deals with material control, purchase function

1. Material Control

2. 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

3. Objectives of Material Control Ensuring non-stop production Low investment in inventory Purchase only on proper Authorisation Purchase at minimum cost and at Economic Order Quantity Protection of Material & Proper Storage Lesser Idle Material Issue of Material on Proper Authorisation Fixing Up Responsibility for Material Ensuring Proper payment & Maintenance of Records

4. Essentials of Material Control-I Inter-Departmental Co-ordination Budgeting & Scheduling Usage of Standard Printed Forms Classification of Material Internal Check Inter-departmental Communication Proper Control on Purchases & Issues

5. Essentials of Material Control-II Proper Usage & Storage Maintenance of Proper Store Records Perpetual Inventory Control Fixing Up Levels of Stock Proper Pricing of issue of Material An Efficient Stores Control Recording Wastage & Shortage

6. 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)

7. Types of Purchasing Centralised Purchasing Decentralised Purchasing

8. Centralised Purchasing: Merits-I Quantity Buying Uniform Buying Policy Expert Staff for Buying Quick Implementation of Purchases Maintenance of Complete records in one Department Avoiding Duplication of purchasing Effort

9. Merits of Centralised Purchasing- II Avoiding Excessive Stocking Recognising Purchase as a Major Function Effective utilisation of trade relations Economy in Recording Prompt Reporting of Scrap, Spoilage etc Reducing Material Cost

10. Demerits of Centralised Buying Lesser Flexibility High Initial Cost of Setting up a Separate department Undue Delay in Supply of Material Difficulty of Maintaining Records of Different Departments

11. Decentralised Buying: Merits Benefits of Local Purchase Lesser Transportation Cost Easy Local Sales through Contact with Local Suppliers Prompt Settlement of Complaints Personal Attention by Departmental Heads Reduces Costly Order Processing Technical Expertise Less Lead Time

12. Purchase Procedure Receiving Purchase Requisition Selection of Sources of Supply Placing the Orders Receiving & Inspection of Materials

13. 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.

14. Specimen of Purchase Requisition ABC castings Ltd.,

15. 2.Selection of Sources of Supply: Steps Involved Inquiry for Tenders & Quotations Receipt of Quotations & Tenders Comparison of Tenders Received Selecting the Best Source

16. 3.Placing the Order Purchase Order : 5 copies to- -supplier - retained by purchase department -department initiating purchase -Receiving Department - Finance Department b. Follow-Up

17. Specimen of Purchase Order

18. 4.Receiving & Inspection of Material Unloading the material Unpacking Checking the number of units, weight, measure, quality as per Purchase Order Reporting the Shortage and Breakage Preparing Material Inspection Note and Goods Received Note Sending MIN to Supplier & Stores Dept Sending GRN to Purchase Dept, Accounts Dept, and the Dept requiring the Material

19. Material Inspection Note

20. Goods Received Note

21. Stores Control: Functions of Stores Department Preparing Purchase Requisitions Receiving Goods into Stores Proper Storage of Goods Avoiding Damage & Deterioration Classification and Coding of Material Issue of Material Maintaining Stock records Maintaining Different levels of Stock Stock Verification at Regular Intervals

22. Types of Stores Centralised 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

23. Centralised Stores: Benefits Economy of Large Scale Buying Better Use of Staff Qualified Staff Better Use of Space Prompt Service Minimum Investment in Stock Better maintenance of Levels

24. Inventory Control Setting Levels of Stock Determining Economic Order Quantity iii. ABC Analysis of Inventory Control iv. Perpetual Inventory System v. Establishment of Budgets

25. i. Setting Levels of Stock: Factors Considered Rate of Consumption Lead Time Availability of Working Capital Economic Order Quantity Availability of Storage Space Cost of Carrying Stock Perishability of Material Seasonality in Availability of Material Loss by Deterioration Nature of Demand

26. 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

27. Ordering Costs Cost of Placing an order Loading and Unloading of Goods Transportation Cost Insurance for Goods in Transit Cost of Receiving & Inspection Administrative Cost

28. Costs of Carrying Warehouse Charges Insurance Lighting Heating Cold Storage & Refrigeration Pilferage Breakage Preservatives Supervision Costs

29. iii. ABC Analysis Category A : 5-10% of Quantity and 70-85% of Value Category B: 20-30% 0f Quantity and 25-30% of Value Category C: 70 – 80% of Quantity and 5-10% of Value

30. Merits of ABC Control Close & Strict Control on Expensive items Ensuring sufficient stock Leading to Efficient Inventory Management Saving the time of the Management

31. Perpetual Inventory System Bin Card Stores Ledger

32. Specimen of a Bin Card

33. Specimen of Stores Ledger

34. Advantages of Perpetual Inventory System Early Discovery of Errors No Disruption in Production for Stock Taking Value of Stock on Any Day Excessive Stock is Avoided Prompt Inventory Information to the Mgt System of Internal Check Control over issue & Usage of Material Qualified Personnel to the Stores

35. Physical Stock Verification Periodic 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

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