Material Usage Variance: Consumption Norms and Overuse Control, from Spreadsheet to Hard Stop

A joinery shop making 200 door frames should use 640 metres of timber by norm and uses 672. The monthly report shows this 5% gap after the frames have shipped. A material consumption norm in manufacturing is the quantity of each material per unit of product including process losses, and material usage variance control compares actual use with it before the document is closed and the material written off.

The example is fictional: one shop, one batch and a calculation to the cent.

What goes into a material consumption norm per unit of product?

Net quantity is what stays in the product. The process loss percentage is the part of the material that goes to waste in cutting, offcuts, evaporation or cleaning. Gross quantity is what must be issued to the shop so that, after losses, the net quantity remains in the product.

For timber, one frame has a net 3.04 m and a loss of 5%, so gross is 3.2 m (3.04 / 0.95). The 3.2 m norm is the figure purchasing uses to calculate demand, the storekeeper uses to issue material and the cost calculation uses to set cost price.

A norm without a tolerance is hard to hit down to the last centimetre or millilitre, because in cutting the timber loses length in offcuts and varnish use depends on application conditions. That is why a minimum and a maximum are set next to the norm, and a deviation between them counts as normal.

What does a table of norms and limits look like for a batch?

An order for 200 door frames. First the norms with prices, multiplied by 200 for the batch.

Now the tolerances. The process engineer sets them per frame, and the limits for the batch are recalculated. For timber the tolerance is 0.1 m either way, for varnish 0.01 l, and for glue an upper limit only.

After the batch was made, the shop wrote off 672 m of timber, 10.4 kg of glue and 21 l of varnish. Comparing with the limits gives three results. Timber exceeded the maximum by 672 − 660 = 12 m. Glue stayed within limits: 10.4 kg is below 11 kg. Varnish fell below the minimum by 22 − 21 = 1 l.

How wide should the tolerance be in the limits?

The width of a tolerance has a money value. The timber maximum of 660 m sits 20 m above the norm, which at €9 per metre is €180. For glue the 11 kg maximum leaves 1 kg of headroom, or €16, and for varnish 26 l leaves 2 l, or €15. If every material reached its upper limit, overuse would be 180 + 16 + 15 = €211, or 3.5% of the €6,100.

If you narrow the timber tolerance to 0.05 m per frame, the batch maximum becomes 650 m and the headroom 10 m (€90). A narrow limit stops documents more often, and somebody confirms every stop by hand. A wide limit lets through amounts that already show in the margin. In the example the actual overuse of €271.90 exceeds the sum of tolerances of €211, so the limits would have triggered.

How much does overuse cost when you only see it at month end?

Timber cost 672 × 9 = €6,048, glue 10.4 × 16 = €166.40 and varnish 21 × 7.50 = €157.50. In total €6,371.90 against €6,100 by norm. The difference is €271.90, or 4.5% of the standard value, and €1.36 per frame.

The total hides the structure. Timber overuse is 32 m, or 5.0% above the norm, and costs €288. Glue overuse of 0.4 kg (4%) costs €6.40. Varnish underuse of 3 l (12.5% of the norm) gives −€22.50. Together 288 + 6.40 − 22.50 = €271.90. The minus on varnish offset part of the pluses in the total.

A check by a second route. Actual value of €6,371.90 minus the norm of €6,100 gives the same €271.90. For timber, 32 m × €9 = €288, and that single line explains more than the whole difference.

The monthly report will show 4.5% on materials. The 12 metres of timber beyond the tolerance and the litre of varnish short stay invisible in it. By then the batch has shipped.

How does a norm become a control in Bimp?

In Bimp, norms and limits live in the specification. On the “Materials and components” tab you set “Quantity”, “Loss (%)” and “Quantity net” for each material. The “Minimum quantity” and “Maximum quantity” columns are turned on in the column settings of the “Product composition” tab. The limits are entered per the product quantity stated in the specification. If limits are empty, no control applies to the material. You can set only a minimum or only a maximum, and the minimum cannot exceed the maximum, otherwise the specification will not be saved.

In the production order, the “Material consumption control” tab appears after “Materials”. It fills in automatically, and a deviation counter sits next to the name. In the example it is “Material consumption control (2)”: deviations for timber and varnish. The “Deviation from norm” column shows +12 m for timber, 0 kg for glue and −1 l for varnish. The “Only with deviations” switch hides rows within the norm. The limits scale when the number of products on the “Products” tab changes. This is the informational mode: the deviation is visible and the document is saved.

The block works in the assembly. If a material quantity is outside the limits, saving stops with a message that the quantity must be within the norm. The foreman opens the “Materials” tab, finds the rows marked “Deviation from norm” and fixes the quantity. When the reason is justified, for example some blanks went to scrap, only an administrator or the account owner can confirm the deviation. They click Save, review the list in the window “Save the assembly with a deviation from the norm?” and confirm with the Save with deviations button.

The two documents work in different modes.

The tab data is calculated and cannot be edited. Rows of one material from different batches or warehouses merge into one, so the total per material is checked and individual batches are not compared.

In the example, the assembly for 200 frames will not save with 672 m of timber and 21 l of varnish until an administrator confirms both deviations. After confirmation the actual quantity is written off from the warehouse, 672 m of timber worth €6,048. The €5,760 norm is not used for the write-off. The “Saved with deviations” event with date and author stays on the “Change history” tab, and all such cases can be filtered by action type.

What should you do when deviations repeat?

Suppose two more batches of 200 frames used 668 and 676 m of timber. The average of three batches is (672 + 668 + 676) / 3 = 672 m, or 3.36 m per frame, against 3.2 m in the norm. A net 3.04 m at this consumption means a loss of 1 − 3.04 / 3.36 = 9.5%, while the specification says 5%.

Three deviations in one direction point to an outdated norm, and confirming the reason in the assembly does not remove it. The 3.36 m norm adds 0.16 × 9 = €1.44 per frame, €288 per 200 frames, the same money as in the first batch. After that, change the loss in the specification (from 5% to 9.5%) and the limits, and review the product price against the new cost calculation.

How does a material requisition card differ from limits in Bimp?

A requisition card with limits is a warehouse document under which the shop receives material within a limit, and the storekeeper signs at each issue. In such a document the control happens at the moment of issue from the warehouse.

Bimp has no document under that name. Materials go to the shop with a stock transfer created from the production order. The quantity to transfer equals the plan minus what has already moved, so a second transfer does not duplicate the issue. Materials can be issued in parts. The limits are checked by the assembly at write-off. A card stops the issue, while limits in Bimp stop the posting of a production document.

What does Bimp do and what does it leave out?

Bimp is a Ukrainian cloud ERP for manufacturers, and write-off limits in it compare actual consumption with the specification norms. The production order shows deviations, the assembly blocks saving, and a confirmation with a deviation is available only to an administrator and the owner and leaves a record in the change history.

The system does not work out the norm or the tolerance. The process engineer sets them, and an inaccurate norm gives false signals in both directions. Control does not apply to materials without limits or to materials added by hand outside the specification composition. In the production order it only informs. The cause of overuse, a scrapped blank or a cutting mistake, the system cannot find out by itself, and that is done by the person who confirms the deviation. For the wider picture, see Material consumption limits in the knowledge base and the Bimp warehouse page.

What did the overuse analysis show on 200 door frames?

A total overuse of €271.90 looked acceptable until it was broken down by row. Then it was clear that €288 comes from timber alone, and the varnish that ran short reduced the total and hid the second problem.

Related reading: how to count raw materials in the shop and how to set reorder points and safety stock.

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