MATERIAL: MATERIAL: ISSUE,CONTROL AND ISSUE,CONTROL AND

VALUATIONVALUATION

DEFINITION OF MATERIAL DEFINITION OF MATERIAL CONTROLCONTROL

ACC. TO B.K.BHAR:

MATERIAL CONTROL IS A SYSTEM WHICH ENSURES THE PROVISION OF REQUIRED QUALITY OF MATERIAL,IN REQUIRED QUANTITY ON REQUIRED PLACE AN TIME WITH MINIMUM AMOUNT OF CAPILTAL.

MEANING OF INVENTORYMEANING OF INVENTORY

• INVENTORY MEANS A SHEDULE OF ITEMS HELD AT PARTICULAR POINT OF TIME.

LEVELS OF MATERIAL CONTROL

QUALITY CONTROL

FINANCIALCONTROL

OBJECTIVES OF MATERIAL OBJECTIVES OF MATERIAL CONTROLCONTROL

AVAILABILITY OF MATERIAL. MINIMUM INVESTMENTS IN MATERIAL. SUITABLE PRICE. TO AVOID SPOILAGE OF MATERIAL. PROPER ISSUE OF MATERIAL. ACCOUNTING OF MATERIAL. CHECKING OF MATERIAL. VALUATION OF STOCK.

CONTROL ESSENTIALS OF CONTROL ESSENTIALS OF MATERIALMATERIAL

• ESSENTIALS ARE

CENTRA--LISED

PERPETUALINVENTORY

SYSTEM

CLASSIFI--CATION

&CODIFICA-

-TION

MAIN TECHNIQUES OF MAIN TECHNIQUES OF INVENTORY CONTROLINVENTORY CONTROL

A) DETERMINATION OF STOCK LEVELS.B) ECONOMIC OPRDER QUANTITY.C) VED ANALYSIS.D) MATERIAL TURNOVER RATIO.E) ABC ANALYSIS.F) PERPETUAL INVENTORY SYSTEM.G) SIMPLIFICATION AND STANDARDISATION.H) CLASSIFICATION AND CODIFICATION.

A) DETERMAINATION OF A) DETERMAINATION OF STOCK LEVELSSTOCK LEVELS

Stocklevels

MAXIMUM STOCK LEVEL

Minimum stock level

DANGER LEVEL

AVERAGE STOCK LEVEL

REORDERING LEVEL

A)A) BRIEFING OF ALL ABOVE BRIEFING OF ALL ABOVE STOCK LEVELSSTOCK LEVELS

1) REORDERING LEVEL:

Reordering level: minimum level + consumption during the time required to get fresh delivery

OR

• maximum consumption*maximum reorder period

2) MINIMUM STOCK LEVEL:

Minim. Stock level = Reordering level + (Avg. consumption* Avg. or Normal delivery Time)

• 3) MAXIMUM STOCK LEVEL:

Maxi. Stock level = (Reorder level +

Reorder quantity) – (Minimum

consumption * Minimum reorder

period)

• 4) DANGER LEVEL:

Danger level = (Avg. ratio of

consumption*Maximum reorder period

for emergency purchases)

• 5) AVERAGE STOCK LEVEL:

Avg. stock level: ½ (Maximum stock

level + Minimum stock level)

OR

Minimum stock level + ½ (Reorder Qty)

B) B) ECONOMIC ORDER ECONOMIC ORDER QUANTITYQUANTITY

• E.O.Q

CARRYING COST

ORDERING COST

CONTINUED…CONTINUED…

• E.O.Q = √2AB

S

Where, A = Annual consumption

B = Buying cost per order

S = Storage and carrying cost

per unit per annum.

c) MATERIAL TURNOVER c) MATERIAL TURNOVER RATIO:RATIO:

• M.T.R = Cost of material consumed

during the period

Cost of average stock held

during the period

Average stock = op. stock + cl. Stock

2

D) A.B.C Analysis of Material D) A.B.C Analysis of Material Control:Control:

• ABC STANDS FOR ALWAYS BETTER CONTROL SYSTEM. IN THIS TECHNIQUE BASICALLY IMPORTANT MATERIAL IS CONTROLLED KEENLY AND UNIMPORTANT MATERIAL IS LEFT OUT.

ADVANTAGES OF ABC ADVANTAGES OF ABC ANALYSIS:ANALYSIS:

• REDUCTION IN PURCHASE COST

• PROPER CONTROL

• BEST UTILISATION OF RESOURCES

• MINIMUM INVESTMENT

• REDUCTION IN CONTROL COST

E) PERPETUAL INVENTORY E) PERPETUAL INVENTORY SYSTEMSYSTEM

IT IS A SYSTEM OF RECORDS MAINTAINED BY THE CONTROLLING DEPTT.,WHICH REFLECTS THE PHYSICAL MOVEMENT OF STOCKS AND THEIR CURRENT BALANCE.

IN THIS BINCARD AND STORES LEDGER ARE MAINTAINED WHICH SHOW GOODS RECEIVED,ISSUED.

F) VED ANALYSIS:F) VED ANALYSIS:

• VED STANDS FOR VITAL,ESSENTIAL AND DESIRABLE.VED ANALYSIS TO HAVE CONTROL OF SPARE PARTS.IN ABC ANALYSIS ONLY PRICES OF MATERIALS ARE CONSIDERD AND NOT THEIR REQUIREMENT.

SIMPLIFICATION AND SIMPLIFICATION AND STANDARDISATION:STANDARDISATION:

• SIMPLIFICATION AND STANDARDISATION ARE THE IMPORTANT TECHNIQUES TO CONTROL THE SIZE OF INVENTORY SO THAT SIZE OF INVENTORY,INVESTMENT AND COST OF KEEPING THE MATERIALS CAN BE REDUCED.

CASSIFICATION AND CASSIFICATION AND CODIFICATION:CODIFICATION:

CLASSIFICATION AND CODIFICATION OF MATERILS ARE ESSENTIAL FOR A GOOD SYSTEM OF STORE KEEPING.CODIFICATION IS NEXT STAGE OF CLASSIFICATION OF STORES.

PURCHASE OF MATERIALPURCHASE OF MATERIAL::

• IN A BIG ORGANISATIONS,ALL PURCHASES SHOULD BE PERFORMED BY A SEPARATE PURCHASE DEPTT. USUALLY KNOWN AS PURCHASE MANAGER.

• CENTRALISED PURCHASING ARE PURCHASED BY ONE DEPTT.,IN OTHER WORDS ALL PURCHASES SHOULD BE PURCHASED BY PURCHASE DEPTT. TO AVOID DUPLICATION OF EFFORTS.

FUNCTIONS OF PURCHASE FUNCTIONS OF PURCHASE DEPTT.DEPTT.

• WHAT TO PURCHASE?

• WHEN TO PURCHASE?

• HOW MUCH TO PURCHASE?

• FROM WHERE TO PURCHASE?

STEPS INVOLVED IN PURCHASE STEPS INVOLVED IN PURCHASE PROCEDURE:PROCEDURE:

RECEIVE PURCHASE REQUISITION

EXPLORING THE SOURCES OF SUPPLY AND SELECTION OF SUPPLIER.

PREPARATION & PLACING PURCHASE ORDERS.

RECEIVING & INSPECTION OF MATERIALS.

STORE OR MATERIAL OR STORE OR MATERIAL OR INVENTORY RECORDS:INVENTORY RECORDS:

• TWO IMPORTANT RECORDS OF MATERIAL RECEIVED & ISSUED ARE GENERALLY KEPT.

BINCARD STORES LEDGER

CONTINUED…CONTINUED…

BINCARD: BIN MEANS A PLACE,RACK,ALMIRAH OR THAT PLACE WHERE MATERIALS ARE STORED.A BINCARD IS USUALLY KEPT IN BIN.IT PROVIDES QUANTITATIVE RECORD OF RECIEPTS,ISSUES & BALANCES OF STOCK.

IT IS MAINTAINED BY STORE KEEPER.

CONTINUED…CONTINUED…

STORES LEDGER: THIS LEDGER IS KEPT IN COSTING DEPTT. THIS LEDBER PROVIDES THE INFORMATION FOR PRICING IF MATERIALS ISSUED AND THE MONEY VALUE AT ANY TIME OF EACH ITEM OF STORES.

STORES DEPTTSTORES DEPTT..

• THE LOCATION OF STORES DEPTT. SHOULD BE CAREFULLY PLANNED AND IT SHOULD BE NEAR TO THE RECEIVING DEPTT. IN ORDER TO MAXIMISE THE TRANSPORTATION COSTS.

ISSUE OF MATERIALSISSUE OF MATERIALS::

• MATERIALS ARE RECEIVED AND KEPT IN STORE CAREFULLY AND FINALLY THE STORE KEPEER ISSUES THEM WHENEVER THOSE ARE REQUIRED FOR PRODUCTION DEPTT.,MATERIALS SHOULD BE ISSUED AGAINST PROPER AUTHORISATION ONLY.THE OBJECTIVE OF MATERIAL ISSUE CONTROL IS TO ENSURE PROPER UTILISATION OF MATERIALS.

MATERIAL ABSTRACTMATERIAL ABSTRACT

• AN ANALYSIS OF VARIOUS MATERIAL REQUISITIONS,MATERIAL RETURNED NOTES AND MATERIAL TRANSFER NOTES SHOULD BE MADE.A MATERIAL ABSTRACT IS PREPARED DAILY,WEEKLY,MONTHLY TO SHOW NET MATERIAL CONSUMED IN EACH JOB DURING THE PERIOD FORB WHICH ABSTRACT IS PREPARED.

PRICING OF MATERIALS PRICING OF MATERIALS ISSUED.ISSUED.

• METHODS USED

COST PRICEMETHODS

STANDARD PRICEMETHODS

MARKET PRICEMETHODS

CONCLUSION