What production consumes, ordered before it runs out.
Direct materials are a different problem: demand is calculated rather than requested, the same part is bought again and again, and running out stops a line. Stock, bills of materials and reorder points sit with the purchasing.
Know what you hold before deciding what to buy.
Purchasing direct materials without stock visibility is guesswork with a purchase order attached. The item record carries what is held, what is on order and what the reorder point is.
- HoldsQuantity on hand, on order and available, per item
- LevelsReorder point, safety stock and maximum suggested from measured usage and lead time, the difference shown, adopted by a person
- MovesEvery transaction — receipt, issue, adjustment, production — against the item, so the balance is explained rather than asserted
- LinksThe item knows its supplier and its contracted price, so replenishment is a call-off rather than a fresh negotiation
What a build consumes, held as structure rather than as a spreadsheet.
A bill of materials is the difference between ordering parts and ordering a product. Producing against one draws the components down automatically.
- SimpleDefine the bill of materials: the components a build consumes and how many
- ThenProduce against it — the components are issued and the finished item is received, in one movement
- ThenSee the shortfall before the build rather than during it
- ComplexKeep several bills for variants of the same product, each with its own component list
The replenishment run proposes; the buyer decides.
The system works out what has fallen below its reorder point and what that means in orders. It does not place them by itself.
- SimpleRun replenishment and read the proposal: item, quantity, supplier, by when
- ThenAdjust quantities where a real-world reason applies — a shutdown, a price break, a supplier's minimum order
- ThenRaise the orders, against the contracted price where one exists
- ComplexWhere the item has no contract, send it to sourcing instead — the requirement is already specified and valued
Receipt into stock, not into a folder.
The receipt updates the stock balance and completes the match leg at the same time — one action, two jobs that are usually done twice.
- SimpleRecord what arrived against the order
- ThenShort and damaged deliveries are recorded as such, so the balance and the invoice both reflect reality
- CostUnits of measure convert, landed cost gives the true unit cost, and stock is held per location and moved by transfer. Rate schedules are on the industry pages
- EffectStock, the match and the supplier's delivery record all move from one entry
The lot number, the date on it, and what to do when it arrives short.
Some materials are not interchangeable units. They arrive as a batch with a date, and where that batch went has to be answerable afterwards.
- BatchLot and serial numbers carried on the movement, and a trace from one batch to every place it reached
- DatedExpiry or best-before on the stock itself, with what to issue first — advised, not enforced, on a ledger that cannot prove which batch left
- ShortMinimum remaining life measured where goods are booked in, against the policy you recorded — and no judgement at all where none has been
- WrongNon-conformance recorded against the batch with a disposition and a reason. It moves no stock: that is a movement somebody makes
Working capital, not just purchase prices.
The direct materials question is rarely the unit price. It is how much cash is sitting on a shelf, and whether the line will stop.
- SeesSpend by category over real order volume, with the direct lines separable
- SeesWhich suppliers carry the parts with no second source
- DoesAdopts levels suggested from actual consumption. None without a stated service level, and none for intermittent or lumpy demand
- ProofEvery order traces to a requisition or a replenishment run — nothing is bought because somebody had a feeling
