Material Control

Material control refers to the systematic management and regulation of materials used in production or operations. It ensures that the right quantity and quality of materials are available at the right time and place, minimizing waste, theft, and inefficiency. Material control is an essential component of cost accounting and inventory management, contributing to operational efficiency and cost reduction.

1. Objectives of Material Control

The purpose of material control is to achieve efficiency, accuracy, and economy in the management of materials throughout the supply chain.

  • Ensure Uninterrupted Production: Maintain adequate stock to avoid production delays.
  • Minimize Wastage and Losses: Prevent theft, deterioration, and obsolescence.
  • Optimize Inventory Levels: Avoid overstocking or understocking.
  • Improve Cost Accuracy: Record material usage correctly for precise costing.
  • Facilitate Budgeting and Forecasting: Help in material planning and cost estimation.

2. Key Components of Material Control

Effective material control involves various interrelated activities and procedures.

A. Purchasing Control

  • Procure materials at the right price, time, and quality from reliable suppliers.
  • Use purchase orders, approvals, and vendor evaluations to maintain control.

B. Receiving Control

  • Verify quantity and quality of materials received against purchase orders.
  • Inspect for damage and maintain goods received notes (GRNs).

C. Storage and Issuing Control

  • Organize materials for easy access and protection from damage or loss.
  • Use bin cards, store ledgers, and requisition slips to issue materials properly.

D. Inventory Control

  • Monitor stock levels using methods like EOQ, reorder levels, and ABC analysis.
  • Conduct regular stocktakes and reconcile with records.

E. Usage Control

  • Track material usage to ensure efficiency and avoid misuse.
  • Analyze material variances for corrective action.

3. Techniques Used in Material Control

A. Economic Order Quantity (EOQ)

  • Determines the optimal order quantity that minimizes total inventory cost.

B. Reorder Level System

  • Triggers new purchases when inventory falls to a predefined level.

C. ABC Analysis

  • Classifies inventory based on value and usage—‘A’ being high value, ‘C’ being low.

D. Perpetual Inventory System

  • Continuously updates stock records with each receipt and issue.

E. Just-in-Time (JIT)

  • Materials are ordered and received only as needed, reducing storage costs.

4. Documents Used in Material Control

  • Purchase Requisition: Internal document requesting purchase of materials.
  • Purchase Order: Formal order sent to suppliers.
  • Goods Received Note (GRN): Confirms quantity and condition of materials received.
  • Material Requisition Note: Request for materials to be issued from stores.
  • Bin Card: Physical record of stock movement in storage bins.
  • Stores Ledger: Book record showing receipts, issues, and balances of materials.

5. Benefits of Effective Material Control

  • Reduces material wastage and pilferage.
  • Improves production continuity and efficiency.
  • Enhances accuracy in cost determination and financial reporting.
  • Supports better supplier and purchase management.
  • Improves working capital management through optimized inventory levels.

6. Challenges in Material Control

  • Poor record-keeping and documentation.
  • Lack of coordination between departments (e.g., production and purchasing).
  • Overdependence on manual processes instead of automated systems.
  • Failure to detect slow-moving or obsolete stock.

Strategic Importance of Material Control in Cost Management

Material control is a vital function in both manufacturing and service industries. It directly influences cost efficiency, production planning, and profitability. By implementing sound material control procedures, businesses can reduce losses, improve resource utilization, and enhance overall financial performance.