material control b.v.raghunandan
DESCRIPTION
deals with material control, purchase functionTRANSCRIPT
MATERIAL CONTROL
Meaning & Importance
Raw Materials, Chemicals, Components, loose tools, implements, maintenance items etc
Most of the products are material intensive, where material forms a substantial part of total cost of production
Objectives of Material ControlEnsuring non-stop productionLow investment in inventoryPurchase only on proper AuthorisationPurchase at minimum cost and at Economic
Order QuantityProtection of Material & Proper StorageLesser Idle MaterialIssue of Material on Proper AuthorisationFixing Up Responsibility for MaterialEnsuring Proper payment & Maintenance
of Records
Essentials of Material Control-IInter-Departmental Co-
ordinationBudgeting & SchedulingUsage of Standard
Printed FormsClassification of
MaterialInternal CheckInter-departmental
CommunicationProper Control on
Purchases & Issues
Essentials of Material Control-IIProper Usage & StorageMaintenance of Proper
Store RecordsPerpetual Inventory
ControlFixing Up Levels of StockProper Pricing of issue of
MaterialAn Efficient Stores
ControlRecording Wastage &
Shortage
Purchase of Material: Elements of Material Control (Organisation of Purchase Department)
Purchasing Department (Purchase)
Receiving & Inspection Department
Store-Keeping Department (Storing, Issue and Accounting for Material
Production department (Receipt of Material)
Costing Department (Perpetual Inventory)
Types of PurchasingCentralised Purchasing
Decentralised Purchasing
Centralised Purchasing: Merits-I
Quantity BuyingUniform Buying PolicyExpert Staff for
BuyingQuick Implementation
of PurchasesMaintenance of
Complete records in one Department
Avoiding Duplication of purchasing Effort
Merits of Centralised Purchasing- IIAvoiding Excessive
StockingRecognising Purchase
as a Major FunctionEffective utilisation of
trade relationsEconomy in RecordingPrompt Reporting of
Scrap, Spoilage etcReducing Material
Cost
Demerits of Centralised Buying
Lesser FlexibilityHigh Initial Cost of
Setting up a Separate department
Undue Delay in Supply of Material
Difficulty of Maintaining Records of Different Departments
Decentralised Buying: MeritsBenefits of Local PurchaseLesser Transportation CostEasy Local Sales through Contact
with Local SuppliersPrompt Settlement of ComplaintsPersonal Attention by Departmental
HeadsReduces Costly Order ProcessingTechnical ExpertiseLess Lead Time
Purchase Procedure1. Receiving Purchase
Requisition
2. Selection of Sources of Supply
3. Placing the Orders
4. Receiving & Inspection of Materials
1.Receiving Purchase Requisition
Received from - Store-Keeper for
Regular Items - Production
Departments for Special Material
- Maintenance Department for material needed for repairs & maintenance
- any Departmental Head like Marketing Manager, Finance Manager etc.
Specimen of Purchase Requisition
ABC castings Ltd., ABG Castings Limited MG Road, Mangalore-3No.Date Required: Purchase Order No.
Item No. Code No. Description Qty Remarks
Requisitioned by: Approved by:
2.Selection of Sources of Supply: Steps Involved
a. Inquiry for Tenders & Quotations
b. Receipt of Quotations & Tenders
c. Comparison of Tenders Received
d. Selecting the Best Source
3.Placing the Order
a. Purchase Order : 5 copies to-
-supplier - retained by
purchase department -department
initiating purchase -Receiving
Department - Finance
Departmentb. Follow-Up
Specimen of Purchase Order
ABG Casting Limited MG Road, Mangalore-3 PURCHASE ORDERNo. Date:Quotation No. Purchase Requisition No.
To Thermax Ltd., Bombay
Dear Sir, Please supply the following as per terms and conditions contained In your quotation number as mentioned above.
Sl.No.
Qty Description Price/Unit
Total Remarks
Purchase Manager
4.Receiving & Inspection of Material
Unloading the materialUnpackingChecking the number of units, weight,
measure, quality as per Purchase OrderReporting the Shortage and BreakagePreparing Material Inspection Note and
Goods Received NoteSending MIN to Supplier & Stores DeptSending GRN to Purchase Dept, Accounts
Dept, and the Dept requiring the Material
Material Inspection Note
ABG Casting Limited,M.G. Road,Mangalore-3
Material Inspection NotePurchase Order No. Date:Inspection Note No. Date:
Sl.No
Description Qty
QuantityRemarksInspecte
dAccepte
dRejected
Inspected by:
Goods Received Note
ABG Castings Limited, MG Road, Mangalore-3
Goods Received Note No: Purchase Order No:Date: Date:
Received from M/s Thermax Limited, Bombay under their Invoice No. TH 567230 dt……. The following:
Sl.No
Description
Stock Code No.
Quantity Rate Amount
Condition of Goods:……………………. Posted in Stores Ledger:……………..Posted in Bin Card:……………………… Remarks…………………………………...
Stores Control: Functions of Stores Department
Preparing Purchase RequisitionsReceiving Goods into StoresProper Storage of GoodsAvoiding Damage & DeteriorationClassification and Coding of MaterialIssue of MaterialMaintaining Stock recordsMaintaining Different levels of StockStock Verification at Regular Intervals
Types of StoresCentralised Stores: One centrally located Stores department Supplying for the requirements of all the Production and service departments
Departmental Stores: each Department has a small stores department of its own
Centralised Stores with Sub-stores
Centralised Stores: Benefits
Economy of Large Scale BuyingBetter Use of StaffQualified StaffBetter Use of SpacePrompt ServiceMinimum Investment in StockBetter maintenance of Levels
Inventory Controli. Setting Levels of Stock
ii. Determining Economic Order Quantity
iii. ABC Analysis of Inventory Control
iv. Perpetual Inventory System
v. Establishment of Budgets
i. Setting Levels of Stock: Factors Considered
1. Rate of Consumption2. Lead Time3. Availability of Working Capital4. Economic Order Quantity5. Availability of Storage Space6. Cost of Carrying Stock7. Perishability of Material8. Seasonality in Availability of Material9. Loss by Deterioration10. Nature of Demand
ii. Economic Order Quantity
A quantity at which the sum of ordering cost and carrying cost is minimum i.e., less than the total cost of ordering and carrying of any other quantity
Ordering CostsCost of Placing an orderLoading and Unloading of GoodsTransportation CostInsurance for Goods in TransitCost of Receiving & InspectionAdministrative Cost
Costs of CarryingWarehouse ChargesInsurance LightingHeatingCold Storage &
RefrigerationPilferageBreakagePreservativesSupervision Costs
iii. ABC AnalysisCategory A : 5-10% of Quantity and 70-
85% of ValueCategory B: 20-30% 0f Quantity and 25-
30% of ValueCategory C: 70 – 80% of Quantity and 5-
10% of Value
Merits of ABC Control
Close & Strict Control on Expensive items
Ensuring sufficient stockLeading to Efficient Inventory
ManagementSaving the time of the Management
Perpetual Inventory System
Bin Card
Stores Ledger
Specimen of a Bin Card Bin Card Description Bin No. Stores Folio No. Code No. Location Code. Unit: Maximum Level : Minimum Level: Reordering Level: Reordering Quantity:
DateReceipts Issues Balance
RemarksGR No. QTY MR No.
Qty Quantity
Entered by: Authorised by:
Specimen of Stores Ledger
STORES LEDGER Description… Code No….. Maximum Level…Location Code No…….. Unit…. Minimum Level……..Re-order Quantity….. Re-order Level….
Date
Receipts Issues Balance
GR No Qty Rate Amt MR No
Qty Rate
Amt
Qty Rate
Amt
Advantages of Perpetual Inventory System
1. Early Discovery of Errors2. No Disruption in Production for Stock
Taking3. Value of Stock on Any Day4. Excessive Stock is Avoided5. Prompt Inventory Information to the Mgt6. System of Internal Check7. Control over issue & Usage of Material8. Qualified Personnel to the Stores
Physical Stock VerificationPeriodic Inventory System: Stock Verification once in a year by a team of people by stopping production-less time consuming and less expensive-but the system is defective
Continuous Stock Verification: Benefits of Perpetual Inventory System
THANK YOU