material control

What is the Purpose of this Picture???

Materials Controls

Physical Control Investment Control

Physical Control • Limited Access• Segregation of Duties • Accuracy in Recording

Material Control

• Order points • Economic Order Quantity (EOQ)

Only Authorized Personnel should have access to materials storage areas

Physical Control

Segregation of Duties

• Purchasing • Receiving • Storage • Use• Recording

Accuracy in Recording

• An effective materials control system requires the accurate recording of the purchase and issuance of materials

Controlling the investment in Materials

• Order Point • Economic order Quantity

Order Point

The Point at which an item should be ordered called the order point

• Usage: the anticipated rate at which the material will be used.

• Lead Time: the estimated time interval between the placement of an order and the receipt of the material

• Safety Stock: the estimated minimum level of inventory needed to protect against stock outs

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Example

• Daily Usage 100 kg• Lead Time 5 Days • Safety Stock 1000 kg • Order Point…………………… (1500 kg )

Economic Order Quantity

• The order quantity (EOQ) is the quantity of inventory that minimize the cost of inventory management.

• The most important categories of inventory costs are ordering costs and carrying cost.

EOQ

2* Cost of order* numbers of units required annually• Carrying cost per units

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