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MATERIALS MANAGEMENT
Prepared by:
Rohit Bansal
Suraj Bansal
Masters of Finance and Control
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Materials Management
CONTENTS
Introduction Definition Objectives Functions
Techniques and Technologies Procurement of equipments History sheet Importance/Advantages/Benefits
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Material Management
Material includes all the things from rawmaterial to semi-finished and finishedgoods.
It has great significance as it has directrelation with the efficiencyof a system.
Expense made on Materials is invested ininventories, storage, transportation,insurance etc.
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Cont
Previously only Marketing and Manufacturingwereconsidered as important activities of an enterprise.
Material management has gained its importancedue to costs involved and economizing the totalactivity.
Material Management is basic function of businessthat adds directly to value of product.
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Cont
MM covers various aspects of input process, like itdeals with Raw-Materials, procurement of machines,other tools and necessary spares for themaintenance.
It involvesplanning and programmingfor procuring ofmaterial and quality goods of desired quality andspecification at reasonable price and at right time.
It involves being up-to-date with market information,stores and stick control, inspection and transportationof materials.
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Definition.
According to American Production andInventory Control Society (APICS)defines Material Management as :
The grouping of managementfunctions sporting the completecycle of material flow, from thepurchase and internal control of
production materials to the
planning and control of work in
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OBJECTIVES OF MM
PRIMARY Right price Higher turnover
Low procurement &storage cost
Continuity of supplier Consistency in quality Good supplier
relations Development of
personnel Good information
system
SECONDARY Forecasting Inter-departmental
harmony Product improvement Standardization Make or buy decision New materials &
products Favorable reciprocal
relationships
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Functions of Material
Management.
Production Control
Inventory Control
Materials Handling
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Production Control
Function of production control aims atdirecting and regulating the movement ofgoods through the entire manufacturing
cycle from the process of purchasingmaterials to producing the finishingproduction.
Departments involved are:1. Purchasing department
2. Receiving department
3. Raw materials inventory department
4. Production department
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Inventory Control
Inventoryis the stock of any item or resource usedin an organization and can include: raw materials,finished products, component parts, supplies, and
work-in-process
An inventory system is the set of policies andcontrols that monitor levels of inventory anddetermines what levels should be maintained, whenstock should be replenished, and how large ordersshould be
Firms invest 25-35 percent of assets in inventory
but many do not manage inventories well
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Cont.
However, inventory control
emphasizes cost minimization, where
as production control focuses onmaterials availability.
Inventory control function represent
three departments:1. Raw materials inventory department.
2. Production department.
3. Finished goods inventory department.
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Economic order quantity
(economic model for inventory
management)
Economic order quantityis the level of inventory that minimizesthe total inventory holding costs and ordering costs.
Underlying assumptions
The ordering cost is constant. The rate of demand is constant The lead time is fixed The purchase price of the item is constant i.e. no discount is available
The replenishment is made instantaneously, the whole batch isdelivered at once.
EOQ is the level of the inventory where ordering cost and carrying costremains equal.
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Cont
Variables
Q= order quantity
Q* = optimal order quantity
D = annual demand quantity of the product
P= purchase cost per unit
C= fixed cost per order (notper unit, in addition to unit cost)
H= annual holding cost per unit (also known as carrying cost) (warehouse space,refrigeration, insurance, etc. usually not related to the unit cost)
Total Cost function
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MATERIALS HANDLING
The primary objective of materials management is to move materialsto the required location in a timely and cost-effective way withoutaffecting the primary objective of the other two materials managementfunctions.
Departments in the materials handling:
1. Purchasing depart
2. Receiving depart
3. Raw materials inventory depart
4. Production depart
5. Finishing goods inventory depart
6. Shipping
7. Distribution centers
8. Warehouses
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MATERIAL FLOW PROCESS
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Organization of MM
department.
Chiefexecutive
PersonnelManager FinancialManager
MaterialManager ProductionManager MarketingManager
Purchase Stores
Dept.
Material
Handling
Research Shipping
section
Receiving Storage Issuing
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The Material Flow Cycle
InputInput Wait forWait for Wait toWait to MoveMove Wait in queueWait in queue SetupSetup RunRun OutputOutputinspectioninspection be movedbe moved timetime for operatorfor operator timetime timetime
Cycle timeCycle time
95%95% 5%5%
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MM TECHNOLOGY AND
TECHNIQUES
TECHNOLOGIES ARE:
Robots
Automated storage and retrieval system AS/AR)
TECHNIQUES ARE:
Kanban card systems
ABC classification systems
Just-in-time purchasing
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Material Management
Technologies
ROBOTS
They are re-programmable and multifunctional
manipulators designed to move materials, parts, tools andother specialized devices through variable programmedmotion to perform a variety of tasks.
Types:
Processing Pick and Place
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Cont.
Automated Storage and RetrievalSystem
They are computer controlled andmechanically operated materials handlingsystems.
They ca perform more complex problemsthan ROBOTS
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Techniques
JIT Purchasing (Just In Time)
It advocates reduction in the size of the purchased to the extent sothat the materials reach the production point directly
KANBAN System
Under this technique firms used their store and other inventoryitems in a single use container like Trays or boxes
Types
Production Authorization Card Vendor Authorization Card
Conveyance Authorization Card
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Cont
ABC Classification System (Always BetterControl)
It is exercise control over all materials
More attention paid to items with high usage value
Materials classified into 3 materials
A account for 60-70% of total cost B account for 10-30% of total cost C account for 5-15% of total cost
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PROCURMENT OF
EQUIPMENT
Points to be noted before purchase of anequipment:
Latest technology Availability of maintenance & repair facility with
minimum downtime. Post warranty repair at reasonable cost. Upgradeability Reputed manufacturer Low operating costs Installation
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HISTORY SHEET OF
EQUIPMENT
Name of equipment
Code number
Date of purchase Name of supplier
Name of manufacturer
Date of installation
Place of installation Date of commissioning
Environmental control
Spare parts inventory
After salesarrangement
Guarantee period
Warranty period Life of equipment Downtime/uptime Cost of maintenance
Unserviceable date Date of condemnation Date of replacement
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Importance/Advantages/Ben
efits
Regular supplyis ensured, aiding for uninterruptedproduction process.
Procurement and transportation costs can becontrolled and checked.
Efficient stock and stores control minimizes waste.
Pre-inspection of RM minimizes chance ofrejection of final product.
Timely supplyand other inputs is ensured.
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Importance/Advantages/Ben
efits Best utilization of labor, capital and equipment is
ensured.
Congestion in stores and confusion can be avoided,
resulting in better services.
Manufacturing Cycle is reduced to min.
Slight changes in material costs, changes the profitstatement of the co.
Shortages can be eliminated.
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Conclusion
MM is an important management tool which will bevery useful in getting the right quality and right quantityof supplies at right time, having good inventory controland adopting sound method and of condemnation and
disposal will improve the efficiency of the organizationand also make the work atmosphere healthy in anytype of organization, whether it is private, government,small organization, big organization or households.
Even a common man must know the basics of MM sothat he can get the best of the available resources andmake it a habit to adopt the principles of mm in all overdaily activity.
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THANKYOU
