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Material Control/Material Management
Material Control and Material Management
Material control or Material Management plays an important role in controlling the cost of production. Strict control over cost of material will increase profit as well as reduce the cost of production. Therefore, it is necessary to take steps to control material from the time of ordering till consumption. Material control involves the control of three important functions. They are: procurement, storage and usage.
Material control may be defined as the regulation of the functions of an organization relating to storage, procurement and usage of materials in such a way as to maintain an even flow of production without excessive investment in material stock.
Just like handling of cash is of utmost importance in the case of a banking business, an efficient handling of materials is of vital importance in the case of a manufacturing business.
Objectives of Material Control
- Make sure that the continuous availability of all types of materials in the factory so that the production may not held up for want of material.
- To prevent losses during the storage.
- Purchase of material of right quality and quantity to avoid quality issues of finished product.
- Purchase of right quantity to avoid overstocking of material which may case deterioration of quality of material as some types of material may expire after a certain period of time.
- Maximize the economical benefit of purchasing goods in quantity. Favorable terms and conditions of purchase of goods may reduce the price without affecting quality.
- Overstocking of material may cause the blocking of money for a long period. Control over stock can reduce the working capital.
- Information about the cost of material and availability of stock will help the management to take informative decisions related to the production and fixation of price.
- Control of freight charges by combining different materials and controlling quantity and distance of storage.
Advantages of material control:
The main advantages of a good system of material control are as follows:
- Reduce production delays by ensuring unrestricted and continuous supply of material on time.
- Minimizes the capital investment on the stock of materials.
- Reduce the cost of storage and issuing of materials.
- Reduce wastage and loss of material through pilferage, theft, spoilage, evaporation etc.
- To ascertaining the position of inventory and accurate valuation of closing stock is possible by introducing perpetual inventory control system.
- Ensure the purchase of material at reasonable price.
- It help the management in initiating and formulating proper purchase policies of materials.
- It reduces the annual operating costs by introducing suitable infrastructure and material handling devices.
- Improve aesthetics of the manufacturing unit by planning storage of material.
Basic requirements of Material Management/Material control
Material control extents to all areas of material management starting from buying, receiving, inspection, storage, consumption and accounting. Basic requirements of a good system of material control are as follows:
- Proper coordination between departments which are involved in the purchasing, receiving, testing, approving, storage of materials and payment of prices.
- A proper budget for materials and supplies to realize the economical benefits of material control.
- Centralized purchasing can improve the efficiency of purchase department and reduction of costs related to purchases.
- Appropriate forms should be used to record receipt, issue and transfer of materials from one job to another.
- Installation of well organized system of storage to prevent deterioration, pilferage, wastage and evaporation of materials.
- Installation of internal audit system to check the stock of materials, purchase, receipts and supplies.
- Fixation of minimum and maximum limit of material in store can avoid shortage and overstocking of material.
- Installation of perpetual inventory system to find out the quantity and value of materials in stock at any point of time.
- Planning of production may be done keeping in view the inventory balance in store by continuous availability of material information.
- Information about obsolete and defective stock should be given to the management from time to time so that steps may be taken for the disposal of such stock.
- Installation of proper system for the issue of materials so that there will be delivery of materials on requisition to the department, process or jobs in the right quantity and at the right moment they are needed.
- Installation of a good system of scrap disposal can increase the utility of space as well as money.
- Quality assurance system to check the quality of raw material in use will increase the quality of finished product.