Meaning
Material refers to the raw material, or the inputs that are required by the company to fulfill the production process.
Subsequently, material Control comprises managerial activities that are undertaken by the decision-makers of the company in order to ensure that the quality, as well as the quantity of the materials that are used in the production process, are not managed such that there are no bottlenecks in the production process.
It also covers ground to ensure that cost-effectiveness pertaining to sourcing, and stocking of materials is taken into consideration.
Objective
There are a few major objectives of material control. These objectives are as follows:
- Ensuring smooth and uninterrupted production flow: During the normal course of business, there are certain unprecedented situations because of which demand might increase or decrease. In this regard, it is important for the managers to ensure that they are well prepared for such an event, and they do not suffer consequences in the form of halted production because of material unavailability. If not managed properly, this might result in considerable financial losses to the company.
- To have proper knowledge about reordering intervals and lead times: When dealing with materials being sourced from another vendor, managers need to ensure that they are able to have a clear idea regarding the lead time (the time is taken from when they place the order of materials, till when they receive the materials), so that they are able to subsequently calculate their reordering intervals. It is imperative for managers to plan this properly so that they are able to avoid any production halts.
- Minimizing costs associated with Material Ordering: Material Control also helps companies to ensure that they can identify the Economic Order Quantity, in terms of ensuring that they are able to keep the costs associated with the material order at a minimum. They need to incorporate ordering costs, as well as stocking costs, in order to ensure that material ordering costs are minimized.
Advantages
Material Control is a very important aspect of production planning, and hence, should be taken very seriously. In the case where managers are able to execute material planning properly, they can seek the following benefits:
- Minimized Costs and Wastage: This is because they would exactly know the amount that is required to execute the production process, and they would not end up ordering more than they actually need.
- To identify areas of improvement: By using ratios like material price variance, and material quantity variance, businesses can identify areas for improvement. This can help them prepare budgets for the coming production cycles, which would help the process to be efficient and effective.
- To prevent theft, and loss of inventory: If businesses keep proper track of material inventory, they are unlikely to face issues, like theft, or any fraudulent practice pertaining to materials.
Disadvantages
Regardless of the fact that material control is considered a good metric for planning, yet it has certain limitations. They include the following:
- Material Planning is an important component that needs to be taken seriously. In this regard, it is highly important to ensure that budgets and planning schedules are not made too strict or tight.
- Material Planning might not always align with the actual figures. Existing variance might cause unrest between the employees, and might put unnecessary pressure on the workers.
- It is harder to implement material control policies because a number of factors are beyond the control of the company.
5 best practices for material control
Therefore, there is no doubt to the fact that even regardless of the limitations that exist, material planning tends to be an increasingly important metric, which can be really helpful for companies. Here are 5 best practices for material control:
- Creation of budgets, and then comparing them with actual figures end of the year, to identify causes for variance. Subsequently, it also includes working to improve variance in the next production cycle.
- Implementing policies like Just in Time (JIT), or Kaizen to ensure that companies are able to optimize the material handling process.
- Having RFIDs installed with material, so that companies can automate tracking of inventory.
- Proper warehousing arrangements to stock and store inventory can ensure that the risk of material being damaged as a result of mishandling is minimized.
- Weekly audits to ensure that the relevant stocking is undertaken by the company in order to ensure that concurrent feedback is taken from the team on a real-time basis, and any issue that might arise is solved on a perpetual basis.
