion of the routine duties of the purchasing department is necessarily more or less theoretical and any method of procedure laid down is subject to such modification as will reduce it to a practical working basis for the individual establishment. To present the subject in a practical manner, therefore, this discussion will be confined to the needs of an average manufacturing business. As has been stated elsewhere in these papers, it is much less difficult to modify a system designed to care for all details in a large establishment than to expand the simple systems of a small business.

The duties of the purchasing agent in respect to the actual purchase of goods may be classified as follows:

1. Receiving _requisitions_, or orders for materials and supplies required for stock or in different departments.

2. Placing and following up orders.

3. Checking receipt of goods.

4. Checking invoices for prices.

5. Filing order copies and requisitions.

=9. Requisitions.= Under ordinary circumstances the purchasing agent will place no orders until he has first received a requisition from either the stores department or the department that requires the material. The requisition should in every case state the purpose for which the material or supplies is required, as well as by whom wanted.

Each department should be supplied with its own requisition blanks, and, to make them distinctive, a different color should be adopted for each department. Each department should also be identified by a letter which will be printed on the requisition blank in connection with a serial number. Thus the requisition numbers of one department will start with _A_1, another _B_1, etc.

A positive rule should be laid down that all requisitions issued by one department are to be signed by one person, usually the foreman. This rule must be rigidly enforced and no requisitions honored without the proper signature.

While requisitions should be drafted in a form to meet individual requirements, Fig. 10 is given as a typical example that will be found suitable in a large majority of offices.

The requisition, as a rule, is made in duplicate. The original goes to the purchasing agent and the duplicate is retained by the foreman. In some of the larger establishments a triplicate form is used, the original and duplicate being sent to the purchasing agent. The duplicate is then returned to the foreman with proper notations to show that the order has been placed.

There are very few cases, however, where this is necessary. It is not a good plan to require the foreman to keep records that can be eliminated, and the average foreman does not care when or where the order is placed; all he wants is the material. He has no interest in going back of the purchasing agent on whom he has made requisition.

When the factory is located at a distance from the office, requisitions should be in triplicate and bear the O. K. of the superintendent or factory manager. The duplicate will then be filed in the factory office pending the receipt of the goods.

[Illustration: Fig. 10. A Typical Form of Requisition Blank]

Foremen who make requisitions on the purchasing agent will retain their copies until the material is received.

On receipt of the requisition, the purchasing agent first investigates to find if the material, or some other that will answer the same purpose, is in stock. If not, he looks up his sources of supply and prices, and then he is ready to place the order. When a large investment is involved, it is usually necessary to obtain special quotations, and sometimes samples, before the order can be placed.

=10. Low Stock Report.= Another form of requisition is the low stock report furnished by the stores clerk. Every article and class of material in stock is given a _low_ limit. When this limit is reached the stores clerk makes a report, Fig. 11, to the purchasing agent. This is recognized as a notice to purchase. The report shows the low limit and quantity in stock. It is important that the low limit be included, for in some cases it will be found advisable to change the limit. Material formerly used in large quantities may now be in so little demand that it will be thought best to reduce the limit. At other times it will be necessary to increase the limit.

[Illustration: Fig. 11. The Stores Clerk's Report of Low Stock]

The report is made in duplicate, a copy being retained by the stores clerk until advised that the order has been placed. There is no special need for keeping these reports permanently; all information that they would supply may be had from copies of purchase orders.

=11. Purchase Orders.= When an order is placed, it is of course necessary to keep one or more copies. The best practice is to make purchase orders in manifold, providing as many copies as may be required. Modern typewriters and carbon paper render it possible to make all necessary copies at one writing.

The number of copies will be governed by the requirements of the business. In a small business where the goods are received by the purchasing agent, one copy is sufficient. When a receiving clerk is employed, a second copy will be needed by him to check the receipt of goods.

The illustration, Fig. 12, shows a set of six blanks, the original and five copies, which will meet the requirements of the average manufacturing business. These copies will be used as follows:

[Illustration: Fig. 12. Typical Form of Manifold Order Blanks]

_Original._ This is to be mailed or delivered to the vendor.

_Follow─Up Copy._ This copy is retained by the purchasing agent to follow up the order. It is first filed in a tickler, or date file, back of the date when an acknowledgment should be received. If no acknowledgment is received, the vendor is followed up and the order filed ahead.

The order is next filed under the date when the invoice should be received. After the invoice is received, the order copy can be used to follow up the transportation company for delivery.

_Receiving Copy._ This copy goes to the receiving clerk who files it according to the name of the vendor. When the goods are received, he checks the items against the copy and returns it to the purchasing agent. In some cases he reports the receipt of goods by means of a receiving slip, which will be explained later.

_Auditor's Copy._ In a highly organized business a copy of every order is given to the comptroller or auditor. The principal use of this copy is to furnish information in respect to obligations incurred, that finances may be provided in advance.

_Cost Department Copy._ The copy furnished the cost department is to post the cost clerks in prices. In many large factories complete files of all orders placed are kept in the cost office. This is an excellent plan since it provides a complete price record.

_Shop Copy._ This is intended for the special use of the factory when located at a distance from the office. It is filed in the office of the factory manager, under the name of the vendor, and supplies him with a record of all orders placed for the factory.

=12. Checking Receipts.= The purchasing agent will be advised of the receipt of goods by the return of the receiving clerk's copy of the order, properly checked. Or, in some cases, it may be advisable to have all goods reported on a special form, Fig. 13.

[Illustration: Fig. 13. A Form of Report of Goods Received]

[Illustration: SURPLUS TOOLS GATHERED FROM OVER─EQUIPMENT AT LOCAL SHOPS AND RETURNED TO CENTRAL STORES ON THE SANTA FE SYSTEM The Reapportionment of Work, Concentrating all Manufacturing Operations at Topeka, Made it Possible to Return to General Stock Many Small Tools, to be Used as Needed Instead of Held in Unnecessary or Excess Local Reserve Courtesy of the _Engineering Magazine_]

In those factories where a receiving clerk, as well as a stores clerk, is employed, the receiving slip should be made in duplicate. One copy will go to the stores clerk with the goods and will later be sent to the purchasing agent, furnishing a double check on the goods. The purchasing agent will send one copy to the cost clerk, first noting the account to be charged. This gives the cost clerk the necessary information for charging out material when used.

One argument in support of this plan is that, having no record of quantities ordered, the receiving clerk will be compelled to carefully count and list all articles received. But it is also true that he is obliged to make a detailed copy instead of merely checking the items against his copy of the order.

Another point in connection with the work of the receiving clerk that has caused much discussion, is the wisdom of furnishing him with a record of prices. The prevailing opinion among manufacturers seems to be that this should not be done. This need not interfere with the operation of our system, for prices can be left off the receiving clerk's copy by using a short carbon. This will keep all blanks uniform in size.

=13. Checking Invoices.= It may be laid down as a rule that invoices should first go to the purchasing agent, not for audit, but to be checked for quantities and prices. The purchasing agent will check the invoice, note on it the purpose, or the department for which the goods were purchased, and forward it to the auditor. The transaction is then closed so far as the purchasing agent is concerned.

=14. Filing.= After the O. K.'d invoice has been forwarded to the auditor, the following papers remaining in the purchasing department are to be filed:

_Follow─up copy of the order_, filed alphabetically under the name of the vendor.

_Receiving clerk's copy of the order_, filed with the original requisition.

_Requisition from the department requesting the goods_, filed numerically according to the departmental serial number; that is, all requisitions from _Dept. A_ will be filed together in numerical sequence.

When a record of goods received has been made on the forms prescribed, the purchasing agent's records will be complete.

THE STORES DEPARTMENT

=15.= In this discussion, the _stores department_, or _stock department_ as it is frequently called, is treated as a subordinate division of the purchasing department. Properly organized, it becomes one of the most valuable from a profit─making standpoint. Without organization it may degenerate into one of the most useless.

To attain the state of efficiency of which it is capable, the organization and system of operation of the stores department must be of the highest order, otherwise it cannot be expected to fulfill its mission. So much has been written about the failure of stores departments and stores systems to produce desired results, that a statement of what is meant by _stores department_ seems to be demanded before we can arrive at intelligent conclusions regarding its functions and operation.

Broadly, the stores department is that department of a business which has the custody of its stock in trade, materials, supplies, and other physical property, except real estate. Reduced to a concrete example, in a trading business the term means that department which is responsible for the storage and proper care of the goods purchased for resale; also the materials and appliances required in the operation of the business. There may be no department known by this name; there may be no one man whose duty it is to supervise the work; nevertheless, the department exists. Every clerk in a small retail store may be a receiving clerk, a salesman, and a stores clerk; or in a larger establishment several men may be employed as stockkeepers; but in both cases the responsibilities of the stores department are shouldered by some one, perhaps by several people.

Like every other department of a business, the organization of a stores department depends largely upon the nature of the business. To furnish an illustration that can be readily understood, we will treat the organization and operation of the stores department from the standpoint of a manufacturer.

ORGANIZATION

=16.= The stores department is properly under the direct supervision of the purchasing agent. In the last analysis he is the man who is responsible for the maintenance of a stock of materials and supplies which will at all times be adequate for the business. It is proper, therefore, that he should have supervision over the _receipt_, _storage_, and _delivery_ of the goods which he has purchased.

In the actual operation of the stores department, the purchasing agent will delegate his authority to the chief stores clerk, who will in turn be assisted by the necessary number of stock men and a receiving clerk. It will be the duty of the chief stores clerk to see that all materials are properly stored, to maintain the records prescribed, and to furnish such reports as may be necessary regarding the movement of the stock. He will have general supervision over the entire department. In the actual physical operations of the department, he will be assisted by stock men who are subject to his orders.

In small establishments the stores clerk also acts as receiving clerk, but in the larger enterprises, a separate receiving clerk is required. He will check the receipt of all goods, deliver them to the storage places prescribed by the chief stores clerk, and make such reports as may be prescribed. While he is, generally speaking, under the orders of the chief stores clerk, he also makes certain reports direct to the purchasing agent.

TAKING AN INVENTORY

=17.= Before a stores department can be successfully organized an _inventory_ must be taken, for this inventory will be the basis on which the records of the stores department are founded.

Stores record systems are quite commonly referred to as perpetual inventories, and, occasionally, such a system is pointed to as a failure for the reason that at the end of the year, or other fiscal period, the inventory, that is, the actual physical inventory of the stock, does not check with the records. The fact that systems of stores records have been regarded as inventories _in fact_, is responsible for most so─called failures. Regarded in its proper relation, a perpetual inventory is nothing more nor less than an accurate accounting of all goods that come into and go out of the establishment, these records to be checked by an actual physical inventory with such regularity and frequency that the accounts can safely be considered as exhibiting a correct inventory. In considering the question, how to take an inventory, we refer, therefore, to an actual physical inventory, that is, a count of every article in stock. When once this inventory is taken and properly recorded, it is entirely possible to install and maintain systems which will make it unnecessary to inventory all of the physical property at any one time.

It has been the general custom in a large manufacturing establishment to shut down for a period of greater or less duration, running all the way from two or three days to as many weeks, for the purpose of taking an inventory. Since it has been considered necessary to shut down for this purpose, inventories have, as a rule, been taken but once a year. All this is unnecessary, for, with proper methods, it is possible to take even a complete inventory without perceptible interruption of the operation of the plant. The first step is to decide, at just what time the inventory is to be taken, and to have all foremen get their shops in readiness. This means a general cleaning up which will make it easy to locate and count, weigh, or measure the _materials_, _tools_, _supplies_, and _work in process_. Then, at a specified time the work of taking the inventory should be started simultaneously in every shop.

The making of the necessary records will be in charge of a clerk who will be assisted by the foremen and as many helpers as may be required. Each clerk is given a supply of tags, ruled as shown in Fig. 14. These are made in the form of shipping tags, but larger than the usual sizes used for that purpose. It will be noted that the tag is perforated near the top. The portion above the perforation shows the season and date of inventory, the card number, and the department. The card number and the department are repeated on the lower part of the card, which is also divided into two parts. The upper half is for an inventory of material, finished stores, and work in process, divided as to _description_, _name of last operation_, the _quantity_, and the _unit_. The lower half is for an inventory of tools, machinery, equipment, and supplies, with provision for the _description_, _quantity_, _unit_, _numbers_, and _location_. By _unit_ is meant the unit in which the material or supplies are priced, as pounds, yards, dozen, gross, etc.

The first operation is to attach one of these cards, which are consecutively numbered, to each machine, tool, bin, rack, or pile of material. Then the clerk and his assistants will go through the shop and weigh and count the material represented by each tag, recording the items on the tag itself. As this is done, the lower half of the tag is torn off. Since a record is kept of the card numbers given to each clerk, it will be necessary for him to turn in every one, and if care is used in placing the tag on every article before the count has begun, there is no possibility of material being overlooked. As a further precaution against the loss of cards, the remaining part of the tag is afterward removed and sent to the office for checking against the main record. As the tag is used merely to insure a record of quantities of all property, it is unnecessary to include prices.

[Illustration: Fig. 14. Labor─Saving Inventory Tag]