Material control b.v.raghunandan


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deals with material control, purchase function

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Material control b.v.raghunandan

  1. 1. Material Control<br />
  2. 2. Meaning & Importance<br />Raw Materials, Chemicals, Components, loose tools, implements, maintenance items etc<br />Most of the products are material intensive, where material forms a substantial part of total cost of production<br />
  3. 3. Objectives of Material Control<br />Ensuring non-stop production<br />Low investment in inventory<br />Purchase only on proper Authorisation<br />Purchase at minimum cost and at Economic Order Quantity<br />Protection of Material & Proper Storage<br />Lesser Idle Material<br />Issue of Material on Proper Authorisation<br />Fixing Up Responsibility for Material<br />Ensuring Proper payment & Maintenance of Records <br />
  4. 4. Essentials of Material Control-I<br />Inter-Departmental Co-ordination<br />Budgeting & Scheduling<br />Usage of Standard Printed Forms<br />Classification of Material<br />Internal Check<br />Inter-departmental Communication<br />Proper Control on Purchases & Issues<br />
  5. 5. Essentials of Material Control-II<br />Proper Usage & Storage<br />Maintenance of Proper Store Records<br />Perpetual Inventory Control<br />Fixing Up Levels of Stock<br />Proper Pricing of issue of Material<br />An Efficient Stores Control<br />Recording Wastage & Shortage<br />
  6. 6. Purchase of Material: Elements of Material Control (Organisation of Purchase Department)<br />Purchasing Department (Purchase)<br />Receiving & Inspection Department<br />Store-Keeping Department (Storing, Issue and Accounting for Material<br />Production department (Receipt of Material)<br />Costing Department (Perpetual Inventory)<br />
  7. 7. Types of Purchasing<br />Centralised Purchasing<br />Decentralised Purchasing<br />
  8. 8. Centralised Purchasing: Merits-I<br />Quantity Buying<br />Uniform Buying Policy<br />Expert Staff for Buying<br />Quick Implementation of Purchases<br />Maintenance of Complete records in one Department<br />Avoiding Duplication of purchasing Effort<br />
  9. 9. Merits of Centralised Purchasing- II<br />Avoiding Excessive Stocking<br />Recognising Purchase as a Major Function<br />Effective utilisation of trade relations<br />Economy in Recording<br />Prompt Reporting of Scrap, Spoilage etc<br />Reducing Material Cost<br />
  10. 10. Demerits of Centralised Buying<br />Lesser Flexibility<br />High Initial Cost of Setting up a Separate department<br />Undue Delay in Supply of Material<br />Difficulty of Maintaining Records of Different Departments<br />
  11. 11. Decentralised Buying: Merits<br />Benefits of Local Purchase<br />Lesser Transportation Cost<br />Easy Local Sales through Contact with Local Suppliers<br />Prompt Settlement of Complaints<br />Personal Attention by Departmental Heads<br />Reduces Costly Order Processing<br />Technical Expertise<br />Less Lead Time<br />
  12. 12. Purchase Procedure<br />Receiving Purchase Requisition<br />Selection of Sources of Supply<br />Placing the Orders<br />Receiving & Inspection of Materials<br />
  13. 13. 1.Receiving Purchase Requisition<br />Received from<br /> - Store-Keeper for Regular Items<br /> - Production Departments for Special Material<br /> - Maintenance Department for material needed for repairs & maintenance<br /> - any Departmental Head like Marketing Manager, Finance Manager etc.<br />
  14. 14. Specimen of Purchase Requisition<br /> ABC castings Ltd.,<br />
  15. 15. 2.Selection of Sources of Supply: Steps Involved<br />Inquiry for Tenders & Quotations<br />Receipt of Quotations & Tenders<br />Comparison of Tenders Received<br />Selecting the Best Source<br />
  16. 16. 3.Placing the Order<br />Purchase Order : 5 copies to-<br /> -supplier<br /> - retained by purchase department<br /> -department initiating purchase<br /> -Receiving Department<br /> - Finance Department<br />b. Follow-Up<br />
  17. 17. Specimen of Purchase Order<br />
  18. 18. 4.Receiving & Inspection of Material<br />Unloading the material<br />Unpacking<br />Checking the number of units, weight, measure, quality as per Purchase Order<br />Reporting the Shortage and Breakage<br />Preparing Material Inspection Note and Goods Received Note<br />Sending MIN to Supplier & Stores Dept<br />Sending GRN to Purchase Dept, Accounts Dept, and the Dept requiring the Material<br />
  19. 19. Material Inspection Note<br />
  20. 20. Goods Received Note<br />
  21. 21. Stores Control: Functions of Stores Department<br />Preparing Purchase Requisitions<br />Receiving Goods into Stores<br />Proper Storage of Goods<br />Avoiding Damage & Deterioration<br />Classification and Coding of Material<br />Issue of Material<br />Maintaining Stock records<br />Maintaining Different levels of Stock<br />Stock Verification at Regular Intervals<br />
  22. 22. Types of Stores<br />Centralised Stores: One centrally located Stores department Supplying for the requirements of all the Production and service departments<br />Departmental Stores: each Department has a small stores department of its own<br />Centralised Stores with Sub-stores <br />
  23. 23. Centralised Stores: Benefits<br />Economy of Large Scale Buying<br />Better Use of Staff<br />Qualified Staff<br />Better Use of Space<br />Prompt Service<br />Minimum Investment in Stock<br />Better maintenance of Levels <br />
  24. 24. Inventory Control<br />Setting Levels of Stock<br />Determining Economic Order Quantity<br />iii. ABC Analysis of Inventory Control<br />iv. Perpetual Inventory System<br />v. Establishment of Budgets<br />
  25. 25. i. Setting Levels of Stock: Factors Considered<br />Rate of Consumption<br />Lead Time<br />Availability of Working Capital<br />Economic Order Quantity<br />Availability of Storage Space<br />Cost of Carrying Stock<br />Perishability of Material<br />Seasonality in Availability of Material<br />Loss by Deterioration<br />Nature of Demand<br />
  26. 26. ii. Economic Order Quantity <br />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<br />
  27. 27. Ordering Costs<br />Cost of Placing an order<br />Loading and Unloading of Goods<br />Transportation Cost<br />Insurance for Goods in Transit<br />Cost of Receiving & Inspection<br />Administrative Cost<br />
  28. 28. Costs of Carrying<br />Warehouse Charges<br />Insurance <br />Lighting<br />Heating<br />Cold Storage & Refrigeration<br />Pilferage<br />Breakage<br />Preservatives<br />Supervision Costs<br />
  29. 29. iii. ABC Analysis<br />Category A : 5-10% of Quantity and 70-85% of Value<br />Category B: 20-30% 0f Quantity and 25-30% of Value<br />Category C: 70 – 80% of Quantity and 5-10% of Value<br />
  30. 30. Merits of ABC Control<br />Close & Strict Control on Expensive items<br />Ensuring sufficient stock<br />Leading to Efficient Inventory Management<br />Saving the time of the Management<br />
  31. 31. Perpetual Inventory System<br />Bin Card<br />Stores Ledger<br />
  32. 32. Specimen of a Bin Card<br />
  33. 33. Specimen of Stores Ledger<br />
  34. 34. Advantages of Perpetual Inventory System<br />Early Discovery of Errors<br />No Disruption in Production for Stock Taking<br />Value of Stock on Any Day<br />Excessive Stock is Avoided<br />Prompt Inventory Information to the Mgt<br />System of Internal Check<br />Control over issue & Usage of Material<br />Qualified Personnel to the Stores<br />
  35. 35. Physical Stock Verification<br />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<br />Continuous Stock Verification: Benefits of Perpetual Inventory System <br />
  36. 36. THANK YOU<br />