Material inventory issuance procedure
Specific objectives; definition; transfer and return of raw material inventory; material requisition note; material issue note; material return note; material transfer note.
Specific objectives
This article is guided by the following 4 specific objectives. The learner/user of this article will be able to;
- Define the term material inventory issuance procedure
- Follow the right procedures of issuing material inventory where they are required
- Transfer materials from one department to another which is in need of the same materials to avoid wastage.
- Return the excess or unwanted raw materials to store or another department within the organization
Definition
Material inventory issuance procedure is the transfer of the right quantity and quality of goods from the store or premises to the respective departments where they are required or needed.
The departments in demand may mostly be the production department especially if it is a case of manufacturing firm or repair and maintenance etc. In our focus, we will concentrate on what happens in a manufacturing set up. Therefore, material inventory issuance procedure is a step-by-step guideline on how to manage raw materials for an organization once they are delivered at the firm’s premises/stores.
Remember that goods purchased have been received by probably the stores department or the concerned department depending on the structure of the organization. Since the goods are available, the next step is issuance. Under inventory issuance transaction, the following are the internal transactions that take place expressed in stages, from stage one to stage three where by there are transactional documents detailed;
Stage 1: Transfer of Raw Materials/Goods from Stores to Department
This is the main reason of transfer of goods from stores. In fact, it is the main objective of purchasing the goods from the supplier so as to meet the departmental demands especially the production department. In this case therefore, the raw materials purchased and are in stores are transferred on demand. To have this mission achieved, a Material Requisition note is used.
Material Requisition Note
Material requisition note is a document prepared by the respective departmental head requesting for the raw materials/goods the department is in need of. The head of department uses his copy duly authorized by responsible official to access the raw materials/goods. Remember when the head of the respective department was applying for goods through the purchasing manager, he/she retained a copy. It is the same copy that is used to have the raw materials transferred to his/her department. The material requisition note contains the details of the department in need of them, the purpose of the request and the authentic signature of the officials responsible, mostly the store or production manager. Once raw materials/goods have been received by the department, a material issue note is prepared as evidence that the department is in possession of them.
Material Issue Note
Material issue note is a document prepared by the departmental head who received the raw materials/goods for production purposes. The roles of this document are;
i). Evidence that goods have been received by the respective department. This is proven by;
Indicating the details of the raw materials/goods received.
Indicating the material requisition reference number.
Appending the signature of the store dispatching officer and the departmental receiving officer.
ii). Used for indicate the monetary value of the raw materials/goods received for the purposes of accounting such as recording in the job or the cost account. This information is later on used by the cost accounting department for the preparation of the cost accounts.
Stage 2: Return of Inventory
Return of raw materials/goods can be from a department to the store or to another department.
Just like in the case of raw materials/goods returned to the supplier, the same way if the department receiving raw materials/goods realize some discrepancies, such as goods being faulty from the stores or being in excess than what the department requires, then the departmental head can return such goods.
If raw materials /goods are returned to the store by the respective department, then material return note is prepared as evidence of that transaction.
Material Return Note
Material return note is a document prepared by the departmental head especially the production manager to give an explanation why the raw materials/goods have been returned to the store. To make it authentic it must bear the authentic signature of the returning officer in the respective department and the receiving officer on the store side. In this document, the responsible officer has to indicate the job number to which it was originally charged to.
Stage 3: Transfer of Inventory
If raw materials /goods are transferred from the production department to another department, then this forms the 4th stage in material issuance perspective.
Where the production department has declined to receive or use the raw materials/goods from the stores, may be because they are in excess or any other reason, if by coincident another department is in need of the same raw materials/goods, then those goods are simply transferred to that particular department. In this case a material transfer note is used.
Material Transfer Note
Material transfer note is a document used to transfer raw materials/goods from the originally intended department of job especially the production department to another department or job with a similar need which will dictate such a transfer. This transfer is done with a consent of the store department to avoid double counting or collusions amongst employees. The details of this document are;
-Details of the raw materials/goods transferred.
-Initial job number or department name and the new job number or department name.
-Signature of both the involved parties in that transfer transaction.
