PRINCIPLE FACTORS OF UTILIZATION OF MATERIAL
The utilization of materials in a majority of concerns is dictated by four principal factors:
1. Product design.
2. Tool design.
3. Specification of material purchased (as to size and type)
4. Labor efficiency.
It follows that cost reduction in this sphere may be effected by changes in manufacturing techniques, product design, sound employee training methods, and by closer co-ordination of purchasing and manufacturing functions of the business, with a view to eliminating avoidable waste.
The establishment of reliable standards, on the basis of which issues can be made, and usage, or yield measured, constitutes an important step towards cost reduction. Wherever possible, standards should be set, both for finished product and wastage in process. This calls, not only for a sound appraisal of existing conditions, but, to be fully effective, requires a constant challenge to current practice.
In the complete absence of standards, recourse should be had to the use of on-the-spot checks to establish usage or yield deficiency.
The relationship between the gross weight of material purchased and the net weight of finished product may reveal valuable information in this respect and point the way to a field of investigation which may yield a rich reward.
It is inevitable that there should be wide divergences in the net usage of materials of different kinds. Some materials give a high net usage, notably plastics, and some, such as paint, give a very low return in net weight used. Each item of material should be weighted according to its usage factor and its content per unit of product in order to
Determine its relative importance in the cost reduction scheme.
Frequently, even where the principle of the use of material standards is accepted, there is little, if any of indirect materials the nature of which usually precludes the degree of accuracy called for in the establishment of direct material standards. Since control cannot be achieved by the same means, this problem affords scope of the adoption of a measure of control through the medium of flexible budgeting of overhead.
By the use of the standards, and assuming the existence of an efficient stores organization, the issue of economical quantities of material is safeguarded.