PURCHASING AND WAREHOUSING
This chapter reviews the purchasing and warehousing functions of Donna Independent School District (DISD) in the following sections:
- A. Purchasing
- B. Warehousing
- C. Textbooks
- D. Contracting Process
B. WAREHOUSING
An effective warehouse provides for the storage, delivery and safekeeping of the goods commonly used by the schools and departments.
The DISD supply warehouse, which is located across from Donna High School, provides services to the 15 schools and 20 administrative departments. When the review team visited the warehouse, the warehouse was clean, stock items were stored neatly on shelves with stock numbers for the items and bulk items were stored on pallet racks. The Warehouse Department stocks paper, office supplies, art supplies and custodial supplies. The schools and administrative departments order supplies and materials from the warehouse using the district's computer system. The orders are picked from stock by warehouse staff, charged to the budget specified on the requisition and delivered to the appropriate location. The department staff inventory warehouse stock monthly and the accounting records are adjusted to reflect the inventory. Warehouse staff also picks up and delivers interschool and U.S. mail to the schools and administrative departments.
The warehouse falls under the direction of the assistant superintendent for Business and Finance. In addition to the Warehouse/Fixed Assets manager who oversees the daily operations of the warehouse functions, the department is staffed with an assistant supervisor, inventory clerk and foreman, as well as four individuals who handle receiving, stocking and mail distribution. Exhibit 8-6 presents the organization of the Warehouse Department.
Exhibit 8-6 Source: DISD Warehouse/Fixed Assets manager, April 2002.
Warehouse Organization
April 2002FINDING
Between May 2001 and April 2002, the Warehouse inventory of supplies increased by more than $120,000. Based on the Warehouse month-end inventory report, the beginning inventory for May 2001 was $152,661 and the ending inventory in April 2002 was $272,846; an increase of 78.7 percent. The supplies inventory as of May 2002 represents 5.3 percent of the district's general fund balance. This percentage amounts to an investment of district funds that does not generate any revenue for the district.
Some governmental entities, including school districts, use just-in-time inventory systems to reduce the amount of district inventories and maximize the amount of funds available to invest. A just-in-time inventory system means that district schools or departments order supplies to be delivered on an as-needed basis.
Robstown ISD (RISD) has implemented just-in-time delivery of supplies and materials. It does not operate a central warehouse facility for the storage of supplies or materials. Items are ordered when the need arises and are delivered directly to the originator of the request or to the central administration office where the mail clerk delivers them to the respective school or facility. This practice avoids the personnel, maintenance and utilities costs associated with the operation of a warehouse facility.
Recommendation 68:
Develop procedures to phase-in the purchase of supplies on a just-in-time basis.
Moving to just-in-time purchases of supplies will allow the district to invest monies previously tied up in inventory.
With the exception of paper, the district should stop ordering supplies immediately and gradually reduce inventory by using the supplies in the Warehouse through May 2003. The district should liquidate the remaining inventory items at that time. Once these supplies have been liquidated, the district should begin purchasing supplies from discount vendors as needed. The discount vendors should deliver all supplies directly to schools and departments.
The district should continue to store copier paper in the Warehouse for delivery to the schools and departments. The personnel located at the warehouse who deliver mail to the district's facilities should deliver copier paper to the schools and departments, as needed.
The assistant Warehouse supervisor should assume responsibility for mail delivery and the remaining supply distribution and inventory functions at the Warehouse. The Warehouse/Fixed Assets manager, who also oversees fixed assets and custodial operations for the district should be assigned to only those duties.
IMPLEMENTATION STRATEGIES AND TIMELINE
1. The superintendent directs the assistant superintendent for Business and Finance to develop procedures to implement just-in-time purchasing. October 2002 2. The assistant superintendent for Business and Finance directs the Warehouse/Fixed Assets manager to stop ordering supplies for warehouse stock, except copier paper. December 2002 3. The assistant superintendent for Business and Finance directs the Purchasing agent to obtain contracts for the district to purchase supplies on a just-in-time basis. January 2003 4. The assistant superintendent for Business and Finance directs the Warehouse/Fixed Assets manager to liquidate the remaining supplies inventory. July 2003 5. The superintendent recommends the elimination of the inventory clerk, foreman, one receiver/stocker/mail position and one receiver/stocker position to the board and receives approval. July 2003 FISCAL IMPACT
The total annual savings realized by implementing this recommendation is based on the salaries of $94,904 for the positions eliminated and the liquidation of supplies. First-year salary savings are prorated.
The calculation for this fiscal impact is shown below:
Eliminate inventory clerk position: Annual salary $14,973 Variable benefits rate x 1.16 $17,369 Fixed benefits $2,502 Total annual salary and benefits $19,871 Eliminate foreman position: Annual salary $20,820 Variable benefits rate x 1.23 $25,609 Fixed benefits + $2,502 Total annual salary and benefits $28,111 Eliminate stocker/receiver and stocker/receiver/mail positions: Annual salary (average salary for positions of $17,040 x 2) $34,080 Variable benefits rate x 1.23 $41,918 Fixed benefits times two + $5,004 Total annual salary and benefits $46,922 Savings from eliminating the three positions: $94,904 Current value of inventory $272,846 Estimated percentage of inventory consumed by May 2003 x .50 $136,423 Estimated return on value of liquidated inventory x .10 One-time Savings from liquidating the inventory: $13,642
Recommendation 2002-03 2003-04 2004-05 2005-06 2006-07 Eliminate positions. $7,909 $94,904 $94,904 $94,904 $94,904 Liquidate warehouse inventory. $13,642 $0 $0 $0 $0 Net Savings/(Costs) $21,551 $94,904 $94,904 $94,904 $94,904
