In: Accounting
Loss of material from procurement to manufacturing is known as material loss and can be classified as normal or abnormal loss. Normal losses are the losses which are unavoidable and these are added to cost of the product by being added to factory overheads whereas abnormal losses are the losses which can be avoided like breakage, theft, etc.
Types of Normal Loss of Material are Wastage, Scrap, Defectives, Spoilage,
For example - During this Covid 19 emergency period, there is a huge demand of N95 masks and we are into manufacture of these masks. Raw material used in N95 masks are Polypropylene, Non woven, Melt Blown Fabric, Elastic Rope for Ear Loops, Plastic Caps, aluminium .
Wastage of material occurs when the masks are being produced and the fabric is cut through digital cutting, some part of cloth is left as waste from which masks cannot be produced. for example when a round piece is cut through a rectangle cloth, the edges are left out as wastage and sent out of the machine.
To control such wastage, the left out edges can be used to make ropes that are used by packing industries such as Amazon to pack cartons.
Scrap is type of loss of material that is no longer sufficient to be used in production. For example, fabric destroyed while transportation or the broken plastic caps can no longer be used.
To control this wastage, the only solution is to lessen the loss by selling the scrap which can be reused by recycling. Plastic caps can be melted. Fabric can be manually cut and handmade surgical 2 fold or 3 fold masks can be produced out of those as they are easy to cut.
Defectives are the masks which are not complete due to some minor defects. These defects can be rectified and masks can be sold in the market later on. defects such as plastic caps, ear loops not fitted properly.
These defects can be rectified manually afterwards and the product can be sold later on in the market.
Spoilage occurs when there is a loss of labor hours, and manufacturing defects making losses irrecoverable. It is when there is power cuts while production process and masks left in between will be spoiled.
To control these it is better to use efficient practices, better technology,