Storing procured goods is a critical function within procurement management that ensures purchased items are preserved in good condition until they are needed for use or distribution. Effective storage safeguards the organization's investment by preventing loss, damage, or deterioration of goods. In the Kenyan procurement context, institutions such as county governments and large retail businesses must adopt efficient storage methods to maintain supply chain integrity and optimize operational costs. This chapter explores the fundamental concepts of storage and stock location, which are essential for procurement professionals to master for effective inventory management.

7.1 Meaning of storage

Storage refers to the systematic holding of goods in a designated, controlled area after they have been procured and received, with the aim of preserving their quality and making them available when they are required. It covers the physical holding of goods and materials as well as the activities that go with it: placing them in their locations, handling, safeguarding and tracking them until they are issued for use or distribution. In procurement management, storage is not merely about placing items in a warehouse; it involves planning to use space well, maintain the condition of the goods and allow easy access. Example: a manufacturing firm keeps raw materials, spare parts, packaging and office supplies in its main store, each in its own area, so that they are protected from damage and loss and can be issued quickly when a department requisitions them.

7.1.1 Types of storage systems

A storage system is the way an organisation arranges where and how its goods are held. It has two sides: how the stores are organised across the organisation (centralised or decentralised), and the physical facilities and equipment used to hold the goods. The right choice depends on the goods and on how they are used, as explained under the factors to consider when choosing a storage system.

Centralised storage

All goods are held in one main store, from which every department is supplied. It gives tight control, makes stock-taking easier, avoids holding the same item in several places and allows better use of skilled stores staff and equipment. Its drawbacks are longer distances to users and delays when departments or sites are far from the store. Example: a single-site packaging company keeps all its stock in one central store next to the production hall.

Decentralised storage

Goods are held in several stores, each close to the department or site that uses them. It gives users faster access and suits organisations spread over several sites or with very different types of goods. Its drawbacks are higher costs, duplication of stock and weaker control unless records are well kept. Example: a road construction firm keeps a site store at each project, holding cement, reinforcement bars and fuel for that site.

Combined storage

Many organisations use a main central store for bulk stock and control, with smaller sub-stores at departments or sites that are replenished from it. This keeps central control while giving users quick access to everyday items.

Physical storage facilities

Organisations use different storage facilities depending on the nature of their procured goods and operational needs:

• Warehouses: large, secure buildings for bulk storage of diverse items, common in manufacturing, distribution and retail.
• Shelving units: organised racks with shelves and bins for easy access to small items, such as spare parts, stationery and tools.
• Pallet racking: steel frames that hold palletised goods at several levels, handled by forklifts, which make use of the height of the building.
• Block or floor stacking: stable, uniform goods such as bags of cement or cartons are stacked directly on pallets on the floor, without racks.
• Cold storage: facilities with controlled temperatures for perishable goods, used in food supply chains and for temperature-sensitive products.
• Open yards: outdoor, fenced spaces for bulky, non-perishable items that are not harmed by weather, such as steel sections, poles and construction materials.
• Special stores: separate, ventilated and secured stores for hazardous goods such as fuels, gases and chemicals.
• Automated storage systems: storage and retrieval controlled by machines and software, used in some large, modern warehouses with a high volume of movements.

7.1.2 Factors to consider when choosing storage system

Choosing a storage system means matching the way goods are held to their characteristics, how they are used and what the organisation can afford. A wrong choice leads to damage, losses, wasted space or slow issues. Example: perishable items like fresh produce require refrigerated storage, while durable goods like office furniture need only dry, secure space.

• Nature of goods: perishable, fragile, hazardous or valuable goods each need particular conditions and handling.
• Volume and size: large volumes or bulky items require spacious storage areas, racks strong enough for the load and suitable handling equipment.
• Shelf life: goods with short shelf lives need a layout that allows first-in-first-out (FIFO) issuing to prevent waste.
• Rate of usage: fast-moving items need quick access near the issue point, while slow-moving items can be held further away.
• Security requirements: high-value or attractive items need secure storage with restricted access.
• Environmental conditions: temperature, humidity, light and ventilation needs affect the choice of facility, especially for chemicals, food and electronic items.
• Location of users: where the users and sites are decides whether a centralised, decentralised or combined system serves them best.
• Available space and building: the size, height and floor strength of the building limit the facilities that can be installed.
• Cost: the cost of buildings, racks, equipment and staff must be justified by the value of the goods and the savings expected.
• Handling equipment and technology: the equipment and systems available, such as forklifts, pallet trucks or a warehouse management system, decide which layouts can be used.
• Safety and legal requirements: fire safety, hazardous goods and occupational safety rules must be met.

7.1.3 Importance of storage of goods

Proper storage ensures that procured goods keep their value and usability until they are needed. It directly affects procurement costs by reducing waste and obsolescence, and it supports the continuity of the organisation's work.

• Preservation of quality: ensures goods keep their intended condition, preventing spoilage, corrosion or obsolescence.
• Protection against loss: safeguards stock from theft, pilferage and damage.
• Availability on demand: holds enough stock to meet operational needs without delays, so production and services are not interrupted.
• Cost efficiency: reduces losses and the costs of frequent reordering or emergency purchases.
• Facilitation of inventory control: enables systematic tracking and management of stock, supporting stock-taking, audit and compliance requirements.
• Bulk buying: space to hold stock allows the organisation to buy in economic quantities and take advantage of discounts.
• Steady supply against uncertainty: buffer stock protects the organisation against late deliveries and sudden rises in demand.
• Safety: proper storage of heavy, flammable or hazardous goods protects staff and property.

Chapter Summary

Storage refers to the systematic holding of goods to ensure their availability when needed, and it involves various types of storage systems designed to suit different needs. Choosing an appropriate storage system requires consideration of factors such as the nature of goods, space availability, and security. Proper storage is essential for preserving the quality of goods and minimizing losses. Stock location focuses on the specific placement of items within the storage area, with its importance rooted in facilitating easy access and efficient inventory management. Selecting a stock location system depends on factors like the size of the warehouse, type of goods, and frequency of access, and it can be implemented using methods such as fixed or randomized locations. The stock location index helps in organizing and tracking stored items accurately, supported by essential documents that record all storage activities. Goods classification organizes items based on characteristics to streamline storage and retrieval processes. Maintaining accurate records of stored goods is critical for inventory control, accountability, and ensuring that stock levels meet organizational needs effectively.