Materials Management for Indian Manufacturers: A Five-Row Test

Materials management is the control of every material a business uses, from the moment you decide you need it to the moment it is consumed or shipped. In a manufacturer it has five steps: plan the requirement, buy it, receive it, store it, and issue it to production.

Choosing suppliers and negotiating price sit upstream of these steps. This page covers what happens once you have decided to buy: whether the plan is right, the order is placed in time, the delivery is booked, the stock is where the record says, and consumption is posted.

Three terms recur below:

• Bill of materials (BOM): the list of components and quantities needed to make one unit of a product.
• Purchase order (PO): the document that commits you to buy a quantity from a supplier by a date.
• Goods receipt note (GRN): the record that a delivery has arrived and what quantity was accepted.

Inventory management is the stock-tracking part of this. If you want the split between controlling stock and managing it, see inventory control vs inventory management.

Input costs take most of every rupee a factory earns. Across India's registered factories, total input was 83.7% of output value in 2024-25, and net profit was 7.0%. The margin is thin, so the cost of material mistakes matters.

India's Annual Survey of Industries (ASI), run by the Ministry of Statistics and Programme Implementation (MoSPI), reports these totals for the whole factory sector. As of November 2026, the latest ASI is 2024-25. The table below is our calculation. We took input, output and net profit (all in ₹ lakh) from Table 3 of the MoSPI press note on ASI 2024-25 for five years, then divided input by output and net profit by output.

In 2024-25, 218,543 factories in operation consumed inputs worth ₹1,38,29,64,338 lakh to produce output worth ₹1,65,23,84,144 lakh. Output grew 7.81% over 2023-24 according to MoSPI. By our calculation, input grew 7.47% (1,382,964,338 ÷ 1,286,883,003 − 1), so input cost grew slightly slower than output (MoSPI press note, 30 September 2026; PIB release).

Worked example (our model, 2024-25 averages). Input is ₹83.7 of every ₹100 of output, and net profit is ₹6.99. A 1% saving on input is 0.01 × 83.7 = ₹0.837 per ₹100 of output. Divided by ₹6.99, that equals about 12.0% of net profit.

Three limits apply:

• ASI "input" includes fuels and other expenses, not only materials, so 12.0% is an upper bound for a saving on materials alone. The materials-only share is smaller.
• The figures are averages for registered factories of every size, not small manufacturers specifically.
• ASI's "net profit" follows the survey's own definition.

Treat 12.0% as the ceiling, then redo the sum with your own figures:

(input ÷ output × 1%) ÷ (net profit ÷ output)

Our reading is that shortages, over-buying, scrap and unposted consumption are where a factory has the most control over that input line.

Run one check per step on records you already keep, and mark each pass or fail. Pull four things: your open production or sales orders with their BOMs, your open POs, your last 20 GRNs, and your stock register with bin locations. The pass lines are our recommendation; set the tolerances before you look.

Plan: is every component for the next two weeks of orders covered?

Multiply the BOM quantity by the order quantity for every component of every order due in the next two weeks. Compare each total with on-hand stock plus confirmed incoming PO quantity arriving before the date you need it.

• Pass: every component is covered, or has a PO already raised.
• Fail: any component is short with no PO behind it.

The full method is in material requirements planning.

Buy: can every open PO arrive before the date it is needed?

List every open PO. Mark whether the supplier has confirmed a delivery date. Then work out each supplier's real lead time, meaning the days from order to delivery on their last three receipts, and check that the PO date plus that lead time falls before the need date.

• Pass: every PO has a confirmed date and can arrive in time.
• Fail: any PO that cannot arrive in time, or any shortage that appeared before a PO existed.

The request that should sit behind each PO is covered in purchase requisition.

Receive: is each delivery booked the same day, against its PO?

For your last 20 GRNs, compare the delivery date, the GRN date and the date the quantity reached your stock record. Compare the accepted quantity with the PO quantity.

• Pass: posted the same working day, with any difference from the PO noted.
• Fail: any material issued to production before it was booked, or any quantity that differs from the PO with no note.

Store: does the bin count match the register?

Count ten fast-moving and ten slow-moving bins and compare each with the register. Before counting, set a tolerance per item class. Our recommendation: zero variance for high-value items and within 2% for bulk items.

• Pass: every count is within its tolerance, and every item is in a recorded location.
• Fail: any miss on a high-value item you cannot explain, or stock found with no recorded location.

For how stock visibility across locations supports the Store check, see inventory visibility.

Issue: does consumption posted match what the BOM says was used?

Take your last 10 completed production orders. For each component, calculate:

variance % = (issued − BOM requirement) ÷ BOM requirement × 100

where BOM requirement is BOM quantity × units produced.

• Pass: every variance is explained (scrap, rework, a substitute) and recorded.
• Fail: issues not posted against an order, or the same component showing unexplained variance on repeated orders.

Fix the earliest failing step first, as our recommendation, because a bad plan flows into every later step. Receive and Issue failures are usually habits: booking late, issuing without an order number. Buy failures are usually fixed by one owner and a weekly PO review. Plan and Store failures need a system once components are shared across many orders or stock sits in more than one location. This is our recommendation, not a measured threshold.

A spreadsheet or the stock ledger in your accounting software can carry one location and a handful of BOMs. Past that, every manual hand-off adds a place for a count to drift.

We built Arka Inventory natively on Salesforce, so the records behind the five steps sit in one place. Our available-to-promise view shows your sales team what they can confidently promise, counting committed stock, incoming stock and lead times across warehouses, all within Salesforce. The records each check uses sit in features we offer.

Our plans are priced in US dollars and billed yearly. As of November 2026, Basic is $199 per month with one user included and extra users at $42 per month. Advance is $499 per month with two users included and extra users at $52 per month. Enterprise is custom-priced.

Arka Inventory runs on Salesforce, and it integrates with Tally (Tally integration guide), QuickBooks Online and Salesforce. Typical onboarding takes at least two weeks and needs your inventory, product and warehouse data; setup guidance and onboarding support are included.

Arka Inventory carries a 4.8 rating on Salesforce, and HCPL Hexmoto, a manufacturer, uses it for inventory and manufacturing operations. To see your own BOMs and warehouses set up, request a demo through our contact-sales page; a 15-day free trial with full access and no credit card is available, and it ends automatically.