Material control

MATERIAL CONTROL
Material control is a system which ensures the provision
of the required quantity of materials of the required
quality at the required time with the minimum amount
of capital investment. It can be defined as safeguarding
of company’s property in the form of inventory and
maintaining it at the optimum level, considering the
operating requirements and financial resources of the
business.

NEED/ NECESSITY/
OBJECTIVES OF MATERIAL
CONTROL
ENSURING UN-INTERRUPTED PRODUCTION
PROVISION OF REQUIRED QUALITY OF MATERIALS
MINIMISATION OF WASTAGES AND LOSSES OF
MATERIALS
TO CONTROL INVESTMENT IN STOCK OF MATERIALS
AIMS AT FIXING THE RESPONSIBILITY
TO KEEP THE RECORDS

ENSURING UN-INTERRUPTED
PRODUCTION
The main objective of the material control is to ensure the un-
interrupted supply of materials for smooth flow of production.
Material control helps in making available the right type of
materials at right time. For this purpose, various material
levels are set up such as:
•Maximum level
•Minimum level
•Re-order level
•Danger level, etc.
The setting up the materials levels and following them ensures
the availability of materials at all the time and non-stoppage of
production process.

PROVISION OF REQUIRED
QUANTITY OF MATERIALS
Material control is also associated with acquiring
the quality material for production process. The
material control department ensures the supply of
quality material from the supplier which is to be
used in the production process. As if the quality of
material is not proper, it will ultimately affect the
goodwill of the concern.

MINIMISATION OF WASTAGES
AND LOSSES OF MATERIALS
Material control system is being installed in the enterprise to ensure
its minimal loss and wastages. For this purpose, various techniques
are used such as:
•ABC analysis (Always Better Control)
•VED analysis (Vital Essential Desirable)
ABC analysis is used to classify the materials on the basis of its
importance and then applying the required degree of control.
VED analysis categorize all the material of the business concern into
three categories i.e. vital, essential and desirable and on the basis of
this, the control is exercised on materials.
The minimization of losses and wastages of materials ultimately
leads to cost reduction and cost control.

TO CONTROL INVESTMENT
IN STOCK OF MATERIALS
Material control system ensures no under-investment or over-
investment in stock keeping. The main aim is to make
available only that amount of raw materials which are needed.
There should be no holding of idle stock. This may lead to lock
up of large amount of capital. Efficient material control
system aims at keeping the optimum level of stock at all the
times. This may be done by using the techniques like:
•Economic Order Quantity
•Material Levels
•Perpetual Inventory System

AIMS AT FIXING THE
RESPONSIBILTY
In a materials control system, the personnel
is required to perform the duties of keeping
the records regarding materials receipt,
issue, inspection etc. the material control
system aims at fixing the responsibility of
operating units and individuals connected
with the handling of the materials.

TO KEEP THE
RECORDS
Material control system ensures the proper
record keeping of the materials purchased,
stored, issued and received. This can be made
possible by adopting the perpetual inventory
system. For keeping the records, following
systems are sued:
•Bin Card
•Stores Ledger

TECHNIQUES OF
MATERIAL
CONTROL

TECHNIQUES OF
MATERIAL CONTROL

1.MATERIAL
LEVELS
MINIMUM LEVEL
MAXIMUM LEVEL
DANGER LEVEL
RE-ORDER LEVEL
This technique is applied to maintain the various levels of stock
to ensure that there is neither over-stocking nor under-stocking
of materials. The various levels are set by taking into
consideration the following points:
•Time involved in procurement or placing the order.
•Availability of floor space
•Quantity and types of materials used
•Consumption of materials per year in the factory.

•MINIMUM LEVEL
It is the level that describes the minimum amount of
stock which must be kept in the store all the times.
This level acts as safety measure, which is why it is
known as ‘buffer stock’ or ‘safety stock’. The fall in
stock of the material below this level acts as a
warning to the management to procure the materials
as soon as possible, otherwise the production process
will be stopped.
Minimum Level= Re-order level- (Normal
Consumption*Normal Delivery Time)

•MAXIMUM LEVEL
It is the highest level of stock that should be available with the
company. The stocking of materials above this point indicates
the locking up of capital and overstocking of materials in the
concern..
Maximum Stock Level= Re-order level+ Re-order Quantity-
(Minimum Consumption*Minimum time required for
delivery)
OR
Maximum Level= Re-order level- Consumption during the
time required to get supplies at minimum rate +Economic
Order Size

•RE-ORDER LEVEL
It is the stock which is fixed between the maximum and
minimum stock levels. It is the level at which the order for the
purchase of materials is placed. It is set generally higher than
the minimum level to cover any emergency which may arise as
a result of abnormal usage of materials or unexpected delay in
obtaining fresh supplies.
Re-order level= maximum stock + average consumption during
normal delivery time
OR
Re-order level= Maximum consumption* Maximum delivery
time.

•DANGER LEVEL
Danger level is fixed at a point below the minimum
level and represents the limit at which special steps
must be taken to obtain emergent supplies of
materials.
It can be calculated as follows:
Danger Level= Normal consumption per
day/week/month* Time required to obtain emergent
supplies

2.ECONOMIC ORDER
QUANTITY
Economic order quantity is that size of the order which given
maximum economy in purchasing any item of material. There
are two main costs that are considered while determining the
economic order quantity. These are:
Material Acquisition Costs are related to the number of orders
placed during a given period. These costs are part of wages
and operating expenses for departments like production
control, purchasing, receiving and stores is incurred for
purchasing and possessing the materials.
Material carrying costs includes the interest charges on
investment in materials, insurance costs, storage costs etc.

3.PERPETUAL
INVENTORY SYSTEM
Perpetual Inventory System refers to a system of maintaining
such records as will reflect the receipts, issues and balance of
all items of materials in store all the times.
The records maintained in a manufacturing concern for
material accounting are divided into two parts:
Bin Card: It is maintained in the stores department and
shows the quantities of materials received, issued and
balance in hand after each receipt and issue.
Stores Ledger: It is maintained by costing office and deals
with the quantities and values of materials received, issued
and balance in hand.

4.ABC ANALYSIS
ABC analysis is a technique that is followed for the purpose of
exercising control over materials according to their importance or
value.
Category ‘A’ consists of materials which consists 5% to 10% of the
total items in a store and represent 70% to 85% of the total store
value.
Category ‘B’ consists of materials which consists of 10% to 20% of
the total items in a store and represent 10% to 20% of the total
store value.
Category ‘C’ consists of materials which consists of 70% to 85% of
the total items in a store and represent 5% to 10% of the store
value.
It is also known as Always Better Control method since it aims at
obtaining maximum control over materials and minimum cost of
control.

5.VED ANALYSIS
•‘V’ stands for ‘Vital’
•‘E’ stands for ‘Essential’
•‘D’ stands for ‘Desirable’
Vital spare parts are those parts, the unavailability of which
will interrupt the production process for quite some time.
Essential spare parts are those spares, the absence of which
cannot be tolerated for more than few hours or a day.
Desirable spare parts are those spares which are needed but
their non-availability for even a week or so will not lead to
interruption in production.

6.MATERIAL
TURNOVER
Turnover of materials refers to movement into and out of an
organization. It can be calculated by comparing balance of
stores with the total issues or withdrawal during a particular
period of time.
Material Turnover Ratio= Value of materials consumed during
the period/ value of average stock
High material turnover ratio indicates that the material item is
fast moving and exhausts easily.
Low material turnover indicates that the material items are
slow moving and organization should not go for over stocking
of materials.

Material control

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