Material Issues — Issuing Stock to Production

When a production order is ready to begin, raw materials must move from the warehouse to the production floor. In many Indian factories, this happens informally — the supervisor walks into the store, picks up what is needed, and production begins. There is no record of what was taken, when, or how much.

A Material Issue is the formal, documented transfer of raw materials from a warehouse location to the production floor. It creates a precise record of what was issued, in what quantity, from which location, and against which production order. This seemingly simple document is the link between your inventory records and your production costs.

What You Will Learn

• Why formal material issues matter for stock accuracy and cost control
• The material issue document structure: header and line items
• Linking material issues to production orders
• Source location selection and its impact on stock
• Batch number tracking for traceability
• The material issue lifecycle: draft, issued, returned
• Step-by-step: creating a material issue for a production order

Prerequisites

Required: Before creating a material issue, ensure:

• A production order exists in Planned or In Progress status (see Chapter 14)
• Raw materials are available in the source warehouse location
• Items and units are configured in the system

Why Track Material Issues?

Skipping the material issue step is the most common shortcut in SMB manufacturing — and the most costly in the long run. Here is what you lose without formal material issues:

Stock accuracy degrades. If you do not record material withdrawals from the warehouse, your stock ledger will show quantities that do not match physical reality. The system says you have 500 kg of MS Plate; the warehouse actually has 320 kg because 180 kg was taken to the shop floor without documentation. Now every stock report, reorder alert, and material planning calculation is wrong.

Production costing becomes impossible. If you do not know exactly what materials were consumed for a production order, you cannot calculate the true cost of the finished goods. Are your flanges costing 400 per unit or 450? Without material issue records, you are guessing.

Waste and pilferage go undetected. When there is no formal record of material issuance, there is no way to compare issued quantity against produced quantity. If 340 kg of steel was issued and only 280 kg worth of flanges were produced, where did the remaining 60 kg go? Was it scrap? Rework? Pilferage? Without the material issue record, you will never know.

Audit trail breaks. For cost accounting, tax assessments, and inventory audits, you need a clear trail from raw material receipt to production consumption to finished goods output. Material issues provide this trail.

Tip: Even if your factory is small and the storekeeper is also the production supervisor, create material issues in the system. It takes 2-3 minutes and saves hours of reconciliation later.

Material Issue Structure

A material issue has two sections:

Header

The header contains information about the overall issue transaction:

Line Items (Material Issue Items)

Each line represents a specific material being issued:

Linking to Production Orders

Every material issue should be linked to a production order. This linkage serves several purposes:

• Material planning — you can see at a glance what materials have been issued against a production order and what remains to be issued
• Cost allocation — the cost of issued materials is attributed to the production order, enabling accurate per-unit costing
• Traceability — from the finished product, you can trace back to the exact materials (including batch numbers) that went into making it

When you select a production order on the material issue, the system knows which BOM is being used and can help you determine the required quantities.

Source Location Selection

The Location (From) field specifies which warehouse or storage area the materials are being withdrawn from. This is important because:

• The system deducts stock from this specific location
• If you have multiple warehouses or storage areas, you need to issue from the location that actually holds the materials
• Different locations may hold different batches of the same material

For example, a factory might have a main raw material store and a smaller buffer stock area near the production floor. If the buffer stock has enough MS Plate for the immediate requirement, issue from there. If not, issue from the main store.

Warning: Always issue from the location where the materials are physically stored. Issuing from the wrong location will create mismatches between the system and physical stock counts, leading to confusion during stock audits.

Batch Number Tracking

For materials where traceability is important — steel with mill test certificates, chemicals with expiry dates, food ingredients with lot numbers — the batch number field on each material issue line provides traceability.

When you issue MS Plate from Batch-2026-MS-047, and that batch later turns out to have a quality issue, you can trace:

1. Which material issues used that batch
2. Which production orders received materials from those issues
3. Which finished goods were produced from those orders

This traceability chain is essential for quality recalls, customer complaints, and regulatory compliance in industries like food processing, pharmaceuticals, and automotive components.

Material Issue Lifecycle

Material issues move through three statuses:

Draft

The material issue has been created but materials have not yet been physically handed over. At this stage:

• All fields can be edited
• No stock movement has occurred
• The issue serves as a "picking list" for the storekeeper

Use the draft status to prepare material issues in advance. The production planner can create the draft based on the BOM requirements, and the storekeeper can review it, check physical availability, and make adjustments before confirming.

Issued

The materials have been physically handed over to the production floor. When the status changes to Issued:

• Stock is deducted from the source location
• The stock ledger records the material movement
• The quantities become part of Work-in-Progress

This is the point of no return for stock deduction. Verify quantities carefully before confirming the issue.

Returned

If materials are returned from the production floor to the warehouse — due to production cancellation, excess issue, or quality rejection — the status changes to Returned:

• Stock is added back to the source location
• The stock ledger records the return movement
• The production order's material consumption is adjusted

Tip: Partial returns are common. If you issued 672 kg of MS Plate but only used 650 kg, create a return for the 22 kg excess. This keeps your stock records accurate and your production costing honest.

Step by Step: Creating a Material Issue

Step 1: Navigate to material issues.

Go to Manufacturing > Material Issues. Click New Material Issue.

Step 2: Fill in the header.

Step 3: Add material issue items.

Based on the BOM for 200 flanges (with scrap percentages applied):

Line 1: MS Plate

• Item: MS Plate 10 mm
• Quantity: 672 (3.36 kg per unit x 200 units)
• Unit: Kg
• Batch Number: BATCH-2026-MS-047
• Notes: Mill test certificate available

Line 2: Hex Bolts

• Item: Hex Bolt M12 x 40 mm
• Quantity: 1,600 (8 per unit x 200 units)
• Unit: Pcs
• Batch Number: (leave blank — standard hardware)

Line 3: Hex Nuts

• Item: Hex Nut M12
• Quantity: 1,600 (8 per unit x 200 units)
• Unit: Pcs

Line 4: Rubber Gaskets

• Item: Rubber Gasket 150 mm
• Quantity: 200 (1 per unit x 200 units)
• Unit: Pcs

Line 5: Primer

• Item: Rust-Preventive Primer
• Quantity: 110 (0.55 L per unit x 200 units)
• Unit: Litre
• Batch Number: PRM-2026-012
• Notes: Check expiry date before issuing

Step 4: Save as draft.

Click Save. The material issue is saved in Draft status. No stock movement has occurred yet. This is your chance to review the quantities and have the storekeeper verify physical availability.

Step 5: Confirm the issue.

Once the storekeeper has physically prepared the materials and handed them over to the production team, change the status to Issued. The system deducts the quantities from the Raw Material Store location and records the stock movement in the ledger.

Warning: Do not confirm the issue until the materials have been physically handed over. If the storekeeper discovers that only 600 kg of MS Plate is available (instead of the required 672 kg), adjust the quantity before confirming and plan a supplementary issue for the balance.

Step 6 (if needed): Handle returns.

If production is completed and 15 kg of MS Plate remains unused on the shop floor, create a return. Change the status to Returned for the excess quantity, and the stock will be added back to the Raw Material Store.

Tips & Best Practices

Tip: Create material issues the day before production is scheduled to start. This gives the storekeeper time to pick, weigh, and stage the materials without holding up the production team.

Tip: Use batch numbers consistently, even if they are not legally required for your products. Batch traceability is a competitive advantage when dealing with large customers — automotive OEMs, for instance, increasingly require full material traceability from their suppliers.

Tip: Compare issued quantities against BOM quantities regularly. If you are consistently issuing 10-15% more than the BOM specifies, your scrap percentages need updating — or your process has a waste problem that needs attention.

Warning: Never issue materials in bulk for multiple production orders using a single material issue. Always create one material issue per production order. This enables accurate per-order costing and prevents attribution errors.

Quick Reference

Material Issue Header Fields

Material Issue Item Fields