Table of contents
- What exactly do you track in production?
- Where do you start with raw materials inventory management?
- Which documents move material from receipt to product?
- What does materials accounting look like in a sliding-wardrobe shop?
- How do you control material overuse?
- What does a material card need for a start?
- How do you organize issuing material to the shop?
- What discrepancies appear at the start and where do they come from?
- What should you check every month once the system is running?
- What does Bimp do and what does it leave out?
- How long does the move to document-based accounting take?
- FAQ
- Raw materials inventory management is a chain of documents: receipt, transfer to the shop, write-off to the product by norm, stock count. No movement in that chain happens without a document.
- Start with the materials and warehouse directories and opening balances. Usage norms, reservations and limits come on top, once balances match the physical stock.
- In the example shop with 500 chipboard sheets, scrap plus shortage come to 12 sheets, or €432. Half of that (€216) would not have been found without a stock count.
- Bimp keeps balances, reservations, specification norms and write-off limits, but does not replace accounting software for statutory reporting.
The spreadsheet says 40 kg of glue, and the can on the shop shelf is empty. Raw materials inventory management in manufacturing is a chain of documents in which every kilogram and every sheet has a receipt, a storage location, a write-off to a specific product and a balance for any date.
You start with three things: a directory of materials and warehouses, opening balances, and the rule that material moves only together with a document. Reservations, norms, limits and stock counts are added in layers after that.
What exactly do you track in production?
Materials are raw materials, components, auxiliary substances and packaging that go into a product or accompany its making. Each item has a name, a unit of measure and a warehouse where it lies. A sheet of chipboard, a metre of profile, a kilogram of glue, a box. They are bought in some units and written off in others: a roll arrives and metres go to cutting.
The consumption norm per product stands apart. It lives in the specification and drives two figures the owner cares about: how much material an order needs and how much was used. The gap between them is overuse or underuse.
The third element is locations. A materials warehouse, the shop and a finished goods warehouse show what has not yet been used, what is already in work and what is ready to ship.
Where do you start with raw materials inventory management?
The first step is to build the directory. Each material needs a unique name, a unit of measure and, if the material is bought from several suppliers, their names from price lists, so the storekeeper can match a delivery note with the catalog. Duplicates such as “Chipboard 16 white” and “White chipboard 16mm” split one balance into two, so the directory is cleaned up before launch.
The second step is the warehouse structure. For a small shop three points are enough, each with a responsible person: materials warehouse, shop, finished goods warehouse. Racks and cells are added when finding the right batch takes noticeable time.
The third step is opening balances. Take them from a physical count on a specific date. The last spreadsheet will not do, because it has already collected discrepancies. Material that is not on the shelf does not enter the opening balance.
The fourth step is the document rule. From the launch date, material does not leave the warehouse without a transfer or a write-off. At first it feels like bureaucracy, but every sheet taken “informally” later turns into a discrepancy that takes weeks to chase.
Which documents move material from receipt to product?
A material’s path consists of five events: receipt, issue to the shop, write-off to the product, write-off of losses and stock count. Each has a document, and together they let you rebuild the balance for any date.
| Event | What it changes | Who is responsible |
|---|---|---|
| Receipt from the supplier | Increases the balance in the materials warehouse | Storekeeper, buyer |
| Transfer to the shop | Decreases the materials warehouse balance, increases the shop balance | Storekeeper |
| Write-off to the product by norm | Decreases the shop balance, forms the product cost price | Foreman, process engineer |
| Write-off of scrap and spoilage | Decreases the balance, charges the loss to expenses | Foreman, storekeeper |
| Stock count | Compares the records with the physical stock, the difference is closed by separate documents | Count committee, chief accountant |
For purchase planning a reservation joins this chain. Material assigned to an order physically stays in the warehouse but is not counted as free, so the buyer sees the real shortage instead of the total balance.
What does materials accounting look like in a sliding-wardrobe shop?
The example is fictional: a shop makes sliding-door wardrobes. The norm is 4 sheets of 16 mm chipboard per wardrobe, and the purchase price of a sheet is €36. In one month the shop made 60 wardrobes. The material movement for that month is below.
| Indicator | Sheets |
|---|---|
| Balance at the start of the month | 200 |
| Receipts (two deliveries, 180 and 120) | 300 |
| Write-off by norm (60 wardrobes × 4 sheets) | 240 |
| Scrap recorded with a document | 6 |
| Calculated balance at the end of the month | 254 |
| Actual balance by stock count | 248 |
| Discrepancy | 6 |
The calculation step by step. Receipts 180 + 120 = 300. Available for the month 200 + 300 = 500 sheets. Calculated balance 500 − 240 − 6 = 254. The actual count is 248, so the shortage is 254 − 248 = 6 sheets, or 6 × 36 = €216.
The month’s total looks like this. Scrap of 6 sheets and shortage of 6 sheets together make 12 sheets, which is 12 / 500 = 2.4% of the available material. In money that is 12 × 36 = €432. The scrap has a document, a cause and a responsible person. The shortage has none of these, and that is what you hunt for: part of the standard offcut that was not recorded, an error in the norm, or material taken without a delivery note. Without the stock count, these €216 would have stayed in the calculated balance, and next month an order for 248 sheets would “look” covered by 254.
How do you control material overuse?
The norm in the specification gives the point of reference. For each material you set an allowed minimum and maximum per product, and compare actual use with these limits when closing the output. Overuse shows with a plus and underuse with a minus.
If control works only as a report, it is read once a month. So it helps to tie the limits to the output document itself: a deviation blocks posting, and a responsible person can allow it with a record in the history. This procedure makes the foreman explain why the tenth wardrobe took 5 sheets instead of 4.
What does a material card need for a start?
A few fields are enough to start, the ones that answer the questions of the buyer, the storekeeper and the process engineer.
| Field | Example value | Purpose |
|---|---|---|
| Name and unit | Chipboard 16 mm white, sheet | One name for warehouse and purchasing |
| Storage warehouse | Materials warehouse | Where to look and what to count |
| Norm per product | 4 sheets per sliding wardrobe | Demand calculation and write-off control |
| Minimum balance | 88 sheets | Signal to the buyer |
| Supplier and delivery time | Supplier A, 10 days | Calculation of the order moment |
| Safety stock, days | 5 | Buffer for a delivery delay |
How to calculate the minimum balance and safety stock is covered separately in the article on safety stock and reorder point formulas.
How do you organize issuing material to the shop?
Issuing material to the shop is where the records most often break. The storekeeper hands material over on a verbal request, the foreman takes it from the warehouse without asking, and leftovers stay at the machine at the end of the shift. Each of these cases produces a movement without a document.
A sturdier scheme has one source of request. Demand is calculated from the production order by specification, the storekeeper moves material with a transfer to the shop warehouse, and at the end of the output the unused remainder goes back with the same document. Then the shop balance matches what physically lies in the shop and can be used when planning the next shift.
Offcuts are handled separately. If an offcut is fit for later products, it stays in the warehouse as a separate item. If not, a write-off with a reason is recorded, and at the end of the month you see how much money cutting takes.
What discrepancies appear at the start and where do they come from?
The first months after launch show where the process diverges from the documents. The causes repeat, because they have a mechanical explanation.
A duplicate in the directory splits one material into two rows, and the balance of each looks half of what it is. Different units of measure in purchasing and write-off give a quantity error if the conversion factor is not set. A norm in a specification built from an old drawing creates overuse on every product, although the shop works correctly. Material taken before the delivery note is recorded appears in the books only at receipt and temporarily gives a negative balance.
The last case shows why the stock balance control setting matters. When the system forbids write-off into the negative, the shop forces the storekeeper to record the receipt on time. When it allows it, the negative balance builds up quietly and is noticed at the stock count.
What should you check every month once the system is running?
Four actions are enough for the reconciliation.
First, compare the calculated balance with the actual one, at least for the most expensive items. Second, review deviations from norms in completed orders and find the materials where overuse repeats. Third, check whether any materials have a negative balance or a receipt that is still unposted. Fourth, compare minimum balances with the actual consumption rate for the quarter, because a norm set a year ago may no longer fit the current output volume.
What does Bimp do and what does it leave out?
Bimp is a Ukrainian cloud ERP for manufacturers. Warehouse accounting in Bimp consists of directories of warehouses and storage locations and the documents that change balances: stock posting, stock transfer, write-off and stock count. Balances and reservations update automatically from purchasing, sales and production documents. Setup goes in this order: warehouses, stock balance control, products, opening balances, then batches or serial numbers for the items that need them. Details are in the inventory overview.
Norms are kept in the specification, and materials are reserved for a customer order with the “Stock reservation (materials)” document, see reserving materials. To control overuse, you set “Minimum quantity” and “Maximum quantity” in the specification: the production order only shows deviations, and the assembly blocks saving until they are fixed or an administrator or account owner confirms them (material consumption limits). The movement of every item is visible in the “Stock movement” report, and the free quantity available for sale is visible in the “Stock with Reserve” report. The warehouse page gives a fuller overview of the stock features.
What is not there. Bimp keeps management accounting, so accounting software stays in place for statutory reporting. The technologist chooses the norm and the allowed limits. The system compares actual use with the value entered and does not check whether the value is justified.
How long does the move to document-based accounting take?
The exact time depends on the number of items and how clean the directory is. Most time goes into recounting balances and merging names into one, and system setup takes less. Starting without that step carries the old discrepancy into the new system.
The conclusion from the example: the spreadsheet balance matches the shelf exactly as far as each material movement has a document. The stock count shows where the chain is broken.
Related reading: how much to order from a supplier and how to calculate safety stock, material consumption norms and overuse control, toll manufacturing accounting.
FAQ
Where do you start with raw materials inventory management?
With a directory of materials and units of measure, warehouses (materials warehouse, shop, finished goods warehouse) and opening balances taken from a stock count. After that every movement is recorded with a document, and usage norms are set in specifications.
Which documents do you need to track materials?
Receipt from the supplier, transfer between warehouses, write-off to production by specification, write-off of scrap and spoilage, posting of surpluses and a stock count. This minimum is enough to rebuild the balance for any date from documents.
How do you control material overuse in the shop?
Compare actual write-off with the specification norm. In Bimp you set the minimum and maximum material quantity in the specification, and an assembly with a deviation can be saved only by an administrator or the account owner.
How often should you count raw materials?
It depends on the value and turnover of the material. Expensive items such as sheet material or components are counted more often, cheap small items less often. The result is recorded with a document, and the difference is closed with a stock posting and a write-off.
In a Bimp ERP demo, a specialist walks through the path of a material from receipt to write-off to a product. One specification and your current balance sheet are enough.
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