Coefficient of using materials: calculation formula, example

The main goal of any business is to maximize profits. This means the need to reduce costs. The coefficient of the use of materials is an indicator that allows one to evaluate the rationality of the latter, their necessity to obtain the final result. If a company spends too much resources for nothing, then it can not be successful. Maximization of profit is possible in a competitive environment only by minimizing costs.

Production as a process

Determination of the coefficient of use of materials makes it possible to assess whether the output is efficient and rational. Then, if the indicator does not satisfy us, we should try to change the situation. However, this is absolutely impossible if you do not have an idea of the production process. Therefore, to begin with, let us consider it on the example of the machine-building industry. It is convenient for analysis, since the production process at most enterprises in this area is similar.

At the first stage, raw materials are produced from raw materials. Already here we can face costs. The more raw materials are wasted, the greater the utilization factor of materials will deviate from unity. The second stage is related to processing the blanks and giving them the desired configuration. Naturally, this is also associated with costs. And they depend on the effectiveness of the initial stage. At the third stage there is already a preliminary and direct assembly of products.

Indicators of production factors

The products produced can be characterized both in physical units and in value terms. Everyone understands that the firm can continue its functioning when its income exceeds costs. However, what do the latter relate to? Consider a three-factor model. In order to release products, we need tools. These are our fixed assets. Rationality and production efficiency depends on how we use them: intensively or extensively. Characterizes the effectiveness of these factors, capital productivity. The inverse of this indicator is also used.

Also for the production of goods, labor items are needed. These are our revolving funds. That's just them and characterizes the coefficient of use of materials. Efficiency is indicated by the indicator already mentioned in the description of fixed assets. This materialoffice. Finally, labor is an important factor in production . It can also be used extensively and intensively. And this affects our costs. The indicator of the effectiveness of the labor force is the productivity of the personnel and the labor intensity of the products. This is also the opposite.

Coefficient of material use

The formula of this indicator characterizes the factor of circulating funds. Also, the use of objects of labor reflects the output of finished products. The latter indicator, as a rule, is used in industries where primary processing of raw materials takes place.

In the manufacturing industry, the utilization rate of materials is often calculated. Reflect what percentage of raw materials should be contained in the finished product, and how things look in reality. There are two types of utilization factors.

Planned

The first kind of indicator, as is clear from the title, is forecast. It is used in planning further activities and building a development strategy. The formula is as follows: Kw = Mh / Mn. The following symbols are used in it: Kpl is the planned utilization factor, Mh is the net weight of the product, Mn is the consumption of materials according to established norms. As can be seen from the formula, it weakly reflects the real situation. The norm is established for a hypothetical situation. In fact, we can face much more than planned, costs.

Actual

This indicator is more realistic characterizes the use of objects of labor. We introduce the notation. Let Kf be the actual utilization factor, Mh is the net of the product, as in the previous case, and Mf is the material actually consumed. Then the formula will look like this: Кф = Мч / Мф.

It is easy to see that in both cases the coefficient can take values from 0 to 1. However, in reality it can not be equal to one. Always some part of the material is wasted, but not contained in the finished product. But it is important to understand that its part can be reused or recycled, that the considered coefficient does not take into account. Therefore, the production process should always be analyzed in a comprehensive way, and not just focusing on the numbers.

Consumption rate of material

This is another important indicator that characterizes the conditions in the industry. We introduce the notation. Let C be the rate of consumption of the material, and K ^ the number of units of actually released products. For the formula, we also need the actual utilization factor of materials - Mt. Let Ned be the rate of consumption per unit of output. Then С = (Мф / Кф * Нед) * 100%.

Factors for improving efficiency

Rational use of materials allows the firm to maximize profits. However, much depends on the situation in the industry as a whole.

The following factors influence the rate of consumption of materials:

• Perfection of production process technology. If the enterprise and the industry develop, then in the course of time it turns out that there is less and less rejection per unit of output. And this means that the material begins to be used more rationally, and the costs are reduced.
• Improvement of technical preparation of the production process. Here we are talking about improving the design of parts, the choice of blanks and material.
• Improving the organization of the production process. This can include the development of cooperation between departments, deepening specialization, improving planning processes.

Example

Consider the cutting of chipboard for the manufacture of parts. The more rational it is, the less material we waste. The coefficient of use in this case will be equal to the ratio of the areas of the stamped part and the workpiece. The better the cutting of particleboard, the closer to unity this indicator. But what should it be?

We can not change the area of the stamped part in any way. Its dimensions are clearly established. However, we can affect the area of the workpiece. It is determined by multiplying the step between parts by the length of the strip. The more economical the contours of future blanks are, the less the gaps between them. And this means less material consumption. Thus, out of the same amount of raw materials, the enterprise will be able to make more products. Costs will decrease, and profit will increase.