2. Classification of materials
◦ Classifying materials means identifying each material according to its subject, so that materials
on similar subjects can be grouped together on the shelves
3. Objective of classification of materials
Objective of classification of materials
◦ To save time and cost
◦ To plan and control material
◦ To satisfy the demand during the period of replenishment
◦ To carry reserve stock to avoid the stock out
◦ To stabilize functions in consumption
◦ To provide our customers reasonable level of service.
4. Basis of classification of materials
◦ Stages of conversion process
◦ Based on Nature of materials
◦ Quality and Utility
5. Stages of conversion process
Stores
Direct
Material
Indirect
Material
WIP
Finished
Goods
Purchased
parts
Raw
Material
Supplies
Flow chart of Material classification based on conversion
process
6. Stages of conversion process of
materials
◦ Direct Material : Direct material are those which are directly used in the production of final
product ( output) Or it becomes part of the output
◦ 1) Raw material : Basic output that are converted into Finished product through the
manufacturing process.
◦ 2) Work in progress: Semi manufactured product Need some more workS before they become
Finished product
◦ 3) Finished goods : Completely manufactured product ready for sale
◦ 4) Purchased parts: This includes those products which are accessories to the main products
produced for the purpose of sale. Examples of stores and spares are bolts, nuts, clamps, screws,
etc. These spare parts are generally bought from outside.
7. Contd.
◦ Indirect Materials : Indirectly used in the production of final product (output) or that gives
support in continuation of production(example - oil, grease, chemicals, disposable tools etc are
indirect material that are used in machine for running of it smoothly)
8. Classification based on nature of
material
◦ Raw materials ( Direct and Indirect)
◦ Consumables
◦ Chemicals
◦ Inflammable item
◦ Furniture
◦ Perishable
◦ Packaging
◦ Empties
◦ Supplies
9. Classification based for quality and
usability of material
◦ Serviceable and Unserviceable : Serviceable means Parts or Components which are used or are
in working condition and The unserviceable equipments and machines are those inventories
which outlived their life. No amount of repairs, renewals or replacements can bring them back to
their usable life.
◦ Semi-finished and Finished
◦ Dead stock : Dead stock are the merchandise that was never sold to or used by consumers
before being removed from sale, usually because it was outdated.
◦ Obsolete material : Obsolete should be defined as materials, equipments or parts which are no
longer usable in the service for which they are purchased and which cannot be utilised safely or
economically for any other purpose. Reason for Obsolete inventory is When you buy too much ,
when technology changes And when you don’t review regular your inventory.
10. Inventories
1. Production inventories : Production inventory refers to the level of materials and supplies on
hand for use in manufacturing production.
2. MRO inventories: Maintenance, Repair and Operating inventories include parts , supplies, and
materials used in or consumed by routine maintenance and repair of operating equipment, or
in support of operations.
3. In-Process inventories : These are goods in the process of manufacturing and only partially
completed. They are usually measured for accounting purposes in between significant
conversion phases.
4. Goods in Transit inventories :Goods in transit refers to merchandise and other types
of inventory that have left the shipping dock of the seller, but not yet reached the receiving
dock of the buyer.
