Techniques of Material Control
I will discuss in this Video different Techniques of Material Control.
Objectives of Materials Control
The objectives of material management are sometimes referred to as the ‘Five Rs of Materials Management:’
1. The right material
2. At the right time
3. In the right amount
And of the quality that is:
1. At the right price
2. From the right sources
Inventory consists of stock of raw materials, work-in-progress, spare pa consumables for production and finished goods for sale. Thus, inventory com includes control over raw materials, spare parts, consumables, partly finished goods, and finished goods. The following are the common techniques of inventory control:
1st Technique : Setting of various stock level
In this technique of material control, we study and control by calculating different level of quantity of stock. With our past records, we have the data of normal usage, maximum usage, minimum usages, re-order quantity and minimum and maximum period and its mid will be average period. With this data, we can find following stock level
a) Re-ordering level
It is the level of stock quantity between minimum and maximum level and material order was sent for getting fresh stock.
formula
maximum usage of stock X maximum delivery period
b) Minimum level
It is the minimum balance, which must be maintained in hand at all times, so that there is no stoppage of production due to non availability of inventory.
Re-order level - ( Normal usage X average period )
c) Maximum level
It shows maximum quantity which should be in the stock, if we buy more, it means we are wasting money.
formula
re-order level X re-order quantity - ( minimum usage X minimum period )
d) Average Stock Level
This is the average of minimum and maximum level and it can be calculated by adding minimum level and maximum level and divided by 2.
formula
minimum level + maximum level / 2
e) Danger level
2. Economic Order Quantity (EOQ)
The economic order quantity, known as EOQ, represents the most favorable quantity to be ordered each time fresh orders are placed.
The quantity to be ordered is called economic order quantity because the purchase of this size of material is most economical. It is helpful to determine in advance as to how much should one buy when the stock level reaches the re-order level. If large quantities arc purchased, the carrying costs would be large.
3.ABC Analaysis
It is the level at which normal issues of the raw material inventory are stopped and emergency issues are only made.
ABC analysis is that technique of material control in which we divide our material into three categories and investment is done according to the value and nature of that category’s materials. After this, we control of material according to their level of investment. .
4.Two bin system
Two bin system is used for the material control. It is that technique of material control in which we have two bins, one is used for in use minimum stock and second bin is used for reserve stock or to keep the remaining quantity of material. This system of inventory control is also called in USA kanban. First bin is utilized for issuing the material for production.
V.E.D. Analysis:
This classification is applicable only for spare parts and is based on criticality. In general, criticality of a spare part can be determined from the production downtime loss, due to spare being not available when required. The VED analysis is done to determine the criticality of an item and its effect on production and other services.
FSN Analysis
frequency of issues/use. F, S and N stand for fast moving, slow moving and non-moving items. This form of classification identifies the items frequently issued; less frequently issued for use and the items which are not issued for longer period, say, 2 years
Method # 5. HML Analysis:
The cost per item (per piece) is considered for this analysis. The items of inventory should be listed in the descending order of unit value and it is up to the management to fix limits for these categories. High cost items (H), Medium Cost items (M) and Low Cost item (L) help in bringing controls over consumption at the departmental level.
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