Every organization makes use of and also stores a variety of items. Some of these items have fairly longer life; say for example, plants & equipment, machines, buildings, furniture, etc. Items costing over lakhs of rupees have a relatively shorter life; for instance, tools and components, materials, stationeries, etc. Organizations mostly need information on materials and their requirements may vary from one to another. It may be easy to estimate the information requirements department-wise for a particular material, such as inspection, storage, design, engineering inventory, receipt, accounts, marketing, finance, etc. Where some departments would focus on the volume, size, shape, some would on engineering properties, financial aspects and on the commercial value of the material. It is in fact very important and purposeful for items to be easily identifiable by its names by various departments of an organization. If not done so, in case of various external organizations, vendors, wholesalers, retailers and customers, etc., there could be a problem in recognizing items, which they prefer to call by different names.
Many a times, a large number of products or part components vary quite marginally or very insignificantly from each other in dimensions or other related features. If these parts are made to the same common characteristics, the functional requirements can be conveniently met. This is referred to as Standardization. The Standardization procedure logically results into reduction in the quantity of parts and varieties handled by an organization.
When an organization handles several items together, the planning and coordination process becomes complex, if they are not handled in unison. Material classification includes grouping of items on the basis of a predetermined criteria. So, what is the rationale of classifying materials?
Let’s take a look at the prime objectives of material classification:
- Formulate processes for planning and control of materials in different classes;
- Formulate procedures for purchase, inspection, storage and issuance, for all materials in a class;
- Formulate accounting and evaluation procedures, for all materials in a class.
This effectuates group efforts on the class system than diluted efforts on each item individually. Classification systems can be significantly based on the (1) nature of materials, and (2) usability of materials.
On the basis of nature of materials
- Raw Materials: Here, the raw materials would comprise all those materials bought from the original manufacturers and thereafter, used directly in the manufacturing process. There could be instances, when the product in one trade could be the raw material for another trade.
- Machinery and Equipment: These mainly comprise all kinds of machinery – whether hand-driven or power, such as lathe machines, presses, typewriters, fans, electric motors and other machines used in the manufacturing process as well as other departments. Tools that come under this category are issued on loan basis to different departments for a specified period, usually till their life time.
- Consumable Items: These items cannot be used more than once in the manufacturing process for the same purpose, for their utility and shapes changes in their first time usage. Some common examples are coal, mineral oil, lubricants, paints, cotton waste, varnishes, stationary items, such as pencil, ink, carbon paper, etc., oxygen and the like.
- Chemicals: These refer to substances processed with the help of chemical formulae devised for the desired purpose. They ought to be stored and issued carefully after a thorough scrutiny and proper analysis, since using them may involve risks to one’s life. Some examples can be acids, carbide, etc.
- Inflammable Items: These items are highly susceptible to fire, such as kerosene, petrol, paints, films, etc. And therefore, they are stored extremely far from the main building and fire-fighting equipments are separately arranged for as a stand-by.
- Consumable Items: These are also regarded as fuel stock, but they differ in terms of their usage. When a material is directly used as a fuel for the oven, furnace, etc., it is termed as fuel stock. It is considered a very critical material to initiate and complete the manufacturing process, but doesn’t constitute the finished product. At the same time, it may also be considered a raw material. For example, coal while being a fuel stock, is also a raw material in an iron and steel industry.
- Furniture: These basically comprise movable items in a room, such as tables, chairs, stools, benches, etc., the repairs and replacements of which need proper record maintenance, while they have been temporarily on loan basis.
- Scraps: These refer to the residue left on the expiration of the life of a particular material during the manufacturing process. Scrap can be resold in the market for some value.
- Packaging Materials: These constitute various forms of wrapping materials, such as saw dust, paper wood carvings, straw, crates, boxes, drums, bottles, wax, grease, plastic bags, cans, etc.
- General Items: This category consists of all those items not classified under the aforesaid categories. In large-sized organizations, general stores section is separately maintained under an independent in-charge as they comprise a large number of items, which though are not associated directly with the manufacturing process, but are needed for proper and smooth running of the organizations. Cleaning materials such as soap, brooms, brasso, staff uniforms and other items of daily use are handled by the general stores department.
On the basis of value analysis of materials
- Serviceable, Unserviceable and Obsolete Items: Here, items that temporarily go out of service are regarded as serviceable items, which after repairs and/or replacement, become serviceable again and their durability are extended for a long time. They are therefore only meant for disposal as scraps. When it comes to obsolete items, they become very old in the presence of new innovations in use, design, etc, and thus, cannot earn you profits.
- Finished Items: These goods are manufactured completely and can be then sold in the market. Semi-finished items are referred to those items that have not been manufactured in complete form and need to be further processed before they can be sold into the market.
- Dead Stock Items: Dead stock items are often found in government departments, such as furniture, machinery, equipment with a definite life and cannot be written off, before their expiry. These items are issued temporarily to their users on loan basis.
- Unused Items: The items are defective, damaged or rendered unusable in the production process for some reason.