New sales slip runs into problems During August 1978 GSA initiated the use of a new self-service store sales slip. sales slip identifies the --line item purchased, The properly completed new --line item unit price and total purchase price, --Federal activity purchaser and approving official, --store personnel performing the transaction. We believe the new sales slip could provide Federal activities with a good system for internal control over store purchases. Generally, Federal activity personnel offered the same opinion. However, there are some problems with its use. A common complaint was that items agency personnel listed on the sales slip for purchase were often not stocked. Therefore, another sales slip had to be prepared at the Federal activity. Also, store personnel issued sales slip continuation sheets to customers in the stores. We believe this defeats GSA's attempt to maintain control over serially numbered sales slips issued to Federal activities. GSA is studying problems related to using the new sales slip. GSA should maintain the sales slip's line item identification of supplies purchased from the stores, regardless of any needed changes relating to its use. CHAPTER 4 PROBLEMS CONTINUE IN THE SELF-SERVICE STORES GSA self-service stores continue to experience shortages of essential supplies, and there is a lack of control over inventories as identified in our prior report. These and other store management problems continue to degrade services to customer agencies, reduce the efficiency of store operations, and provide opportunity for fraud and abuse in the store program. We found a wide variety of deficiencies as a direct result of store management not adhering to prescribed GSA program procedures. The most serious problems involved --stock replenishment practices; --large quantity sales to customers; --control of outdated, damaged, and perishable stock; --inventory pricing practices; and --physical security of store contents. STOCK REPLENISHMENT PRACTICES AND LARGE VOLUME SALES ADVERSELY AFFECT SUPPLY AVAILABILITY Stock replenishment practices in stores are generally based on store personnel's subjective observations of inventory turnover and on unsystematic ordering procedures. Bulk sales and other large sales severely deplete store inventory, compounding the problems caused by poor replenishment practices. We believe these practices leave the self-service stores with empty shelves and an inability to satisfy retail customers' needs. We received many complaints from Federal activities that GSA stores were constantly out of stock of needed supplies. Although a number of these complaints were caused by the purge (see p. 12), we believe improper store practices create shortages of needed items. Replenishment practices GSA procedures for stock replenishment focus on a systematic process called the economic order quantity with appropriate modification to consider space limitations, excessive value, shelf life, standard quantities, transportation costs, and seasonal items. Store managers are expected to implement these replenishment procedures based on replenishment and status records for individual line items carried by the store. Six of the nine stores we reviewed did not follow the prescribed procedures. These store managers do not think that the economic order quantity is an effective and economical method for stock replenishment. Instead, they monitor their stores, and, when stock appears to be low, they order the amount they believe is needed. Reasons given for not using the economic order quantity included --drastic fluctuations in demand for certain items and --uncertainty of supply delivery. Store managers' ordering practices are not effective Store managements' poor recordkeeping helps to prevent self-service stores from being appropriately stocked. In six of the nine stores we reviewed, we found that out of stock items were not reordered. Also, documents which are used to show the status of ordered items were not maintained. The following examples describe several situations. St. Louis, Missouri --Items were ordered using the wrong Federal stock --Open orders were included in stock replenishment records dating back to 1976 with no information provided to show if the orders were received. Dallas, Texas --111 items were out of stock and 40 were not reordered. Savannah, Georgia --Replenishment records were in such disarray that we could not determine the number of items out of stock nor which items were ordered. Bulk sales create inventory fluctuations GSA procedures provide that when a shopper desires a quantity of an item which exceeds the predetermined normal issuance quantity or a quantity that would seriously impair the stock position of the item, store personnel shall issue only a reasonable portion of the quantity requested. We found that this procedure was being disregarded and large volume sales were being made by the self-service stores. The following list of individual line item sales were taken from individual sales slips. 1,728 ball point pens 4,320 pencils 5,000 file folders 200 cases of bond paper 960 cans of abrasive cleaner 1,000 appointment books 1,000 planning books 144,000 paper bags 1,000 boxes of paper clips 120 moisteners a/This sale exhausted the entire stock from one self-service store. It was not uncommon to find individual sales transactions amounting to several thousand dollars. We found individual sales exceeding $10,000 and in one case $20,000. We believe these large transactions cause the drastic fluctuations in demand the store personnel noted as a reason for not using the economic order quantity. Also, we do not believe such large transactions fit the concept of a retail operation. STORES STOCK DEFECTIVE SUPPLIES Store management practices for controlling outdated, damaged, and deteriorated stock are inadequate. We found nu merous items stocked which were unusable but stocked for sale to customers. GSA procedures prescribe the actions store managers should follow when merchandise requires removal from the store because of quality complaints, damage, or expired shelf life. Systematic procedures are also prescribed for the control of shelf life items. Under these procedures, stores are permitted to sell expired merchandise if the items are inspected and found to be usable. Numerous items on the display shelves were found to be either outdated, damaged, or deteriorated in five of the stores visited. We found --ink pads were leaking or dried in their containers, --ink bottles had leaked about a fifth of their contents, --development dates on photographic film had passed, and --dry cell flashlight batteries shelf-life date had Our observations were further supported by complaints from Federal activities, such as: --Ink pads were dried out. --Batteries were dead or exploded during use. --Whiteout was dried in the bottle. --Erasers broke off pencils. --Wrapping twine broke and was too slippery to hold a knot. --Mechanical pencils lasted for only two or three times of use before breaking. --Pens leaked. --Felt tip pens were missing felt tips. --Glue on the back of envelopes did not stick. The following photographs illustrate some of these examples. |