Management of Automatic Procurement Items

Management of Automatic Procurement Items

Automatic Procurement (AP) items are those that have regular consumption pattern and are used by more than one user in an organization. Procurement action or such items are taken centrally and cyclically by one department which also is responsible for their custody and consumption regulation. AP items also known as Stock Control Items have thus the following characteristics:
Items that are used by more than one user Items that have regular consumption Items that are consumable in nature Items for whom sources are available
AP items are identified and listed periodically in each Plant for the convenience of all the users. These items are grouped under various commodities like fasteners, Hardware items, Electrodes, Cables etc based on the nature of these items.
Monitoring of Planning, indenting, Stock and issue of such items are monitored by a central agency under Materials Management, known as “Stock Control”.

Planning of AP items & Indents Raising

The Indents for the procurement of AP items are raised centrally by Stock Control section. For most of the items the indents are generated automatically by the computer system based on the trends of past consumption without involving detailed planning process. However special requirement by different users, additional capital repair requirements are considered while finalizing the quantity for procurement

Safety Stock, Re-Order Level

As the stock outs of items have adverse effect on the continuous running of the plant and the production, care needs to be taken to ensure continuous availability of items. However as the consumption of items and the supply of the same may vary due to uncertainties, sufficient stocks of the items are needed to be maintained to take care of such variations which is known as safety stock.
Safety stock is the minimum stock to be maintained to take care of stock out situations due to variation in the consumption as well as supply. Safety Stock = Buffer Stock to take care of consumption variations+ Buffer stock to take care of supply variations.
Safety stock of an item is decided based on the criticality of that item and uncertainties involved in the consumption & supply of that item. So Safety Stock varies for various categories of items.
Re-Order level (ROL) is the stock level of an item at which the procurement activity is initiated by raising indent so that the items are received before the stock out of that item.
ROL = Quantity required for the consumption during the lead time of procurement+ Safety Stock
Based on the lead time of procurement of the item & its safety stock requirement, the ROL is fixed for each AP item.