Material Control

Material control is a systematic control over the purchasing, storing and using of material to minimizing the possible cost. In every manufacturing concern materials constitute an important factor of production. It is an important element of cost covering 60-70 percent of the total cost of the production. Material control may be defined as the level of material maintenance so as to ensure uninterrupted production and minimizing the investment of funds. Thus material control is the proper control of material which reduces the cost of production, minimizing the investment of fund in the purchases of material & increases the profitability of the organisation. Controlling of materials Materials/inventories account for a large portion of the working capital requirements of most of the businesses. This fact makes materials or inventory management a major problem requiring constant attention by all three management levels (top, middle and low). At present, the problem of materials management has become even more acute due to market conditions and inflation. Effective materials management and materials control is found in an organization in which individuals have been vested with responsibility for, and authority over, the various details of procuring, maintaining, and disposing off inventory. Such a person or persons must have the ability to obtain, coordinate, and evaluate the necessary facts and to take actions when and where needed. Effective material management is essential in order to (1) provide the best service to customers, (2) produce at maximum efficiency, and (3) manage inventories at predetermined levels to stabilize investments in inventories. Successful materials management requires the development of a highly integrated and coordinated system involving sales forecasting, purchasing, receiving, storage,

production, shipping, and actual sales. Both the theory of costing materials and inventories and the practical mechanics of cost calculations and record keeping must be considered. In cost accounting, the primary problem is the determination of the cost of various materials consumed in production process. Materials management deals with: 1. Procedures for materials procurement and use. 2. Materials costing methods. 3. Cost of materials in inventory at the end of a period. 4. Costing procedures for scrap, spoiled goods, and defective work 5. Transfer of materials cost to finished production 6. Physical inventory 7. Adjusting Materials Ledger Cards and Accounts to Conform to Inventory Accounts 8. Costing procedures for scrap, spoiled goods, and defective work: Materials Control: Steps Involved 1) Purchasing of materials 2) Receiving of materials 3) Inspection of materials 4) Storage of materials 5) Issuing of materials 6) Maintenance of inventory records 7) Stock audit 1) Purchasing of materials

Purchasing of materials involves a number of steps, which may be different from one company to another. Generally, following steps are involved in purchasing of materials. a) Purchase requisition A purchase requisition is a formal request initiated by the store-keeper. The purchase requisition can also be initiated by other departments for purchase of special items not normally stocked. With the help of purchase requisition, the purchase manager comes to know the types of materials required for different departments. Generally, printed forms are used for this purpose. It is prepared in three copies. Each of the the copies is sent to the purchasing department, initiating department and accounting department respectively. Only an authorized person should sign a purchase requisition. b) Request for quotations or tenders After receiving a purchase requisition, the next step of purchase procedure is to find the convenient and economical sources of supply. The purchase department must maintain a list of suppliers. Selection of a particular supplier is usually made after inviting tenders or quotations from possible sources of supply. Invitations for tender in a prescribed format are sent to prospective suppliers. It contains detailed information about the availability of goods, price of materials and terms and conditions of purchasing. Tenders are received in sealed covers before the due date expires and are opened on the date fixed for the purpose. 3. Purchase order After completion of the above procedure, the purchase department prepares a purchase order for the supply of materials. The purchase order is a contractual agreement with the supplier for the supply of materials. Purchase order is prepared in five copies, the original copy is sent to the supplier, the second copy for receiving department, third for account department, fourth for initiating department and fifth one is retained in the purchasing department for reference. 2) Receiving of materials The receiving department should perform the function of unloading and receiving of materials dispatched by the supplier. The receiving department verifies the materials with the help of a delivery note and the copy of the purchase order after receiving the delivery

of goods. The supplier sends detailed information and an invoice of the materials supplied by it. It has to verify and check the quantity and physical condition of materials by making a comparison of the purchase order and the materials received. 3) Inspection of materials When the invoices are received from the supplier, they are sent to the store and accounting departments for the verification of the quality and price of materials mentioned in the invoices. After checking the required documents, the store department requests the accounting department for making the payment of the invoice to the supplier.