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5 Main Categories of Obsolete

There are 5 main categories of obsolete, surplus, and scrap items in materials management: 1) obsolete materials and equipment, 2) unserviceable equipment and machines, 3) deteriorated stock, 4) surplus stock, and 5) scrap material. Obsolete items are those no longer usable for their intended purpose due to changes over time but still have economic value. Surplus items accumulated due to faulty planning, forecasting, or purchasing and still have potential usage value. Scrap is waste generated during manufacturing processes or due to poor manufacturing that has little to no value.

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350 views3 pages

5 Main Categories of Obsolete

There are 5 main categories of obsolete, surplus, and scrap items in materials management: 1) obsolete materials and equipment, 2) unserviceable equipment and machines, 3) deteriorated stock, 4) surplus stock, and 5) scrap material. Obsolete items are those no longer usable for their intended purpose due to changes over time but still have economic value. Surplus items accumulated due to faulty planning, forecasting, or purchasing and still have potential usage value. Scrap is waste generated during manufacturing processes or due to poor manufacturing that has little to no value.

Uploaded by

SoorajKrishnan
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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5 Main Categories of Obsolete,

Surplus & Scrap Items –


Materials Management

The obsolete, surplus & scrap items can be put under the following categories.

1. Obsolete materials & equipment

2. Unserviceable equipment & machines

3. Deteriorate stock

4. Surplus stock

5. Scrap material

1. Obsolete Materials & Equipment:

Obsolete should be defined as materials, equipment’s or parts which are no longer


usable in the service for which they are purchased and which cannot be utilized safely
or economically for any other purpose. Broadly, it can be said that spares for plants sold
become obsolescent when the machines they are carried for go out of production or are
no longer available. Ordinarily, obsolescence arises on account of the following
reasons:

(a) Adoption of standardization or elimination of non-standard varieties.

(b) Faulty planning leads to over stocking of inventory.

(c) Non-implementation of project/job.

(d) Changes in demand due to change in fashions and supply conditions and change in
business policy.
(e) Purchasing wrong items results in non-utilization of stores.

(f) Bad communication within the organization as well as with suppliers.

(g) The sudden emergence of new technology or a design change.

(h) Excess purchasing, whether due to wrong forecast of requirement or to take


advantage of quantity discount.

. Surplus Stock:
Surplus means such items which are more than the required quantity and cannot be
consumed during a specific time for certain reasons. These are the materials which can
be consumed at some future time or that which is no longer required for the job, for
which it was purchased. Surplus materials arise from many reasons:

(i) When manufacturing operations are suddenly curtailed on account of design


improvement etc.

(ii) When the project has been completed.

(iii) These stores may be in excess of the normal manufacturing and repairing
requirements to the job concerned.

(iv) Excess purchase of stores due to wrong judgment at the procurement stage.

(v) When there is a change in the specification of size.

5. Scrap Material:
Scrap has been defined as the incidental residue from certain type of manufacturing
operations, such as turnings, boring, spurs, flashes etc. According to ICMA (London), “It
is a discarded material having some value which is usually either disposed off without
further treatment i.e., other than the reclamation and handling or is introduced into the
production processes in place of raw materials.
Obsolete, surplus and scrap management.

Obsolete items are good in all respect but have no useful role in the company due to
changes that have occurred in the course of time. They have economic worth in the
market.

Surplus items are those that have accumulated due to faulty planning, forecasting and
purchasing. Hence a usage value is associated with these items.

Scrap is wastage generated due to processes like turning, boring drilling etc. and also
dueto bad manufacturing. it is said that in India nearly Rs. 2500 crores are tied up
asobsolete, surplus and scrap items.

Causes for their generation

Changes in product design – obsoletion

Rationalization – initiative for variety reduction leads to surplus or obsolete items

Cannibalization – parts of one idle machine are fitted on another machine


neededurgently during maintenance, results into obsoletion of parts and at times even
scrap

Faulty planning and forecasting – leads to excess procurement, surplus generation.

Faulty purchase practices – sub-optimization in buying to utilize available discountsand


transportation economy, surplus and obsolete stocks are generated.

Other causes – parts kept aside for insurance claims, bad storage system, bad
materialhandling, bad manufacturing and badly maintained machines are other causes
for spoilage and scrap.

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