Classification by codification

Materials codification is also frequently known as the identification of materials, whereby each item is uniquely identified in the inventory. This is quite important when it comes to requisitioning materials for order placement by the purchase department, for receiving and expediting items on supplier receipts, to have a unique record for all items in stock and therefore, administer control over the inventory levels, apart from the loss, obsolescence, deterioration or pilferage of items in the inventory.

A good materials management system seeks identification of materials through unique codification, whether they are raw materials, work-in-process or finished goods. If it is not present in an organization, it can lead to many ambiguities in the operation departments and loss of control over inventory levels. Variety reduction and standardization are two additional benefits attached with material codification. Much to one’s amazement, a majority of large private and public sector organizations have a significant portion of their inventory lying in the stores or elsewhere, which do not have a proper nomenclature or identification system. Common inventory items, such as rods, pipes, electrical switches, valves, cables, spare parts, nuts and similar equipments, are available under different names and coding, which reduces the item’s actual availability to meet operational requirements. Where one section of an organization may call an item as ‘nut and bolt’, the other may call it a ‘fastener’. Due to this, two different requisitions are made; two different purchase orders are sent out, and two different inventory levels are built in into the system. Where both sections might be using the same item, one maybe calling it a ‘pipe’, the other will call it a ‘conduit’. This unnecessarily increases the inventory level, when preventing duplication is considered of utmost importance for a good materials codification system.

However, in many cases, even large corporations are not even aware of which materials are lying in the inventory for a longer duration, which can otherwise be removed from the list, and their recovery value be recovered and storage space be freed. Also many a times, due to duplication in the identity of materials, they are often quoted as ‘not available’ which is why, most of the production programs suffer with subsequent loss to the organization in its entirety. Needless to say, proper identification of inventory helps in simplifying the processes, such as storage, receiving, procurement, manufacturing and warehousing, resulting into multifarious benefits to the organization. This simple concept will give proportionate results in comparison to the rigorous application of the inventory control principles.

Group Classification

The term ‘coding’ refers to a unique number given to a particular item in the inventory. For example, 010237 can be used to specify an item, of a specific material, specific shape and specific dimensions. And yes, each of this group of numbers must be able to convey some unique details. For examples, these numbers can be used to denote the first classification of materials in an inventory – 01: raw materials, 02: purchased components, 03: spare parts, 04: tools, 05: fixtures and patterns, 06: other supplies, 07: work-in-process material, 08: finished goods, 09: capital equipment. The next group of classification should be made on the basis of ‘shape’ of the items, such as wire, bar, tubing, sheet, rod, strip, etc., followed by classification on the basis of the construction material, such as mild steel, stainless steel, copper, bronze, brass, aluminum, PVC, special alloy, polypropylene, etc. One can also add more classifications to these; for instance, composition, features, use, etc. In case of metals, a group of classification can be made on the basis of tempered, cold rolled, normalized, hardened, annealed, etc. After the classification by use is made, the next group classification is made to identify the items as ‘Finished’ products. Such codification by group classification, all relevant details should be sequentially numbered.

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