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Optimum investment in materialy Keeping the amount invested i N Materials uy of material control, Locking up of nde funds in stocye reel en ‘of working capital, Overstocking should be be ded in viegt mig’ ioermgsestmestandoverstockinn be avoided yy Wits level for all major: items of materials Tin, 4 Favourable terms ofpurchans The purchase price ang other advantage to the fi im. At the same ‘Materials should be LOU beg 4 spec tM 4 Per requirements Pet + Conta of Wasage } Wastage of mater Suing storage ang handling on Should be minimises r'andards can be ed for asaya’ Pha be shes EP the acta mateo the standany S48 ang anh stu cand 05 tL Pia SPoilage date oF peting Pied and ag # SOCK levels ang sing man sb SOL stock of ay hese only it go is prop ore keeper terials on nt 84 consumption of a mah nee Materials byt employees. "OF invoices nly th rong the physical resi * SUPPliens — Purchase com ea These fourns outline of cis? rene 8l requires eecive cos ae chasing Teceiving and ine onc bartments soa adequate Sales. At the same timegsi 33 Se centralised Purchasing : In order to conomise the ring and to avoi sj buying of raw materials the purch ming nd t avoid , sing function is to be centralised. ‘Proper scheduling of materials requ drements ensures availability of materials se rigttime 4. Classification and codification of material leads to easy identification and ger contol of materials. 5, Receipt of Materials : Checking and inspection of material by receiving xpual inventory system avoids closing down of factory for stock verification and valuation. 10. Levels ofstocks are to be maintained inthe form of reorder level, maximum, ‘veland minimum level to avoid shortage and over stocking of materials 11. Economic ordering quantity is to be operated for each type of materials ° optimise the cost of buying and storage. |2. Pricing of Issues : A suitable method of pricing is to be followed for {Et Valuation of material cost of jobs, orders, processes and valuation of losing stocks, '3. Control of materials during the production process: Proper Accounting Tecords are to be maintained to avoid wastage of materials during "sumption, ie set 14 Suitable reporting system helps management to take decisions re ssnemtinmaterials and avoidance of obsolete, dormant and slow moving materials. “Advantages of Material Control ° flective material Control system— 7 Ensures availability of material for production. Reduces wastage of raw materials. Achieves economy of buying and storage costMaron 3 inthe quality and obsolescence of materials. On the other hand, less stock may result in frequent purchases, higher costs, work stoppages, loss in production, etc. In order to avoid overstocking and understocking of materials in the storeroom, different levels of stock are fixed, They are: 1, Reorder level . 2, Maximum level : 3. Minimum level 4, Average level 5. Danger level Re-order level _ Its that level of stock at which new purchase order is placed for fresh supplies of the material. Itis fixed somewhere between the ‘maximum and minimum levels to avoid unnecessary storage or shortage. Reorder level = Maximum consumption x Maximum re-order period (or) = Minimum level + (Average rate of consumption x Average time to obtain fresh supplies) Note The choice of formula depends on the information available in a given problem. “ Maximum level 11 represents that level of stock above which the Stock should not be allowed to rise. It is to be fixed Keeping in mind un- ‘etessary blocking of capital in stores. Maximum level = Re-order level + Re-order quantity - (Minimum consumption x Minimum re-order period) Minimum Fevel It is that level below which the inventory of any Sep HUN not be allowed to fall. It is also knov.n as safety or buffer te The main object of fixing this level is to avoid unnecessary delay ‘ampering of Production due to shortage of materials. Minimum level =Re-order level - (Normal consumption Normal re-order period) Ave jing the fapgg9® level This level of stock may be determined by wing th ing formete Average level = Maximum level + Minimum level (or) 2 = Minimum level +4 (Re-order quantity)jned below the mining, deters are taken for gy = Ld eit Frock is Fixed abo oF yevel- Ble in ary 0 be OFGETED Where, aris quantity, the Purchaser i veoh ne should DUY 2th fing jown as Economic Orderig i which is most economicg is the quan ypes of COStS are taKen ing the EOQ, two WYP 3d carrying cost. he over. Quanity (£00) to omer. While consideration, Le. orden Ordering cost Itrefes determining t ig cost al tothe cost of placing an order and securing te eres dependson the number of orders placed and the number of items aie edeachtme. Whenever orders increase in number and fewer quanti are purchased on each order, the ordering cost would begin to rise. Costa stationery, salaries of those engaged in receiving and inspecting, salaries of those engaged in preparing the purchase orders, etc. are some examples of ordering cost Carrying saneng Seat sth costincured to carry/maintain te inveton mune omacral eat” 8 possession cost tis incurred on mas salaries, rent, material per ag the cost of store keeping (statione®) Cost, ee), i ), interest on capital locked up it Stores, the incidence ne of nsuran and wastage o ce 00 ‘sige of matt, evaporate Usk of obsolescence, deteriora , et Economic Ord ' erin following formule eM ity “an be calculated with the help of¢. Storage and carrying cost per annum Sometimes, consumption of material may not be given in units but only alue. In such a case, the formula for EOQ is slightly changed. Where, 4- Annual consumption of materials in rupees B - Buying cost per order § - Storage and carrying cost percentage JE OF MATERIALS ee reqilired (aicoucce