Raw Materials Inventory Flashcards, test questions and answers

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What is Raw Materials Inventory?

Raw Materials Inventory is a critical component of any successful business. It is the inventory of materials used in the production process that must be accurately tracked and monitored to ensure on-time production, timely delivery, and accurate product quality. Raw material tracking helps identify inefficiencies and maximize profits by eliminating waste.Raw Materials Inventory management begins with proper acquisition and storage of the materials needed for production. This includes selecting vendors with reliable delivery schedules, maintaining appropriate levels of safety stock, avoiding unnecessary overbuying or underbuying, utilizing bulk buying discounts when applicable, and evaluating suppliers based on their prices, quality and availability. An effective system should also include procedures for monitoring inventory levels in order to identify trends or opportunities for improvement as well as periodically reviewing inventory quantities to avoid excess buildup or shortages. Additionally, it is important to establish an accurate system of recording transactions so that all raw materials are accounted for throughout the entire process.The next step in managing Raw Materials Inventory is implementing a plan for controlling costs associated with its use. This may include reducing material costs by using alternative sources, negotiating better pricing from suppliers, employing strategies such as just-in-time ordering or consignment stocking agreements whenever possible, taking full advantage of available volume discounts from vendors, utilizing alternative packaging options when necessary to reduce waste costs and using secondary products where available if they will meet customer requirements at lower cost than premium products. In addition to controlling costs associated with raw materials use it is also important to implement controls around how much material goes into a given product as well as how much scrap material is generated within each process step so that it can be properly accounted for in the final product cost analysis.Finally, an effective Raw Materials Inventory program must have measures in place to track performance over time so that any changes made are monitored appropriately before being fully implemented across all departments within the organization.