Financial control over Stores Expenditure, cost of materials, cost on materials

To reduce Expenditure:  

Majority of the expenditure of any industry is either on men or materials.  The relative expenditure on men and materials vary from industry to industry but in most of the industries’ expenditure on materials is 45% to 70% of total expenditure. Therefore, two broad areas for reducing expenditure are men and materials.  However, reducing expenditure on men is a very difficult task in today’s environment of tight labour laws and strong trade unions.  Therefore the other area to be tackled remains reducing expenditure on materials.  

When we talk of expenditure on materials, it is relevant to point out here that there are two types of costs related to materials- 

“cost of materials” and “cost on materials” i.e. there is always some extra expenditure related to materials which is not actual cost of materials.  

It needs to be appreciated that we can very well tackle these extra costs (cost on materials) without compromising the actual level of service (consumption) and achieve reduction in expenditure.