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Classification of materials
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- 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 classificationof 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 classificationof materials ◦ Stages of conversion process ◦ Based on Nature of materials ◦ Quality and Utility
- 5. Stages of conversionprocess 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 conversionprocess 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 onnature of material ◦ Raw materials ( Direct and Indirect) ◦ Consumables ◦ Chemicals ◦ Inflammable item ◦ Furniture ◦ Perishable ◦ Packaging ◦ Empties ◦ Supplies
- 9. Classification based forquality 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.
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