What is Material Control?
Material Control can be understood as a system that facilitates the availability of an adequate quantity of material with desired quality, at the right time and place, while preventing the needless blocking up of the company’s funds in stores. This is to maintain a continuous and timely supply of material while avoiding understocking and overstocking.
It is the scientific method of controlling and regulating the various activities i.e. purchase, storage, issue, and consumption of material in a manner that maintains a continuous flow of production, without making an unnecessary investment in the materials. This enables the reduction of losses and material wastage to a great extent.
Here it must be noted that material control is a broader term that includes inventory control. Also, cost of production, material planning, purchase procedure, transportation and usage, all form part of material control.
The system has to be extensive in a way that it covers the entire process, right from the stage when the order for material is placed with the suppliers to the stage when the materials are consumed in production. It is a function of management related to the procurement, storage, issue, handling, and consumption of material to reduce wastage and losses, and derive economy at the maximum level.
Objectives of Material Control
The objectives of material control are discussed here:
- To prevent overstocking and understocking: Maintenance of optimum investment in the inventory is significant taking into account the operational requirements and the financial resources, with the aim of decreasing the carrying cost. Also to provide an uninterrupted supply of the required inventory, so that the operational activities are not held up for the long term.
- To ensure material procurement: Material control has a crucial role to play in providing the required quality and quantity of material at a very low cost from reliable sources.
- To ensure economy in purchasing: Purchase of material is a specialized function, purchase of material at affordable prices, a valuable contribution can be made to reduce the cost.
- To make certain proper quality: At the time of purchase of material, primary consideration should be given to quality, as the material of inferior quality or substandard quality or defective, would be of no use.
- To minimize total cost: Total cost includes ordering cost and carrying cost. Material control takes into account various factors which ensure the availability of the material at a very low cost.
- To avoid wastage and losses: Various control methods and techniques are implemented to prevent the wastage, misuse, and loss of material at the time of storage and usage.
- To maintain records: Material control plays an important role in maintaining a proper and up-to-date record of the materials.
- To provide the necessary information: It is required to provide relevant information about raw material, its cost, and availability to the management which helps the management in taking important decisions.
Essentials of Material Control
Stringent control over an organization’s material is essential for preventing theft, and also to reduce the overall wastage and misuse, due to excessive inventory, overissue, spoilage, leakage, pilferage, deterioration, etc. The essentials of material control are:
1. There should be proper coordination and cooperation among different departments of the organization as to the purchasing, receiving, testing, storing, production, planning, and accounting.
2. There must be a centralized purchase department in the organization under the control of a purchase manager who is competent as well as qualified.
3. The company must follow a perpetual inventory system that reflects the physical movement of goods in chronological order, along with the closing balance. This ensures up-to-date information about the quantity of material
4. There has to be a proper purchase system that ensures procurement of materials and stores of the prescribed quality from a reliable source, at reasonable prices.
5. Storage of material needs to be properly planned provided adequate protection and supervision.
6. Minimum and maximum stock levels should be fixed, and budgets are to be prepared for effective control.
7. There has to be an ideal method that classifies and codifies material.
8. Forms used for the requisition, order, issue, return and transfer of material must be in a standard format.
9. There have to be proper storage facilities to prevent losses occurring due to damage, evaporation, pilferage, theft, and deterioration.
10. An effective internal control system and internal audit should be there to make certain that all the movement of inventory is properly accounted for and reported.
Activities Involved in Material Control
Material Control involves a range of activities in a rational manner to exercise control over the consumption of material, the activities may be related to:
- Quality checking
- Record Keeping
- Material handling
- Stock Audit
Advantages of Material Control
- Facilitates the continuous flow of materials to production
- Prevents wastage, misuse, and losses during various activities
- Assists in procuring the right quantity and quality of materials in a timely manner
- Reduces the risk of fraud and theft.
- Helps in preparing monthly statements of materials to help in internal checks and audits.
- Helps in the reconciliation of accounting records with physical stock taking.
- Ensures cost reduction through the determination of Economic Order Quantity (EOQ).
- Helps in fixing responsibility on employees.
- Avoids locking of working capital in materials.
- Provides prompt and accurate information about the value of materials used for the production of various items.
Prerequisites of Effective Material Control
- At the time of need, the desired quantity of material will be available to the firm.
- The purchase of material will be carried out only when there is a requirement for it and that too only at the most favorable prices.
- Payment vouchers of material will be approved only when the materials of desired quality are received and in good condition.
- Appropriate physical control will be implemented to protect the material against losses.
- Issue of materials must be duly authorized and accounted for.
Material Control is simply the planning, organizing, and controlling the purchase, storage, and usage of material so that various objectives can be achieved efficiently and economically. It helps in the reduction of the cost of production and raises the company’s profitability.