Describe the main stages in controlling direct materials?

In a manufacturing business the control of materials used in the production process is essential to ensure that production is not delayed due to shortages and that the business does not tie up capital by storing excess quantities of inventory.

The main stages in material control are:

1. The stores or production department sends a purchase requisition to the purchasing department, giving details of the quantity and type of materials required.

    

2. The buyer in the purchasing department sends a purchase order to the supplier.

    

3. The supplier sends the materials with a goods received note, which is checked against the materials received and the purchase order.

    

4. The materials are added to the existing inventory in the stores and the quantity is added to the inventory level shown on the bin card.

    

5. When materials are required, the production department sends a materials requisition to the stores and the stores issues the materials and deducts the quantity from the inventory level shown on the bin card. Periodic stocktaking ensures that a physical count of all inventories is made to confirm that the actual quantities support the levels shown on the bin cards.