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Materials
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Joseph Anbarasu
Bishop Heber College
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MATERIALS
Types of Materials:
a. Direct Material
The materials, which can be identified with the individual units, are known as
‘direct material’. These materials form part of the finished product. All costs,
which are incurred to obtain direct material, are known as ‘direct material cost’.
Leather used in the manufacture of shoes and yarn required for production of cloth
are examples of direct materials.
b. Indirect Material
Indirect materials do not form part of the finished products. Indirect material
cannot be accurately allocated to a particular unit of product. Examples of such
materials are: consumable stores, cotton waste and lubricating oils, required for
the maintenance of machines, etc
Material control includes the control of three important functions i.e., procurement
or purchase control, storage or inventory control and issue control. Material control
involves two objectives. The two objectives of material control as stated in the
definition are
a. Ensuring even flow of production and
b. Prevention of excessive investment in material sock.
3. What are the objectives of material control?
Material control must ensure that the following requirements are fully met.
a. Proper coordination amongst the departments involved in the process of
material control
b. Centralisation of purchase function
c. Fixing responsibility of every function of material control
d. Using proper forms with regard to receipt, issue and transfer of materials
from one job to another
e. Execution of a system of internal check to ensure the work of one person is
automatically checked by another.
f. Proper storage of materials and supplies
g. Scheduling material requirements and the preparation of the material
budget
h. Fixation of stock levels
i. Striking an appropriate balance between quality and price while buying
j. Proper system for the issue of materials
k. Operation of perpetual inventory system of stores control
Disadvantage:
1. It offers lesser economy of scale in purchasing.
2. There are problems of co-ordination among various departments of the
organisation and it usually leads to unplanned buying
3. Uniformity in prices may not be experienced because every branch
head may not posses the calibre of an expert buyer.
1. Purchase Requisition:
A form known as Purchase Requisition is commonly used as a formal request to
the purchasing department to buy materials specified therein. The requisition is
received from certain authorised persons. They are storekeeper, purchase
planner, plant engineer, department heads.
A purchase requisition has the following purposes:
a. It sets the purchasing process in motion
b. It is a written record of details like quantities, any speciation etc.
c. It provides date for reference i.e., date when materials are required.
Dates are important in case responsibility for stoppage in production
due to shortage of materials is to be determined.
BITOSOFT LTD
PURCHASE REQUISITON
Department------------------------ No------------------------------
To be delievered at------------- Date----------------------------
--------------------------------------- Date required----------------
Please order the items listed below:
Description and
Item No. Quantity Code no. Purpose
3. Purchase order:
When the supplier is identified, the most common procedure is the preparation
of a purchase order. The purchase order is the form used by the purchase
department authorising the supplier to supply the specified materials at an
agreed price and terms. The purchase order should be carefully prepared as it
forms a basis of legal contract between parties concerned.
The number of copies of the purchase order depends on the size of the
organisation. A bigger concern usually issues 5 copies. The supplier receives the
original order. Purchase department retains the second copy. The receiving
department gets the third copy. Accounting department files the fourth copy to
make an entry in the stores ledger. Last copy is sent to the department
requisitioning the material as an intimation of the order and expected date of
receipt of materials.
BITOSOFT LTD
PURCHASE ORDER
Supplier No.
Date:
Please supply the following subject to the terms and conditions given on the reverse side of
the purchase order:
4. Receipt of Materials:
Receiving Department receives all incoming materials. When the packages are
received, the receiving official gets them and makes a detailed verification of
the contents. The details of the materials received are entered in a Goods
received note. Five copies of the note are prepared. Receiving department
Dr. Joseph Anbarasu 5
keeps one copy. The remaining copies are routed to the purchase department,
the department originating the purchase requisition, the stores department and
the accounting department.
BITOSOFT LTD
GOODS RECEIVED NOTE
Storekeeper………………….
After comparing these documents with the invoice, if it is found that the
invoice is in order, the purchase manager will sign it and pass it to the accounts
department for payment.
The main functions of storekeeper are receipt, storage and issue of materials.
Apart from these main functions, there are quite a few other functions, which are
incidental to these. Various functions and duties of storekeeper are as follows:
a. Receive materials into the stores after checking them with the contents of
the Goods Received Note;
b. Store the materials in the allotted places;
c. Maintain proper record of receipt, issue and balance of all items of
materials
d. Employ location coding and stores coding for easy identification of every
item of stores
e. Maintain the Stores department in a tidy manner
f. Protect material from losses due to fire, theft, evaporation, obsolescence
etc.,
g. Issue stores, against proper authorization, in right quantity of right
specification, and at the right time
h. Ensure that the stock neither exceed the maximum level nor go below the
minimum level at any point of time
i. Prevent unauthorized persons entering into the stores
j. Co-ordinate the work of staff in the stores department
k. Periodic comparison of bin card balances with physical quantities in the
bins
l. Advise management of obsolete and slow moving stocks.
Location of Stores:
Layout of Stores:
Layout of stores should facilitate easy flow of goods in and out with out any barrier.
Layout refers to the internal arrangement or placement of material inside the
stores. It aims at effective utilization of space available for storage of materials.
The stores should be divided into racks, which should be sub-divided into small
spaces. All these spaces are know as bins. A bin is allotted for every kind of
material. All bins should be serially numbered.
The stores should be equipped with racks, bins, shelves, boxes, barrels, jars,
drums, cylinders etc. The receptacles should be arranged in such a way as to make
the fullest utilization of available space. They should be easily accessible at the
same time. Sufficient space should be provided for the movement of trucks,
conveyors, lifts and other mechanical devices.
Items in stores are meant issuance. The management generally lays down the
procedure for the issue of material. The storekeeper should ensure the following:
Dr. Joseph Anbarasu 7
BITOSOFT LTD
MATERIALS REQUISTION
Qnty. Description Code Bin Card Stores Ledger Folio Rate Amount
No. No. No.
11. Why should there be classification of stores? Write a note on classification and
codification of materials.
Importance of Classification:
Classification: