Location of Store room : The location of stores in an enterprise should be at a place where handling, transportation and the movement of the material is at a minimum level. If there is only single plant or many plants situated in the same area then it is profitable to have one centralize store to service all production operations.
But in case of plants located at distant places it is desirable to have separate store for each plant. Sometimes a policy of maintaining centralized stores for common category of items and decentralized stores for individual items is followed by the management. The choice of centralized or decentralized system of stores depends on the degree of control, convenience, reduction in costs of storing, transportation, nature of items etc.
Advantages of Centralized Storing System
The following are some of the advantages and disadvantages of centralized storing :
(i) economy in investments.
(ii) reduction in incidental expenses
(iii) less storage space.
(iv) better security arrangements to safeguard against pilferage and theft.
(v) less man-power required due to which reduction in administrative costs.
(vi) economy in transportation costs.
(vii) more bargaining power due to buying in bulk.
(viii) the variety of items in the inventory can be reduced due to more scope of standardization of items.
Disadvantages of Centralized Storing System
(i) more material handling operations.
(ii) chances of bottlenecks and delay are likely to be more.
(iii) more exposed to loss due to natural calamities like fire, rain, dust etc.