MAM5W Materials Management

Unit I - V

UNIT I: SYLLABUS

• MATERIALS MANAGEMENT • DEFINITION AND FUNCTION • IMPORTANCE OF MATERIALS MANAGEMENT

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Meaning and Definition

Meaning: • Materials are of pivotal importance in the manufacturing of a

product. • Materials form an important part of the cost of a commodity and,

therefore, proper control over its procurement, issue, movement and use are necessary.

Definition: • According to International Federation of purchasing and

materials Management: “Materials management is a total concept involving an

organizational structure unifying into single responsibility, the systematic flow and control of material from identification of the need through customer delivery”

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Objectives of Material Management

Objectives

Primary Secondary

Low prices High inventory turnover Low cost acquisition Continuity of supply Consistency of quality Low payroll costs Good records

Reciprocal relations New material and products Economic Make-or-buy Standardization Product improvement Acquisitions Forecasts

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Functions Of Material Management

Functions

1)Material Planning function 2)Purchasing 3)Receiving and stores 4)Material handling 5)Production Control 6)Inventory and stores control 7)Shipping/Physical distribution 8)Traffic

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Organization of Material Management

Shareholders

Board of directors

Chief executive

Materials Manager

Purchase dept

Receiving Dept

Stores dept

Materials Handling

Traffic Section

Shipping Section

MAM5W– Materials Management

https://youtu.be/dM-EU1MMHyQ 6

Interface with other functions of Material Management

Interface

Internal factors External factors

Market Forecasting Production Finance Inventory control Inspection And Quality control Materials Handling, Traffic Physical Distribution Materials Flow-process

Consumers/Customers Suppliers/Other Companies

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IMPORTANT QUESTIONS

• Define Materials Management • Write the importance of Materials Management • Explain the functions of Material • Explain the process of communication • Write about the layout of business letter • State the importance of business letter

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UNIT II: SYLLABUS

• INTEGRATED MATERIALS MANAGEMENT • THE CONCEPT •INVENTORY CONTROL •FUNCTION OF INVENTORY AND IMPORTANCE •REPLENISHMENT STOCK •MATERIAL DEMAND FORECASTING •MRP •ABC, VED, AND FSN ANALYSIS •STORES PLANNING

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Functions/Activities OF Material Management

• Materials Planning and Control • Purchase • Storekeeping • Traffic or Carrying and Forwarding

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Advantages of Integrated Materials Management

Better Accountability Better Coordination Better Performance Adaptability to EDP Procurement at the right time Increased Productivity Control of price Better focus on Urgent Material Miscellaneous Advantages

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Meaning and Definition Of

Inventory

• Meaning: The dictionary meaning of inventory is ’stock of goods’, or ‘list of goods’. In a manufacturing concern inventory may include raw materials, work in process and stores, etc.

• DEFINITION: The American Institute of Certified Public Account defines “Inventory in the sense of tangible goods, which are held for sale, in process of production and available for ready consumption”.

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Motives of holding inventories

Motives of holding inventories

Transaction motive

Speculative motive

Precautionary motive

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Types of Inventory

Types of inventory

Movement inventories Buffer

inventories Anticipating Inventories

Cycle inventories

Decoupling inventories

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Replenishment Stock

• Replenishment means to become full again; to restore to a state of original fullness.

• The object stock replenishment techniques is to ensure that the optimum stocking level for each item in the inventory is maintained at the targeted service level.

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Material Demand forecasting

• When demand levels are not known exactly, as with independent demand, then forecasting proactively aims to give best estimate of future demand and to predict changes.

• Forecasting also aims, reactively, to minimize errors in previous forecasts.

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Types of material/Inventory Demand Forecasts

• Market Research • Market Demand Models • Historical Techniques • Minimum Stock levels • Demand Patterns

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Inventory Control

• Meaning: Inventory control means making the desired item of required

quality and in required quantity, available to various departments when needed. Too much inventory creates a problem of their storage, huge investment and the maintenance of stored items from deterioration, pilferage, damage, etc.

• DEFINITION: According to L.V.Fine , “ The planning and scheduling of

materials used in the manufacturing process. It is possible to exercise control over the three types of inventories recognized by the accountant as raw material, work-in-progress and finished goods.”

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Scope of inventory control

• Determination of inventory policies • Determining various stock levels • Determining economic order size • Safety or buffer stock • Determining lead time • Examine the work of inventory policy

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A-B-C- analysis

Applications of ABC analysis: Information of items which require higher degree of control. To evolve useful re-ordering strategy. Stock records Priority treatment to different items Determination of safety stock items Stores layout Value analysis

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VED analysis

• In VED analysis the items are classified on the basis of their criticality to the production process or other services.

• In the VED classification of materials V stands for Vital items without which the production process would come to a stand still

• E in the system denotes Essential items whose stock out would adversely affect the efficiency of production system.

• D items are the desirable items which are required but do not immediately cause a loss of production.

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FSN analysis

• The FSN classifications calls for classification of items as fast-moving, slow moving, and non-moving. Some analysts classify the items as FSDN; fast moving, normal moving, slow moving, and dead(non-moving). This speed classification helps in the arrangement of stocks in the stores and in determining the distribution and handling patterns.

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Material Requirement Planning(MRP)

Definition: According to American Production and Inventory Control

Society, “MRP constitutes a set of techniques that use bill of material, inventory data, and the master production schedule to calculate the requirements for materials.”

Elements of MRP • Technical • Basic data elements includes :master production schedule, bills of

material, inventory records • People

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Benefits of MRP

• Reduction in work-in-process • Priority benefits • Effective utilization of capacity • Other benefits

Limitations of MRP • Causes incorrectness in MRP • Causes over-dependence • Unreliable inventory data • Cause inaccuracy in MPS • Requires Discipline

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IMPORTANT QUESTIONS

• What is Inventory? • What are the functions of Inventory Control? • Describe the scope of Inventory control. • Discuss the objectives of MRP • Explain about VED analysis

MAM5W– Materials Management

https://youtu.be/qtmfCMtlsag https://youtu.be/vMSARPybFxg

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UNIT III: SYLLABUS

• PURCHASE MANAGEMENT • PURCHASING PROCEDURE • DYNAMIC PURCHASING PRINCIPLES • INTERNATIONAL PURCHASE • IMPORT PURCHASES PROCEDURE

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PURCHASE MANAGEMENT

• According to Alford and Beatty, “Purchasing is the procuring of materials, supplies, machines, tools and services required for equipment, maintenance, and operation of manufacturing plant”.

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Types of Purchases

• Raw Materials • Semi-Finished Products • Finished Products • Maintenance, Repair and Operating Items • Production Support Items • Services • Capital Equipment

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Principles of Purchasing

• Right Price • Right Quality • Right Time • Right Source • Right Quantity • Right Attitude • Right Contract • Right Material • Right Transportation • Right Place of Delivery

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PURCHASING METHODS

• Purchasing by requirements • Purchasing for specify period • Market purchasing • Speculative purchasing

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DYNAMIC PURCHASING

• A dynamic purchasing system is a completely electronic process for making commonly used purchases of products

• The cost of setting and running a dynamic purchasing system are borne by the contracting authority

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IMPORT SUBSTITUTION (IS)

• According to M.P.Todaro, “Imports substitution entails and attempt to replace commodities usually manufactured goods formerly imported with domestic sources of production and supply

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METHODS OF IS

• Tariff policy • Increase in production • Research • Swadeshi spirit

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INTERNATIONAL PURCHASING

• Characteristics • Increased purchasing scope • Increased purchasing risk • Decreased purchasing price • Stable purchasing channel

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METHODS OF

INTERNATIONAL PURCHASING

• Exporting • Licensing • Franchising • Joint Venture • Strategic alliances • Management contracts • Acquisition

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BENEFITS OF INTERNATIONAL

PURCHASING • Price / Cost Benefits • Improved Quality • Product and Process Technology Development • Improved Supplier Responsiveness • Improved Communication

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RISK INTERNATIONAL

PURCHASING

• Less than Expected Cost Savings • Environmental Factors • Weak Legal Environment • Risk of Creating Competitors • Inadequate or Low-Skilled Workers • Over-Reliance on Suppliers • Erosion of Morale and Commitment among Home-Country

Employees

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IMPORTANT QUESTIONS

• Define Purchasing • Explain the various responsibilities of the purchase department • What are the eight rights of purchasing? • What are the methods of import substitution? • What are the benefits of international purchasing?

MAM5W– Materials Management

https://youtu.be/ntHnQrQBG2Y https://youtu.be/Ph4tr_RtoJM

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UNIT IV: SYLLABUS

• STOCK KEEPING AND MATERIAL HANDLING • OBJECTIVES AND FUNCTIONS OF STORE KEEPING • STORES RESPONSIBILITIES • LOCATION OF STORE HOUSE • CENTRALISED STORE ROOM • EQUIPMENT, SECURITY MEASURES OF STORES • PROTECTION AND PREVENTION OF STORES

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Store keeping and Materials handling

• Meaning: Stores form the basis of material management. Stores play a vital role in the operations of a company. Storing or storekeeping is a service to the production department.

• DEFINITION: Storekeeping may be defined as a function of receiving, storing and issuing of raw materials, tools, spares, consumables,. Etc. to the respective department.

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Objectives of Storekeeping

• Minimizing cost of production • Maintaining the value of materials • Services to user departments • Establishing co-ordination with other departments • Advising materials manager.

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Functions of Storekeeping

• Receipt • Storage • Retrieval • Issue • Records • Housekeeping • Surplus stock

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Types of stores

• Main or centralized stores rooms • Central store with sub-store • Specialty store • Branch or decentralized store room • Warehouses

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Benefits of storekeeping

• Minimum investment • Continuos flow of material • Fewer accidents • Minimum wastage • Good quality at minimum cost • Proper storage for improved output

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Stores Responsibilities

• Receiving material • Arranging material • Preservation of the material • Recording • Issue of material • Issuing purchasing requstion • supervision

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Stores Procedure

• Materials planning • Receipts of materials • Receipt procedure • Storage of materials • Inventory records • Valuation of stock and materials

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Location of stores house

• Location of the stores should be carefully decided and planned so as to ensure maximum efficiency.

• The best location of stores is one that minimizes total handling costs and other costs related to stores operation.

• In general, stores are located close to the points of use.

• All departments should have easy access to the stores especially those which require heavy and bulky materials.

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Factors affecting location of store house

• Proximity with user departments • Security consideration • Type of material • Ease of transport • Good material control • Scope for future expansion • Avoidance of boredom

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Different situations for protection of stores

• Protection from acts of war • Prevention of unauthorized entry • Theft control

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Methods of store accounting

• First in first out • Last in first out • Standard cost method • Average cost method

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Objectives of materials handling

• Reduction in wastage of machine time • Reduction in manufacturing cycle time • Safety and safe working conditions • Customer satisfaction • Avoid disruption • Enhances productivity

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Factors affecting materials

• Production system • Types of products • Type of building • Cost of materials handling

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Types of material handling

• Block and tackle • Winches • Hoists • Elevator • cranes

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IMPORTANT QUESTIONS

• What do you mean by store keeping? • What do you mean by specialty store? • What are the factors affecting location of stores? • Explain about layout of stores • What are the functions of Material Handling System?

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UNIT V: SYLLABUS

• VENDOR RATING • VENDOR MANAGEMENT • PURCHASE DEPARTMENT RESPONSIBILITY • BUYER SELLER RELATIONSHIP • VALUE ANALYSIS • ISO TYPES

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VENDOR MANAGEMENT

• Meaning: Vendor management is the management and control, by an

entity, of those third parties that supply goods and or services to that entity. In other words, vendor management is the process of defining the structure for how relationships with suppliers will be developed and maintained.

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Objectives of vendor management

• Establishing goals • Selecting vendors • Managing vendors • Consistency meet goals

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Vendor Rating

• Vendor rating is the result of a formal vendor evaluation system.

• Vendors or suppliers are given standing, status or title according to their attainment of some level of performance, such as delivery, lead time, quality, price or some combination of variables.

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Techniques of vendor rating

• Categorical plan • Weighted point method • Cost ratio method • Critical incidents method • Checklist system • Incoming material rating plan • Matrix method

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Important aspects of Buyer-Seller relationship

• Reciprocity • Back-door selling • Ideal relationship

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Types of vendor relations

• Traditional or transactional relation • Collaborative relation. • Alliance-type relation

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Value analysis

Meaning : Value analysis is an organized creative approach, which

emphasizes efficient identification of unnecessary cost, i.e., cost that provides neither quality, nor use, nor life, nor customer satisfaction.

Definition: According to CIMA official terminology, value analysis is defined as “ A systematic interdisciplinary examination of factors affecting the cost of a product or service in order to devise means of achieving the specified purpose most economically at the requires standard of quality and reliability”.

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Objectives of value analysis

• To maintain the functional objectives • Saving in cost • Quality promotion • Import substitution • Maximization of the value of product • Elimination of unnecessary processes • Time consideration

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Techniques of value analysis

• Matrix technique • MISS technique

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Purchase Department

• Meaning: The purchase department plays a very important role in an

organization because purchasing has its effect on every vital factor concerning the manufacture, quality, coat, efficiency.

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Functions of purchasing department

• To receive the purchase requisition from the department which needs the material.

• To maintain relations with the suppliers. • To maintain purchase records. • To coordinate and supervise the staff of the purchase department. • To follow-up purchase order.

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International organization for standardization

• ISO is a non-governmental organization that forms a bridge between the public and private sectors, and is the largest standards organization in the world

• ISO enables a consensus to be reached on solutions that meet both the requirements of business and the broader needs of society.

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Elements of ISO 9000

• Management responsibility • Quality system • Document control • Design control • Purchasing • Process control • Corrective action • Contract review

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Procedure for obtaining of ISO

• Preliminary information • Formal application • Screening and evaluation • Issue first stage approval • Issue second stage approval

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IMPORTANT QUESTIONS

• What is Vendor Management? • What is Vendor Rating? • What are the aspects of Vendor relation? • Describe the advantages of Value analysis. • Explain the criteria of Vendor Rating.

MAM5W– Materials Management

https://youtu.be/dtaRf2Fx_2U https://youtu.be/fqGDy-WWgbU

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