Production Management

Difference Between Centralized and Decentralized System of Store-keeping

Centralized and decentralized system of store-keeping; which form of system would you recommend for a medium sized industrial concern. This question is not unusual. But each system has its advantages and disadvantages.

Different organizations have different working systems, viz, (a) Centralized System. The burden of the entire purchase and accounting rests with the stores organization. (b) Decentralized System. For all intents and purposes the working rests with the departments or constituent parts and only a nuclei stores organization is maintained where rate inquiries, tenders are advertised and supply orders issued centrally.

Comparative Study of Centralized and Decentralized Systems

1. In centralized system the purchase custody, receipt, inspection, and accounting are all done by the stores organization. The chances of pilferage are minimum under the system. While in decentralized system all formalities of purchase are completed except calling for tenders and placing for final orders. Chances of pilferage cannot be ruled out.

2. The departmental funds can be utilized centrally under centralized system. This feature ensures maximum utility with least funds. Under decentralized system the departments seldom wish to part with their own belongings although the others may perish for want of the same.

3. Expenditure can be kept under control in centralized system. But in decentralized system it is difficult to fix maximum, minimum decentralized expenditure. purchases under centralized

4. Uniform structure of prices will exist the matter of as every department selection. Unified system which is not possible under decentralize system. In-charge may have his own whims and fancies in

5. Under centralized system divisions can be ordered to meet the requirements of other constituents which is not possible under the decentralized system.

6. Under centralized system lesser staff can give maximum results when the staff is divided into small pockets with lesser utility.


For a medium sized organization centralized system is recommended in view of the following advantages :

1. There is reduction of working capital owing to the reduction in number of pocket stores and carry over of stocks.

2. A lightening of the system in general and of methods of inspection of stores are often a source of neglect and loss.

3. There is also possibility of lower tender prices. Firms are reluctant to tender for contracts requiring frequent delivery in small quantities to numerous depots, the transport costs being to factor for consideration with the suppliers.

4. A unified stores control facilitates a closer supervision of stocks more effort in the direction of standardization, a better control of obsolete and surplus stocks.

5. Consolidation of the stores system and the work of checking invoices for payment and a reduction in the number of accounts for payment.

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