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Material Management
Prof. Dr. Basavaraj K. Nanjwade M. Pharm., Ph. D
Department of Pharmaceutics
KLE University College of Pharmacy
BELGAUM-590010, Karnataka, India.
E-mail: [email protected]
Cell No.: 00919742431000
There are thousand reasons for failure, but only one way to success,
HARD WORK
mailto:[email protected]:[email protected] -
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ContentsDefinition
Objective and importance
Principles of material management
Functions of material management
MaterialsQuality and Quantity19 July 2012 2KLE College of Pharmacy, Nipani.
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Value analysis
Purchasing
Vendor development
Buying techniques
Purchasing cycles and procedure
Advantages of material management
Contd..
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Contents
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Definition
It is defined as an organizational concept,
which has the authority and responsibility of
all activities, concerned with the flow of
materials in the organization.
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Objectives and importance
Efficient use of the working capital.
Lowering inventory investment and increasing
the inventory turnover.
Responding to the market changes related to
any product.
Ensuring the cooperation of all departments. Providing best services to the king of the
market i.e customer.
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Principles of material handling
Least handling is the best handling.
Lengths and number of move to beminimized.
Unit loads
Minimize the distance.
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The design of the container.e.g. shippers
are used for storing finished bulk. & forraw materials as per the property ofmaterials they are stored- plastic
containers ( light weight containers)
Re-handling and back tracking of thematerials should be avoided.
The materials handling service should notinterfere with the production flow.
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Principles of material handling
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Classes of materials
Raw materials:- These are materials that
are used in the product which is in an
unprocessed condition.
Purchased Parts:- These are the items
used in the assembly of the product.
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In-progress materials:- They are called
work in progress inventories. These
goods require further processing.
Finished materials:- These are fully
manufactured goods, inspected and ready
for delivery to the customers.
Supplies:- These are consumable goods
used in the process of manufacturing.19 July 2012 9KLE College of Pharmacy, Nipani.
Classes of materials
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Functions of material management
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Materials-Quality & Quantity
Four factors affecting the purchase of rawmaterials are
1) Quality :- The suitably of an item toaccomplish the intended work.
The raw materials should satisfy thefollowing requirements.
i. Efficiency of the material.
ii. Cost and the shelflife.iii. For equipments, power consumption and
power requirement.
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Quantity
From the inventory point of view, quantitystandards are decided on the following
parameters;
i. Maximum inventoryii. Minimum inventory
iii. Standard order
iv. Reorder point3) Price
4) Delivery Date19 July 2012 12KLE College of Pharmacy, Nipani.
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Value Analysis
Definition:- It is a systematic study of every
element for its cost in a part, material or service tomake certain that it performs its function at thelowest possible cost.
Benefits of value analysis:-
i. Decrease in existing cost of the product or service.
ii. Unnecessary expenditure is identified andeliminated.
iii. Product value improves for new materials andprocesses.
iv. More profits.
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Value ratio
Mathematical representation of the value can be
done as Function
Value =
Reasons for unnecessary costs:-
i. Lack of information
ii. Lack of ideasiii. Changed circumstances
iv. Wrong beliefs, habits and attitudes
Total cost
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Value Analysis Technique
In this technique (n) number of questions areapplied, like:-
o what must I do?
o What else does the item do?
o What does it cost?
o What else will the job do?
o What will be alternative costs?
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Purchasing
Centralized :- the purchasing
procedure of materials fordifferent department is donetogether from one
purchasing department.This is seen in small
organizations.
Advantages
Efficient system
Bargaining capabilitiesincreased
Good raw material obtainedat lower price
Decentralized:- different
department purchase theirrequirement seperately.This is basically seen inlarge organizations.
Advantages
Flexible purchasing system
Procurement is faster
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Vendor development
The supplier or the person who sells therequired materials or services for the
production is known as a vendor.
The purchase of raw materials/service from a
specific vendor is known as the vendor
development.
There are four stages of vendor development:-
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Stage Name Development
1st
Survey stage Identifying the potentialsources of suppliers.
Seeking information.
Provisional vendors list.
2nd
Enquiry stage Analysis of information instandard enquiry format.Accreditation, FDA
approval, ISO certification.
Personal visits.
3rd
Negotiations and
selection stage
Quality control
specifications, clarification,
credit, quantity discounts.
4th
Experience and
evaluation stage
Performance appraisal,
Quality, delivery time.
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Four stages of vendor development
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1) Survey stage
The following sources are considered for information
Trade directories :- e.g.
Yellowpages.eindiabusiness.com
Trade journals:- e.g. Pharmatimes
Telephone directories
Suppliers catalogue
Salesmen
Other ways are like interchanging of information
with other companies, tracing of public tenders and
advertisements in the press.
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2) Enquiry stage
After getting the information of the suppliers,
detailed analysis of the supplier is beingcarried out. A comparison is being made
between the different suppliers on basis of the
following points:-
a. Technological competition,
b. service competition,c. price competition,
d. delivery time.19 July 2012 20KLE College of Pharmacy, Nipani.
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The following aspects can be verified by the firsthand visit:-
Internal facilities of the vendor
Financial adequacy, stability and reputation ofthe vendor
Location of vendors factory
After sales service
Industrial relations
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2) Enquiry stage
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3)Negotiation and selection stage
The vendors who clear the enquiry stage areselected and negotiations are being carried out
with them.
The various aspects such as credit, quantity
discount, quality specifications are being
discussed.
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The buyer evaluates and appraises theperformance of the vendor.
The objective is to improve the performance
of the vendors.
Few ways of evaluating a vendor are:-
o Categorial method
o Weighted point methodo Cost ratio method
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4) Experience and evaluation stage
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The buyer sets up some category on which the evaluation of the vendor is done. Specimen
of suppliersevaluation form is given below.Grading
Factors Always
9 8 7
Usually
6 5 4
Seldom
3 2 1
Never
0
Supplies are as per
quantity selectedDeliveries are on
time
Rigorous follow up
is not necessary
Willing to
accommodate when
production schedules
are suddenly
changed
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Categorial method
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Weighted point method
Here the rating points are divided between quality,delivery and price.
For eg quality50 pointsdelivery- 30 points
price 20 points so total is 100 points.
The rating can be obtained by following equation.
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Quantity rating = (no. of lots accepted/ no. lots
received) rating points
Delivery rating = (no of lots delivered on time/ noof lots delivered) rating points
Price rating =(least offer received/ suppliers offer)rating points
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Weighted point method
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Buying techniques
Purchasing of material , machinery and services
is done by purchasing department.
For buying the material company has to pay up a
price, the value that a seller sets on his goods in
the market is called as the price of that good.
Price is one of the greatest variables in the
purchasing of material.
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How is the purchasing done????
Quotations :- It is a kind of an inquiry done to
know whether the vendor can supply the desired
material and at what price.
They are not the purchase order. They just containall the details including freight, taxes and many
other costs.
The highly used quotation techniques are Spot quotations
Floating a limited enquire
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Spot quotations:- this is basically used for the small
items not related to the technical purpose.
The prospective buyer goes to the market and gets thequotations from the different suppliers.
Floating a limited enquire:- this method is used when thevalue of the purchase is small. In this technique the
reliable vendors are called upon and asked to provide the
quotations.
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Tenders:-It is a written letter or a published document
that is aimed at finding the price for procuring certain
materials.
Tenders are invited from recognized firms. A few
types of tenders are:
# single tender# Open tender
# Closed tender or limited tender
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Single tender:- It is invited from one reliablesupplier. This kind of tender is floated only whenthe itms are required urgently.
Open tender:- Also known as press tender. Thisis used when the value of item to be purchased isvery high. It is used to locate more suppliers.
In this tender procured, a small amount of the
deposit money is taken from the supplier so thatthey do not withdraw from the submitted rates.
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Closed tender or limited tender (Negotiations):-It is done to arrive at the mutual understanding
between the supplier/vendor and the buyer.
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Whats the need for negotiation?@ prices are related to large volumes or to a large value.
@ terms and conditions are required for large volumes.
@ contract is desired for a longer period.
@ variations in quantity to be purchase are possible.
@ when supplies or services can be obtained from only
one source.
@ when no acceptable quotations are received from the
other vendors.
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Process of negotiations:- It is a kind of win-win situation.
Both the parties try to benefit to the maxima through thenegotiation.
It is not a kind of bargaining but a mutual understanding
between the two parties.
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# Volume contracts:- This kind of discount is offeredproportionate to the volume of material ordered.
# Cash discount:- Cash discount is given on the basis of
the time of the payment done by the purchaser. Thenormal credit period is 90 days.
# Cumulative discount:- It is a method of offering thediscount on the basis of actual purchases and appropriate
to the quantity range in a year.
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Purchasing cycle and procedure
The purchasing department of the company is
responsible for the purchase of all the raw materials aswell as the requirements.
The following steps are followed in the purchasing cycle.
1) Recognition of need and receipt of requisition: Therequisition includes the following information:-
- Name
- Quality and quantity specifications
- Date by which material is required
- Place at which material is to be delivered
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2) Selection of potential sources of supply
3) Making request for quotation
4) Receipt and analysis of quotations
- material specifications and quality
- price of the material- taxes
- terms of payemeny
- place of delivery
- delivery period
- gurantee period
- validity of tender
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5) Selection of right source of supply
6) Issuing the purchase order
7) Follow-up of the order
8) Receipt of materials,reports and analysis
9) Checking and approving of vendors invoice for
payment
10) Closing of completed order
11) Maintenance of record and file
Purchasing cycle flow chart has been given in the
following slide.
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Purchasing cycle and procedure
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Need recognitionSpell out of specifications &
requirements
Official requisitions
Check specifications,
prices/supplies
Select suppliers
Quotations & analysis prices and terms, negotiations, finalisation
Purchase order for supply
Suppliers acceptance
Specifications
filePurchase
records
Suppliersrecord
Inquiry tender
Follow-up
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Contd .
Delivery of materials
Materials & reports,
analysis
Payment made
Checking of invoice
with purchase order
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Example of Materials and People Flow
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Objectives :
Minimum wastage of space
Maximum ease of operation Minimum handling cost
Minimum other operational cost
Store should be located adjacent to the manufacturing area.
It depends up on nature and value of items to be stored and
frequency with which items are received and issued
Location of Stores
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Facilities of Store
Inspection center
Quarantine room
Washing room
Centralized weighing department
Adequate space
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General function :
Maintenance of Stock (materials and tools)
Maintenance of hygiene, sanitation, andpest control
Maintenance of material handlingequipment
Functions of stores
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Specific functions :Receiving & recording of raw materials
Quarantine storage Sampling & approval by QC
Positioning & StorageIssuing & recording of materials
Receiving & Dispatching of finished goods
Distribution
Optional functions :Dispensing, Maintenance of weights & measures
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Functions of stores
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M t i l h dli t
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Involves handling, storing, and controlling material
The raw materials, in-process materials and
finished goods are moved from one place to
another in the plant.
Adds value through time and place utility
Impacts space requirement, profits, quality, safety,
and productivity On an average, 20% of production cost is spent on
material handling system
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Material handling system
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Twenty Principles of Material Handling
1. Planning principle. Plan all material handlingand storage activities to obtain maximum overall
operating efficiency.
2. System principle. Integrate as many handlingactivities as is practical into a coordinated system
of operations, covering vendor, receiving, storage,production, inspection, packaging, warehousing,
transportation. etc.
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3. Material flow principle. Provide an operationsequence and equipment layout optimizing
material flow.
4. Simplification principle. Simplify handling by
reducing, eliminating, or combining unnecessary
movement and/or equipment.
5. Gravity principle.Utilize gravity to move material
wherever practical.
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Twenty Principles of Material Handling
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6. Space utilization principle.Make optimumutilization of space .
7. Unit size principle.Increase the quantity, size,or weight of unit loads or flow rate.
8. Mechanization principle.Mechanize handlingoperations.
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Twenty Principles of Material Handling
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9. Automation principle. Provide automation to
include production, handling, and storage
functions.
10. Equipment selection principle. In selecting
handling equipment, consider all aspects of the
material being handled.
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Twenty Principles of Material Handling
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11. Standardization principle.Standardize handling
methods as well as types and sizes of handling
equipment.
12. Adaptability principle. Use methods and
equipment that can best perform a variety of
tasks and applications where special purposeequipment is not justified.
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Twenty Principles of Material Handling
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13. Dead weight principle. Reduce ratio of dead
weight of mobile handling equipment to load
carried.
14. Utilization principle.Plan for optimum utilization
of handling equipment and manpower.
15. Maintenance principle. Plan for preventive
maintenance and scheduled repairs of all
handling equipment.19 July 2012 54KLE College of Pharmacy, Nipani.
Twenty Principles of Material Handling
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16. Obsolescence principle. Replace obsoletehandling methods and equipment when moreefficient methods or equipment will improveoperations.
17. Control principle. Use material handlingactivities to improve control of production
inventory and order handling.
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Twenty Principles of Material Handling
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Selecting Material Handling System
Systematic Approach
1. Define the problem
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Selecting Material Handling System
2. Analyze the problemObserve activities
Obtain layouts, flow patterns, schedules, etc.
Obtain information on existing material handlingequipment
Analyze situation by Twenty Principles of MaterialHandling, and/or forms
Can activities be combined, simplified,eliminated???
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3. Identify possible solutionsOrganize meeting with:
material handlers
machine operators
supervisors
support engineers
4. Evaluate alternatives
Meet again to rate alternatives
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Selecting Material Handling System
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Material Handling Equipment
Five categories:
1. Industrial trucks
2. Automated guided vehicles
3. Monorails and other rail guided vehicles
4. Conveyors
5. Cranes and hoists
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Industrial Trucks
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Industrial Trucks
Two basic categories:
1. Non-powered
Human workers push or pull loads
2. Powered
Self-propelled, guided or driven by human
Common example: forklift truck
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Nonpowered Industrial Trucks
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p(Hand Trucks)
(a) Two-wheel hand truck, (b) four-wheel dolly,
(c) hand-operated low-lift pallet truck
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Powered Trucks
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Powered Trucks
Capacities from 450 kg up to 4500 kg
Power sources include on-board batteries and internal combustion motors
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Powered Trucks
Designed to pullone or more trailingcarts in factories andwarehouses, as well
as for airportbaggage handling
Powered by on-
board batteries or ICengines
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Automated Guided Vehicles
An Automated Guided VehicleSystem (AGVS) is a materialhandling system that usesindependently operated, self-
propelled vehicles guidedalong defined pathways in thefacility floor
Types of AGV: Driverless trains
Pallet trucks
Unit load AGVs
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Driverless Automated Guided Train
First type of AGVS tobe introduced around1954
Common application
is moving heavyloads over longdistances inwarehouses and
factories withoutintermediate stopsalong the route
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Unit Load Carrier
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Unit Load Carrier
Used to move unitloads from station tostationOften equipped forautomaticloading/unloading ofpallets and pans usingroller conveyors,moving belts, or
mechanized liftplatforms
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Rail-Guided Vehicles
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Rail-Guided Vehicles
Self-propelled vehicles that ride on a fixed-railsystem
Vehicles operate independently and aredriven by electric motors that pick up power
from an electrified rail
Fixed rail system
Overhead monorail - suspended overhead
from the ceiling On-floor - parallel fixed rails, tracks
generally protrude up from the floor
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Overhead Monorail
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Overhead Monorail
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Conveyor Types
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Conveyor Types
Roller
Skate-wheel
Belt
In-floor towline
Overhead trolley conveyor
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Cranes and Hoists
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Cranes and Hoists
Handling devices for lifting, lowering and transportingmaterials, often as heavy loads
Cranes
Used for horizontal movement of materials
Hoists
Used for vertical lifting of materials
Cranes usually include hoists so that the crane-
and-hoist combination provides Horizontal transport
Vertical lifting and lowering
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Hoist
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Hoist
Load
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Salvaging and Disposal of
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Salvaging and Disposal of
Scrap and Surplus
The words Scrap and Surplus
symbolize waste and to that extent these
account for the loss of profits.
Scrap is commonly used for waste of all
kinds.
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Disposal of scrap, surplus, recyclable, obsolete
materials is one of the most important area ofmaterials management, but often overlooked or
considered minor.
Popular due to increased public awareness of
environment, government legislation, better
recognition of opportunities it offers in return.
e.g. paper files and forms are recyclable item
that can be sold to recycle company.19 July 2012 82KLE College of Pharmacy, Nipani.
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Salvage :
It is defined as the processing of materials(items) for advantageous use or disposal ofcompany property, which is no longereconomically useful in its present position.
Salvage operation :
Waste materials are properly collected andstored at one place continuously, so that thesecan form a separate batch in production.
Recoverable materials are stored in a scientificway as other items stored.
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Materials are stored in terms of quality or size orspecifications.
Waste is invested for suitability to recover or avoid them.
Salvaging operation are possible under the followingconditions:
Evidences from laboratory tests and assays that the drugproducts meet all applicable standards of identity, strength,quality and purity.
Evidence from inspection of premises that the drug
products and their associated packing were not subjected toimproper storage condition, as a result of the disaster oraccident.
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Disposal
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Disposal
Disposal of scrap, waste and surplus
materials can be effected by several way :
Surplus material should be returned to the
original supplier. Alternatively a customer who
needs them should be explored.
As a social obligation, some material are
defected or broken before selling them as scrap.
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Unit lode, Pelletization and
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,
Containerization
Unit load is a set of items (raw material, semifinished parts, finished product) to be movetogether, like:
A set of cartons on a pallet
A set of products in a container
In a unit load, parts are
In something (In a carton) On something (On a pallet)
Grouped by something (wrapped, strapped)
19 July 2012 89KLE College of Pharmacy, Nipani.
Reasons for using unit loads in material handling
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Multiple items
handled
simultaneously
Required number
of trips is reduced
Loading/unloading
times are reducedProduct damage is
decreased (a) Wooden pallet, (b) pallet box, (c) tote box19 July 2012 90KLE College of Pharmacy, Nipani.
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Types of Pallets :
Materials used :
Softwood Hardwood
Paper
Plastic
Steel Aluminium
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TRAINING AND DEVLOPMENT
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TRAINING AND DEVLOPMENT
Training and development may be defined as an
attempt to improve current or future performance
of employees through learning, usually by
changing the employees attitude or increasinghis/her skills and knowledge.
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TRAINING AND DEVLOPMENT
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Training and development program - Steps :
I. Explain the trainee what is the job, how is the
job done and why is it done (relevance).
II. Show how the job should be done
(demonstration).
III. Allow the trainee to do the job (practice).
IV. Follow up by explaining what was done
correctly and what was done incorrectly.Correction always should be made as
privately as possible (feedback).
19 July 2012 95KLE College of Pharmacy, Nipani.
TRAINING AND DEVLOPMENT
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Training and development program
Methods :
I. On-the job training
II. Off-the job training
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TRAINING AND DEVLOPMENT
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I. On-the job training :
Majority of industrial training are on-the job
training, because it is related to the
productivity.
On-the job training refers to methods that are
applied at the workplace, while the employee
is actually working.
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TRAINING AND DEVLOPMENT
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II. Off-the job training :
This method is commonly used for the
training of employees.
Off-the job training refers to methods that are
applied away from workplace.
19 July 2012 98KLE College of Pharmacy, Nipani.
JOB ANALYSIS
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Job analysis is defined as a process of collecting
and studying information relating to theoperations and responsibilities of a specific job.
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JOB ANALYSIS
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Uses of job analysis :
Personnel planning
Training and development
Work scheduling
Performance appraisal
Job evaluation
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JOB ANALYSIS
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Job Description :
is defined as a combination of statement
containing the work to be performed and the
essential working conditions of a particular job.
Job specification :
may be defined as a statement of human
qualities and other desirable characteristics
required for discharging the assigned job.
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JOB ANALYSIS
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Job Analysis
Job description Job specifications
Job title Education
Job place ExperienceJob summary Training
Machines, tools and equipment Judgment
Materials and forms used InitiativeWorking condition Responsibilities
Hazards Physical effort19 July 2012 103KLE College of Pharmacy, Nipani.
JOB DESIGN
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Job design involves conscious efforts to
organize tasks, duties and responsibilities into aunit to achieve objectives.
Job design involves three steps. Specifications of individual tasks.
Specification of the methods of performing each
tasks.
Conversion of tasks into specific jobs to be assignedto individuals.
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Job enrichment
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It acts as an additional motivating factors toother models described earlier in job design.
This factor attracted more attention, both in
academic circles as well as in practice.
Therefore, it requires a detailed study.
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Job enrichment
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Job enrichment is concerned with designing ofjob in terms of the following :
Work content provides greater variety.
Levels of knowledge and skills are higher. More autonomy and responsibility in terms of
planning, directing and controlling is given to
workers for their own performance.
Work experience becomes meaningful.
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LABOR WELFARE
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LABOR WELFARE
Labor Welfare means working out things for thewell-being of the labors. Knowing there wants
and enabling them to fullfill there wants.
Labor welfare is the voluntary efforts of employer
to establish within the existing industrial system,
working and sometimes living and cultural
conditions of the employee beyond what isrequired by law.
19 July 2012 110KLE College of Pharmacy, Nipani.
Advantages of material management
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It eliminates unproductive handling of thematerials like back-tracking, rehandling
etc.
It reduces idle machine capacity and thus
ensures better turnover on investment.
It reduces considerably the idle time of the
workers.19 July 2012 111KLE College of Pharmacy, Nipani.
Advantages of material management
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The quality of the materials is also maintained
through minimum human touches, elimination ofbreakages, etc.
Every inch of the factory space is properly
utilized.
The issue of materials is also facilitated.
It helps in maintaining effective production
planning and control.19 July 2012 112KLE College of Pharmacy, Nipani.
Advantages of material management
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Reduced operating costs and timely
production.
Greater job satisfaction on the part of both
the workers and the employer.
19 July 2012 113KLE College of Pharmacy, Nipani.
References
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CVS Subrahmanyam; PharmaceuticalProduct and Management, Published by-
Vallabh Prakashan, Page no :- 260282
S.C. Saksena; Business Administration
Management, Published by- Sahitya
Bhawan, Page no :- 262 263, chapter20.
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