Reorder Level of Stock

Reorder Level of Stock: Definition The reorder level of stock is the fixed stock level that lies between the maximum and minimum stock levels. At the reorder stock level, an order for the replenishment of stock should be placed. In other words, the reorder stock level is the level of inventory at which a new purchase order should be placed. The reorder level of stock is generally higher than the m…

Read more

Minimum Stock Level or Minimum Stock Limit

Minimum Stock Level: Definition and Explanation A minimum stock level is a threshold value that indicates the level below which actual material stock items should not normally be allowed to fall. In other words, a minimum stock level is a minimum quantity of a particular item of material that must be kept at all times. The fixing of this level acts as a safety measure. For this reason, the minimum…

Read more

Methods and Principles of Codification of Materials

Methods of Codification There are several common methods used to codify materials. These methods include alphabetical, mnemonic, numerical, decimal, alphanumeric, and color codification. Alphabetical Codification of Materials As the name indicates, this method involves the use of alphabetical letters as codes to facilitate the easy and quick identification of materials. Code Description A Raw Mate…

Read more

Stores Management in Manufacturing Concerns

In manufacturing concerns, it is possible to manage stores in the following ways: Centralized stores Decentralized stores Centralized stores with sub-stores Centralized Stores Management Centralized stores management occurs when a single storehouse is established for the whole organization. This central storehouse caters to the needs of every department within the organization. Centralized stores…

Read more

Store Keeping

In the process of material control, after any purchased materials are received and checked, the next step is the storage of materials, also known as storekeeping. Store keeping is the task of maintaining safe custody of all items of supplies, raw materials, finished parts, purchased parts, and other items. These items are held in a storeroom for which a storekeeper acts as a trustee. As such, stor…

Read more

Receiving and Inspection of Materials

Receiving of Materials In small and medium-sized manufacturing concerns, the receipt and inspection of materials are performed by the stores department or the storekeeper. However, in large manufacturing companies, a receiving department is usually set up. The receiving department performs the following functions: (i) Receives, unloads, and unpacks materials. (ii) Checks whether packages and their…

Read more

Material Cost

Material Cost: Definition Material is the most important element of cost. In most manufacturing organizations, 50% to 70% of the total cost of a product is represented by the cost of the material. Material cost was defined by the Institute of Cost and Management Accountants as follows: “the cost of commodities supplied to an undertaking.” Examples of material cost include: Cost of cotton or cotton…

Read more

Classification and Codification of Materials

Classification of Materials Classification is the systematic division, grouping, or categorization of materials or items based on some common characteristic. Classification of materials can be performed on different bases (e.g., nature, manufacturing process, value, and purpose). To identify materials that are purchased and stored for commercial purposes, they should be properly classified. The de…

Read more

Inspection and Storage of Materials

Inspection of Materials Due to the growth of precision capabilities in measurement techniques and manufacturing processes, new products have been developed, along with quality improvement routines for old products. As a result, it has become necessary to thoroughly inspect any materials purchased either at the supplier’s warehouse (or godown) or at the time goods are received by the receiving depa…

Read more

Procedure for Receiving of Materials

After a receiving department unpacks materials received on order from a supplier, the materials are verified by consulting: Purchase order Delivery paperwork received from the transport agency or the supplier Invoice or bill  The materials received report is used to record the verification results. At least three copies are required: The original copy is sent to the storage department The second c…

Read more