Definition of Material Control
“Materials control is the systematic control over the materials at all its stages—procurement, storage and usage—so as to help in maintaining regular and uninterrupted flow of the materials in the production pipeline.”
No system of costing can be said to be complete without the proper system of material control. Material control is a system which ensures the provision of the required quantity of materials of the required quality at the required time with the minimum amount of capital investment.
Materials refer to all commodities consumed in the production department used for producing a particular item either directly or indirectly. Inventory is a common term which is usually used for raw materials, work-in-progress, finished goods stocked in the store and the components.
Materials are material for the computation of the cost of production. Since in some cases it constitutes more than 65 percent of the total cost a proper control over them is necessary. An efficient material control system helps in a considerable reduction in the cost of material and thereby in the total production cost.
Systematic and effective control over materials helps in maintaining the production schedules, meeting the market demand and avoiding excessive investment in inventories.
Scope of Material Control
A material control involves the functioning of the operation enumerated below with efficiency.
- Purchasing or Procurement of Materials.
- Receiving of Materials.
- Inspection of Materials.
- Storage of Materials
- Issuing of Materials.
- Maintenance of Material Records.
- Materials or Stock Audit.
Objectives of Material Control
The main objectives of material control may be given as follows:
(i) To Ensure Un-interrupted Production:
The first objective of material control is to ensure smooth production by making available all types of required materials in the required quantity at the right time. Un-interrupted supply of materials is essential for the smooth flow of production which is important for the success of any business.
(ii) To Provide for Required Quality of Materials:
The second objective of material control is to ensure the availability of all types of materials of the required quality. If the quality of the materials is not proper, it will affect the quality of the product, which in its turn is bound to affect the reputation and sale of the business concern.
(iii) To Minimize Wastages and Losses of Materials:
Material control system also aims at controlling or minimizing all types of wastages and losses of materials which may arise due to carelessness in the storing, issuing and handling of materials.
(iv) To Control Investment in Stock of Materials:
Material control system also aims at minimizing the capital investment in the stock of materials. Materials are purchased and stored before the actual production commences. A large amount of capital may be locked up in materials which may not be required at that time. Similarly, sometimes there may be under-investment in materials leading to interruptions in production due to non-availability of the required quantity of materials. Efficient material control system helps in ensuring optimum investment of capital in the purchase of materials.
Advantages of Material Control System
The main advantages of a good system of material control may be summarised as follows:
- It helps in preventing production delays due to lack of materials by ensuring regular supply of proper quantities of materials at the right time.
- It helps in ensuring the production of proper quality by ensuring the purchase of materials of proper quality.
- It helps in eliminating wastage in the use of materials.
- It reduces the risk of loss from fraud and theft.
- It reduces the cost involved in the storing and issuing of materials.
- It minimizes the capital investment in the stock of materials.
- It furnishes quickly and accurately the value of materials used in various departments.
- It helps in keeping perpetual inventory and other records to facilitate the preparation of accurate material reports.
Basic Requirements of Material Control
As we already know that the functions of a good system of material control include scheduling of the requirements, purchasing, receiving, inspecting, maintaining stock records etc. To ensure effective and efficient working of the material control system, the following principles should be observed:
(i) There should be proper co-ordination among various departments, particularly production department, purchases department, inspection department, stores department, cost department etc.
(ii) There should be a centralized purchasing set up under the authority of an experienced and competent Purchase Manager.
(iii) Standard printed forms should be in use for making requisitions, placing orders, receiving materials, inspection of materials, issue of materials for consumption etc.
(iv) There should be a proper system for classification, codification and standardisation of materials.
(v) There should be an efficient arrangement for storing materials in order to avoid the possibility of deterioration of quality, theft, wastage, etc.
(vi) There should be an effective system of internal check for every aspect so that there is proper control over transactions at every stage. Each transaction in respect of materials must be approved by proper authority.
(vii) Different stock levels (e.g., maximum level, re-order level, minimum level etc.) should be fixed for each item of material in the stores.
(viii) There should be a proper system for the valuation of materials issued to production since it considerably affects the costing records.
(ix) The use of Perpetual Inventory System should be made so that the stock of various items of material is recorded after each transaction.
(x) Regular reports on the quantity and value of materials received, issued and balance in hand, should be prepared.
(xi) There should be regular reconciliation of the reports on materials with corresponding accounting records.