12 material mgmt
TRANSCRIPT
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MATERIALS
MANAGEMENT
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MATERIALS MANAGEMENT
Short range decisions about supplies, inventories
production levels, schedules and distribution.
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MATERIALS MANAGEMENT CYCLE
Acquisition of raw materials
Distribution storage
Storage conversion
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TASKS OF MATERIALS
MANAGEMENT
Supplier selection
Issuing purchase releases
Inbound transportation
Initiating purchase request
Inventory control on sight
Assigning priorities to work
Outbound transportation
Inventory control at distribution centers
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MAKE OR BUY DECISIONS
The factors for make or buy decisions include
Available capacity
Expertise
Quality considerations
Nature of demand
Cost
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PURCHASING
The management of acquisition process which includes
deciding which suppliers to use, negotiating contract anddeciding whether to buy locally or centrally
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THE ACQUISITION PROCESS
Recognize need
Select suppliers
Place orders
Track orders
Receive orders
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OUT SOURCING
Out sourcing is buying goods or services from outside
sources instead of making the goods or services withinhouse.
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REASONS OF OUTSOURCING
Outside sources can provide materials better
cheaper and more efficiently because of economy of
scale
Expertise and knowledge
Supplier may hold a patent on a necessary part
Outsourcing gives added flexibility
Outsourcing enables the company to focus on core
activities
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RISKS OF OUTSOURCING
Loss of control
Greater dependency on suppliers
Not possessing ability to perform in house
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INFORMATION ON EXTERNAL SOURCES OF
SUPPLY
Industrial advertisement in news papers andperiodicals
Supplier catalogues
Supplier salesman
Trade journals
Telephone directory yellow pages
Trade directories
Enquiries through advertisement
Records of past purchases
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JIT
JIT (Just in Time ) is both a philosophy and a set
of methods for manufacturing.
JIT emphasises :
1. Waste Reduction and Adding Value
2. Total Quality Control 3. Devotion to Customers
JIT is a manufacturing system whose goal is to
optimise processes and procedures by continuouslypursuing waste reduction.
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JIT7 Wastes
1. Overproduction
- reduce set up time, synchronise time and quantity betweenprocesses, compacting layout. Make only what is needed now.
2. Waiting
- balance uneven loads, synchronise workflow, use flexibleworkers and equipment.
3.Transportation
- reduce through correct choice of location, layout, materialhandling.
4. Processing
- question each parts requirement, then process (Is itrequired?)
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JIT
7 Wastes
5. Stocks/Inventory
- reduce load times, reduce stocks, reduce
other wastes
6. Motion
7. Defective/poor quality products
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JIT Purchasing
JIT Purchasing Traditional Purchasing
1. Purchase lot Small lots with Large lots with less
size frequent purchasing frequent deliveries
2. Selecting Single source in Multiple sources &
suppliers nearby area with short term contracts
long term contract
3. Evaluating Zero % of defect 2% reject acceptability
suppliers acceptable
4. Receiving Eliminate Buyer is responsible for
inspection counting & inspection
5. Negotiating Quality & fair price Lowest price
& bidding
process
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JIT Purchasing
JIT Purchasing Traditional Purchasing
6. Mode of On time delivery Delivery schedule left totransport Delivery schedule suppliers. Concern for
left to buyer cost
7. Product Loose. Suppliers to Rigid specs
specification innovate. Buyer
relies more on
performance specs than
on product specs
8. Paper work Less delivery time & More
quantity level can bechanged by telephone calls
9. Packaging Small standard containers Big size
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SUPPLIER SELECTION
Factors for supplier selection include
Lead time & on time delivery
Quality & quality assurance
Flexibility
Location
Price
Product or service changes
Reputation & financial stability
Dependency of supplier on other buyers
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SUPPLIER AUDITS
As a means of supplier feed backAreas covered in audits
Management style
Quality assurance
Materials management
Design process
Procedures
Scope of improvement
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SUPPLIER CERTIFICATION
Detailed examination of the policies & capabilities of a
supplier
Advantages
Inspection & testing activities can be eliminated
Less risk of problems with supplied goods
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SUPPLIER PARTNERSHIP
Stable relationship with relatively few reliable suppliers
who can
Provide high quality supplies
Maintain precise delivery schedules
Remain flexible to changes
Suppliers can be a source of ideas that contribute to
competitiveness of an organization.
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OBSTACLES
Supplier hesitant to enter into partnership
Supplier may have to increase his investment in
equipment
Cultures of buyer & supplier are different
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VENDOR EVALUATION AND RATING
1. Evaluating the performance before the vendor has
delivered anything.
2. Evaluating the performance of vendor after the
deliveries have been made.
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FACTORS FOR VENDOR EVALUATION
Reliability
Technical capabilities
Convenience
Availability
After sales service
Sales assistance
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QUALITY RATING
RQ = Q1 + Q2 X1 + Q3 X2 + Q4 X3 x 100
Q
Q quantity supplied
Q1 quantity accepted
Q2 quantity accepted with concession
Q3 quantity accepted with rectification
Q4 quantity rejected
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PRICE RATING
Rp = PL x 100
P
PL lowest price quoted
P price agreed by supplier
DELIVERY RATING
RD = promised delivery time x 100
Actual delivery time of full consignment
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QUANTITY RATING
Rqty = qty supplied within delivery time x 100
Quantity promised
SERVICE RATING
Rs is assigned for all service factors so that
a1+ a2+ a3+ a4 = 100
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COMPOSITE VENDOR RATING
f1RQ + f2 RP + f3 RD + f4 Rqty + f5 Rs
f1+f2+f3+f4+f5 = 1
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VENDOR DEVELOPMENT
Communication of essential & helpful information
like design, specifications, standards, practices etc.
Communication of engineering changes
Developing methods for detecting deviations from
standard promptly
Helping the vendors in resolving quality problems
Rendering necessary technical assistance
Providing quality data in lieu of incoming
inspection
Review vendors performance periodically &
providing feedback
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ETHICS IN PURCHASING
Do not accept gifts from vendors
Reject offers for favors like lunch, liquor week
end resorts etc.
Code of conduct should be laid down
Purchase managers should be selected on the basis of
competency and should be rewarded suitably
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CONTRACT NEGOTIATIONS
Negotiation are on the basis of
Price
Delivery schedule
Payment for freight
Quality standards
Technical specifications
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OBJECTIVES OF CONTRACT NEGOTIATION
Most economic purchase of materials
Establish long term relations with suppliers
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PURCHASE ORDER
A legal document that authorizes the supplier to
produce the goods.
Represents buyers obligation to buy the material
against the specified terms
Confirms approval of suppliers quotation by
ordering organization
Needs acceptance and acknowledgement of
supplier
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PURCHASE ORDER SHOULD CONTAIN
Name and address of organization
Name and address of supplier Identification number
Quantity
Description of product
Any relevant technical data
Reference to any certification
Price
Delivery schedule
Delivery instructions
Cost allocation
Purchasers signatures
Conditions of business
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STORES FUNCTIONS
The major functions of stores are as follows
Receipt
Storage
Retrieval
Issue
Records
Housekeeping
Control
Surplus management
Verification
Coordination & cooperation
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RECEIPT SYSTEM
The receipt system involves
Receipt of copy of purchase orders
Receipt of advice note from supplier and
consignment note from transporter
Unpacking of goods received & checking quantityof goods as per packing list & its condition
Preparing provisional goods inward note
Inspection & testing against purchasespecifications
Preparation of clearance or rejection note
Preparation of final goods inward note
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STORAGE SYSTEMS
Closed store system
Open stores system
Random access stores system
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STORE RECORDS SYSTEM
Two records are usually kept of materials and other
goods received, issued or transferred.
Bin card
Shows details of quantities of each type of material
received, issued and on hand each day. One card isattached to each bin on shelf containing the material
Stores ledger
Identical with bin card except that here money values are
shown.
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ISSUE SYSTEM
Receipt of program and bill of materials
Receipt of work order / material requisition
Issue against material requisition
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STORE ACCOUNTING SYSTEMS
FIFO system
LIFOsystem
Average cost system
Market value system
Standard cost system
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STOCK VERIFICATION SYSTEMS
To reconcile the store records and documents for
their accuracy and usefulness,
Identification of areas deserving tighter document
control,
To backup the balance sheets, stock figures, and
To minimize the pilferage and fraudulent
practices
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LAYOUT AND DESIGN OF STORES
The space for receipt and inspection should beprovided adjacent to the main stores.
Use of third dimension must be made effectively.
Different storage facilities should be situated in
clearly defined lanes, so that items are quickly stored &
located.
Main lanes should usually be 1.5 to 3 meters wide,depending upon the type of material & the amount of
traffic involved.
Clear markings should be made at storage space to
facilitate location & identification.
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The fast moving items should be stored near the
dispensing window.
The layout should permit the use of modern
material handling equipment.
Stores layout should encourage the FIFO
Due space should be left for expansion purposes.
A pleasing and hygienic environment must be
provided within store room
Adequate lighting arrangement should be provided.
Adequate safety arrangement should be provided.