The Ordering, Receipt, and Issue of Raw Materials

The efficient management of raw materials is essential to smooth production operations, cost control, and inventory accuracy. The process typically involves three major stages: ordering, receiving, and issuing materials. Each stage requires proper documentation, authorization, and control procedures to ensure accountability and prevent losses or delays.

1. Ordering of Raw Materials

This is the initial step in the procurement process, where materials required for production are identified and formally requested.

A. Purchase Requisition

  • Purpose: An internal document prepared by the stores or production department to request specific materials.
  • Contents: Item description, quantity, delivery date, and authorization.

B. Purchase Order (PO)

  • Purpose: A formal document issued to a supplier for the delivery of raw materials.
  • Contents: Supplier details, item specifications, agreed price, quantity, and delivery terms.

C. Considerations Before Ordering

  • Inventory levels and reorder points.
  • Supplier reliability and delivery lead time.
  • Cost and quality of materials.

2. Receipt of Raw Materials

Upon delivery from the supplier, materials must be checked, verified, and recorded before being added to stock.

A. Goods Received Note (GRN)

  • Purpose: Confirms the receipt of materials and matches the purchase order.
  • Details: Quantity received, condition, and any discrepancies noted.

B. Inspection and Quality Control

  • Purpose: To ensure the raw materials meet predefined specifications and quality standards.
  • Outcome: Rejected materials are returned; accepted ones are moved to stores.

C. Stock Updating

  • Tools: Bin cards and stores ledger are updated to reflect new stock levels.

3. Issue of Raw Materials

Materials are issued from the stores to the production department as per production requirements.

A. Material Requisition Note (MRN)

  • Purpose: An internal document requesting materials for production.
  • Details: Item name, quantity, department, and approval.

B. Issue Voucher / Stock Issue Note

  • Purpose: Confirms the actual issue of materials from stores and updates stock records.

C. Control Procedures

  • Issue only on authorized requisitions.
  • Use FIFO or other appropriate methods for issuing materials.
  • Maintain accurate records for cost control and inventory valuation.

Importance of Managing the Raw Material Process

Effective control over the ordering, receipt, and issue of raw materials ensures timely production, reduces wastage, and supports accurate inventory management. It also promotes accountability, cost efficiency, and compliance with organizational policies.