Centralized Store and Decentralized Store Advantages And Disadvantages
What is a centralized store?
In a centralized store, materials are received and distributed to a company’s departments, divisions, sub-stores, and production floors. This store works as a central point for production and sales.
A store like this is the only one in the company that receives and distributes materials to all departments and sub-stores. There is a single store that stores and issues materials for all departments and branches for storekeeping.
Advantages Of Centralized Stores
- Easily Manageable
- More economical
- Easy Handling
- Less space is occupied.
- Consistent production support
- Ensures a regular supply of stock
- Less human resources needed
- Reduces and minimizes the risk of loss
- Minimizing waste is possible
Disadvantages Of Centralized Store
- Delay in sending materials to production.
- Increase in material handling cost.
- Requires a massive amount of capital.
- Increase pressure on management.
- Not suitable for large size businesses
What is a Decentralized store?
The term “decentralized store” refers to a store where materials are both received and issued from the same location. In order to minimize the carrying costs of inventory and avoid production disruption, large groups of the company maintain decentralized stores closer to their production centres. Each production department purchases and handles raw materials separately. A decentralised store is ideal where there are large movements of materials and production.
Advantages of Decentralized Store
- Easy to manage and control inventories
- Reduce the risk of abnormal losses (losses due to fire, Carrying)
- Fast and easy fulfilment of individual departmental needs
- Zero internal transportation costs
- Suitable for large and medium-sized businesses
- Lower material handling costs
Disadvantages of Decentralized Store
- A higher amount of capital required
- Require more space for individual departments
- Need more human resources to manage inventory and materials
- More Chances of fraud and pilferage
- Pressure on management in managing different stores and inventories
- Higher staffing and expense cost
Conclusion
Centralized and Decentralized store both has some major advantages and disadvantage. Different size of the business has different requirements. Management will decide which type of store fits best for them according to the nature and size of their business.