The obsolete, surplus & scrap items can be put under the following categories.
1. Obsolete materials & equipments
2. Unserviceable equipment & machines
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3. Deteriorate stock
4. Surplus stock
5. Scrap material
1. Obsolete Materials & Equipments:
Obsolete should be defined as materials, equipments or parts which are no longer usable in the service for which they are purchased and which cannot be utilised safely or economically for any other purpose. Broadly, it can be said that spares for plants sold become obsolescent when the machines they are carried for go out of production or are no longer available. Ordinarily, obsolescence arises on account of the following reasons:
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(a) Adoption of standardisation or elimination of non-standard varieties.
(b) Faulty planning leads to over stocking of inventory.
(c) Non-implementation of project/job.
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(d) Changes in demand due to change in fashions and supply conditions and change in business policy.
(e) Purchasing wrong items results in non-utilisation of stores.
(f) Bad communication within the organisation as well as with suppliers.
(g) The sudden emergence of new technology or a design change.
(h) Excess purchasing, whether due to wrong forecast of requirement or to take advantage of quantity discount.
2. Unserviceable Equipments & Machines:
The unserviceable equipments and machines are those inventories which outlived their life. No amount of repairs, renewals or replacements can bring them back to their usable life. Such equipments become irreparable and thus fit only for disposal as scrap. Examples are crankshaft, connecting rods, bearing etc. of an engine. Replacement is taken from stores on requisition and old ones are thrown into the scrap dump and sold by weight.
3. Deteriorate Stock:
Deterioration because of evaporation, spoilage, damage, moisture, rust or any other reason causing reduction in the value of stock is known as deteriorated stock. It is a state or condition when with the lapse of time the usable value of stores falls. For example, rust to iron, moisture to cotton over a period of time will reduce the economic value of stocks.
4. Surplus Stock:
Surplus means such items which are more than the required quantity and cannot be consumed during a specific time for certain reasons. These are the materials which can be consumed at some future time or that which is no longer required for the job, for which it was purchased. Surplus materials arise from many reasons:
(i) When manufacturing operations are suddenly curtailed on account of design improvement etc.
(ii) When the project has been completed.
(iii) These stores may be in excess of the normal manufacturing and repairing requirements to the job concerned.
(iv) Excess purchase of stores due to wrong judgement at the procurement stage.
(v) When there is a change in the specification of size.
5. Scrap Material:
Scrap has been defined as the incidental residue from certain type of manufacturing operations, such as turnings, boring, spurs, flashes etc. According to ICMA (London), “It is a discarded material having some value which is usually either disposed off without further treatment i.e., other than the reclamation and handling or is introduced into the production processes in place of raw materials.