Integrated+Material+management-+condensed+(2).ppt

8/10/2019 Integrated+Material+management-+condensed+(2).ppt

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Integrated

MaterialsManagement

Dr. D.T.ManwaniB.E(Mech), M.B.A(Finance), Ph.D(Finance)

Professor & Head


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Management Management refers to the establishment and attainment of

objectives. The basic resources six Ms Men, MaterialsMachine, Methods, Money and Market are brought togetherand integrated.Further they are planned, organized ,coordinated, processed harmoniously and controlled with aview to achieve the end results.

Basic Resources

MEN

MATERIALS

M/CsMETHODS

MONEY

MARKET

Planning Staffing

Coordinating

&

Communicating

Organising Directing Controlling

ER

6 Ms


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Materials Management It is a distinct process of management covering all

aspects pertaining to Cost of Materials

Timely supply of quality material.

Materials utilization

For a balanced growth and efficient running of theenterprise , the above aspects are so controlled thatthey lead to Maximisation of production

Reduction in the cost of production

Maximisation of the margin of profit.Materials Management is both science as well as anart of managing materials.


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Functions of Integrated Materials

Management Planning & Sourcing

Budgeting

Researching & Analysing Indenting & Procuring

Receiving, Moving, storing & preserving

Accounting & controlling

Issuing & Dispatching

Disposing.


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INTERGRATED MATERIALS MANAGEMENT

OBJECTIVES

MINIMISATION OF COST

MAXIMISATION OF PROFIT

ATTAINMENT OF THE OBJECTIVES

OF THE ENTERPRISE

PRIMARY SECONDARY

PROVISION OF

MATERIALSMINIMISATION

OF INVENTORIES

1. Economic

Procurement

2. Proper storage

3. Proper issue &

distribution

1. Inventory Control

2. Movement, storage

accounting

3. Assuring High

capital turnover

ratio

1. Location of New

sources of supply

2. Variety reduction &

simplification

3. Standardisation &Quality control

4. Value Analysis

5. Coordination

6. Development of skill &Knowledge.


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IMPORTANCE OF MATERIALS MANAGEMENT Materials form the largest single expenditure in most of the manufacturing

organizations. They usually represent 40-70% of the total cost of the finalproduct.

Maximisation of Wealth of Share holders

Maximise Profit after Tax

Optimal capital structureMaximise Earnings

before Interest & Taxes

Maximising Operating

Profit

Minimise interest Burden

Minimise cost of

Products

long Term

Loan

Working

Capital

Minimise InventoriesMinimise Cost of materials

Maximise Earning per Share


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Benefit of Integrated Materials Management

Centralised Authority & Responsibility Well coordinated Efforts resulting in

Better inventory planning

Faster inventory turnover

Assured Material availability Efficient coordination

Better communication

Better Buyer- Supplier relations

Reduced materials handing costs. Smooth flow of materials

Improved productivity

Increased profitability


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Objective Evaluation of PerformanceThe performance ofmaterials department is judged by

A better inventory turnover

Reduced stock outs A reduced lead time

Reduced paper work

A minimum handling of materials.

Reduced storage & preservation costs.

A better materials planning. A better result oriented communication, judicious

inventory control & speedy solutions to materialsproblems.

Team spiritIntegrated Materials Management offers better

scope for active coordination. Economic use of data processing systems. Integrated

Materials Management facilitates the collection, processingretention, analysis & distribution of data for use inmanagement decisions.

Computerised integrated Materials Management Systemsare being utilized by the companies to obtain the gains .


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PURCHASING(6 Rs)

Purchasing in modern industrial environmentdoes not refer to mere buying or procurement ofmaterials.Purchasing is the procurement of

right quantityof material,

of right quality,

at rightprice,

to be supplied at righttime, at right place,

from right source


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Historically purchasing focus has been on price andcontinuity of supply, but modern trends have addedfollowing strategic actions :-

IntegrationThe firms supply strategy must be integratedwith the organizations marketing, conversion & financestrategy and that of the company or SBU(Strategic BusinessUnit)

Business EnvironmentSupply Management must

address the identification of threats & opportunities in thefirms supply environment.

TechnologySupply management must address issues oftechnology access and control.

Component & commodity strategiesSupply managementmust develop formalized market driven supply plans forcritical purchased materials & sources.

Management Information System

Supply base strategySuppliers and the resulting supplybase must be carefully developed.


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Purchasing Activities

Materials requirement review

Specifications Development

Make or buy analysis

Materials standardization Determination of inventory

levels

Quality requirementdeterminations

Negotiation of price & terms

Supplier selection

Joint problem solving withsuppliers .

Supplier monitoring & analysis.

Communication andspecification changes

Productivity/cost improvements

Development of sourcingstrategy

Market Analysis

Price forecasting

Large range purchasingplanning

Determination of purchasingpolicy

Value Analysis

National Association of Purchasing Management USA hasidentified following activities related to purchasing


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BAR CODING Bar Codes are patterns of alternating wide and narrow

black lines and white spaces and numbers and symbols

that are seen on everyday products at super markets

and retail stores.

The bar codes are read by scanning devices that use theinformation for a variety of purposes, such as recording

prices and quantities, printing sales receipts and

updating inventory records.

Bar codes are also useful in manufacturing anddistribution. In manufacturing, bar codes track the

progress of the jobs just before each operation and

specific processing instructions for each job can be

provided to operations.


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BAR CODING- Contd

They are also used to update in, company inventory

records, monitor quality losses and monitor productivity.

In distribution, companies can keep track of items in

ware houses and reroute to customers. Managers can

instantaneously determine the location of any item in the

system and its status.

Employee bar codes can be used to track employee

attendance and location.


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BAR CODING(Contd..)

Bar codes provide companies with high ability to monitor

and control items in manufacturing and distribution by

providing accurate , up to date information on quantity ,

quality, location and other data. This enables managers

to realize significant improvements in productivity and

effectiveness and to provide outstanding levels of

customer service.


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Value Analysis (VA) History

VA had its genesis during the war years of the early 1940s. By the mid1960s Values analysis was established as the corner stone of mostpurchasing research and cost reduction programs in major manufacturingfirms.

During World War II many critical materials and components were difficultto obtain, and most manufacturers were required to specify numeroussubstitutes in their design and production activities.

Harry Erlicher, the Vice President of Purchasing for the General ElectricCompany, observed that many of the required substitutions during thisperiod resulted not only in reduced costs but also product improvement.Consequently, Mr. Erlicher assigned to L.D. Miles, the task of developinga systematic approach to the investigation of the function/cost aspect ofexisting material specifications. Larry Miles not only met this challengesuccessfully, but subsequently pioneered the scientific procurementconcept, General Electric called Value Analysis.


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Value Analysis (Contd)

In 1954, the U.S. Navys Bureau of Ships adopted a modifiedversion of General Electrics Value analysis concept in an attempt toreduce the cost of Ships and related equipment. In applying the

concept, the Navy directed its efforts primarily at cost guidanceduring the initial engineering design. Stage and called the ValueEngineering program.

Value Engineering (VE), even though it embodied the sameconcepts and techniques as GEs value analysis (VA) program, In

an operational sense however, the two terms typically are usedsynonymously in industry todayonly the timings differ.


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Concept

The technique of V.A. represent a potentially powerfulset of tools which can be used by management incontrolling materials costs. The fundamental objective of

all V.A. activities is the procurement (or manufacture) ofmaterials representing the Best Buy in terms of thefunction to be performed. V.A is the systematic andthorough approach used in attaining this objective.

Function (f)

Value = ..

Cost (c)


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V.E vis -a- vis V.A

As practiced in U.S.firms for many years, V.Atechniques were most widely used in programsdesigned to engineer unnecessary costs out ofexisting products.

Finally the most progressive firms began to follow theNavys V.E programs, that applied the V.A conceptduring the early states of the new product designprocess to obtain the greatest benefits.


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The V.E concept finds its most unique use in twotypes of companies

Those companies that produce a limited number of unitsof a very expensive product.

Those companies that produce mass products requiringexpensive tooling.

The Federal Acquisitions Regulations U.S stipulate thatmost defense procurement contracts must be subjectedto V.E studies prior to initial productions.

VA/VE Tools Design Analysis of the required produce part or material.

Cost Analysis of the required produce, part or material.


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Design Analysis

It entails a methodical step by step study of allphases of the design of a given item in relationto the functions it performs. Approach is

designed to lead the analyst away from atraditional perspective which views a part ashaving certain accepted characteristics andconfiguration. It encourages the analyst to adopta broader point of view and to consider whether

the part performs the required functions both aseffectively and as efficiently as possible. Bothquality and cost are the objects of the analysis.


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Analysis of each component attempts to

answer four specific questions :- Can any part be eliminated without impairing the

operation of the complete unit ?

Can the design of the part be simplified to reduce its

basic cost?

Can the design of the part be changed to permit theuse of simplified or less costly production methods

Can less expensive but equally satisfactory

materials be used in this part ?


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When viewed in this manner from the stand point ofcomposite operation and cost possibilities for making

component design, simplifications frequently aremore apparent than is possible under the originaldesign conditions.

An organized VA/VE study usually utilizes a numberof individuals with different types of backgrounds,experience and skill impossible to combine in theperson of a single designer. Resulting designchanges often permit the substitution of standardizedproducing operations for more experience operations

requiring special set up work. In some cases,considering the volume of parts to be produced, anentirely different material or production processturns out to be more efficient than the one originallyspecified.


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The Values Analysis Check List -National Association of Purchasing Management suggests firstdetermine the functions of the item & then determine the following

Can the item be eliminated

If the item is not standard, can a standard item be used?

If it is a standard item, does it completely fit the application, or is it a misfit ?

Does the item has greater capacity than required ?

Can the weight be reduced ?

Is there a similar item in inventory that could be substituted ?

Are closer tolerances specified than are necessary ?


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The Values Analysis Check List(Contd)

Is unnecessary machining performed on the item

Are unnecessarily fine finishes specified ?

Is Commercial quality specified ? (Commercial quality is usuallymost economical.)

Can you make the item less expensively in your plant ? If you aremaking it now, can you buy it for less?

Is the item properly classified for shipping purposes to obtain lowesttransportation rates ?

Can cost of packaging be reduced ?

Are suppliers being asked for suggestions to reduce cost ?


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Cost Analysis(contd)

Though cost analysis is used in negotiating an original

procurement, it has become useful in V.A. in two ways

Cost analysis is conducted for currently purchaseditems whose costs appear excessive.

It serves as a means of locating high cost partswhich should be subject to design analysis.


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Generalized procedure model of the value analysis :-


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VENDOR ANALYSIS

Vendor Analysis is the process of

evaluating the sources of supply.

The main factors for selecting a vendor are:

Price, Quality, Services, location, Inventory

policy of supplier & flexibility


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Supplier Certification

It is a detailed examination of the policies

and capabilities of a supplier. ISO 9000

QMS is most widely used internationalcertification.


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Suppliers Audit

Periodic Audits of supplier are helpful in

getting current information on suppliers

production capabilities, quality anddelivery problems etc. Supplier audits are

also important first step in the supplier

certification program.


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Simplification

Most frequently, simplification means

reducing the number of standard items a

firm uses in its product design and carriesin its inventory.

For example, no of types of grease were

reduced to Six from earlier twenty seventypes. Number of bearings and fasteners

reduced by 50%


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Thank You

Integrated+Material+management-+condensed+(2).ppt

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