material management chapter 1
TRANSCRIPT
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MATERIALS MANAGEMENT
WEALTH of a country is measured by itsGross National Product ( GNP) - the output
of goods and services produced by thecountry in a given time.
We may have rich natural resources in oureconomy such as mineral deposits, forests,etc. but these are only potential sources ofwealth.
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MATERIALS MANAGEMENT
A production or manufacturing function isrequired to transform the naturalresources into useful products.
Production takes place in all forms oftransformation - extracting minerals from
earth, farming, lumbering, fishing andusing these resources to manufactureuseful products.
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MATERIALS MANAGEMENT
Value is added at each stage in the developmentof the final product.
Manufacturing firms are in the business ofconverting raw material to a form that is of farmore value and use to the consumer than theoriginal raw material.
In order to obtain most value out of ourresources, we must design production processesthat make products more efficiently.
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MATERIALS MANAGEMENT
Once the production processes are in place, weneed to manage their operations so that theycan produce the goods most economically.
Managing the operations entails planning forand controlling the resources used in theprocess: labor, capital and material
The major ways in which a firm plans andcontrols is through the flow of MATERIALS.
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MATERIALS MANAGEMENT
The flow of materials controls theperformance of the process.
If the right materials in the right quantitiesare not available at the right place at theright times at the right price the process willnot produce what it should. Labor andmachinery will be poorly utilized.
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MATERIALS MANAGEMENT
Materials are any commodities used directly orindirectly in producing a product such as rawmaterials, component parts or assemblies.
Materials management is the grouping ofmanagement functions supporting the completecycle of material flow, from the purchase andinternal control of production materials to the
planning and control of work in process to thewarehousing, shipping, and distribution of thefinished product.
Thomas F. Wallace & John R. Dougherty
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MATERIALS MANAGEMENT
Materials management involves planning,programming, organizing, directing,controlling, and coordinating the various
activities concerning the materials.
The production managers found it necessary
to develop an organized body of knowledgeon this subject. The resulting set of relateddisciplines is known as materialsmanagement.
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MATERIALS MANAGEMENT
Materials management is themanagement of the flow of materials
into an organization to the point,where, those materials are converted
into the firms end product(s) Bailey & Farmer
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SIGNIFICANCE OF MATERIALS
The amount spent on materials is higher thanother inputs
Materials offer considerable scope for reducingcost and improving profit
Improving return on investment depends on theeffective utilization of materials.
Materials add value to product
Quality of end product depends on materials
Increasing demand for ensuring environmentalsafety
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SIGNIFICANCE OF MATERIALS
Materials management assumes responsibility forwhatever happens in purchasing, storing, inventory orany other area connected with materials.
Need for preservation of scarce resources for posterity
The efficiency of any organization depends upon theavailability of right materials, in right quantity, at righttime and at right price.
Materials are life-blood ofmans development
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OBJECTIVES OF MATERIALS MANAGEMENT
Maximize the use of the firms resources
Provide the required level of customerservice
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MATERIALS MANAGEMENT
We need to plan the flow of materials into,
through and out of production process.
Three basic elements in a material flow system:
Supply
Manufacturing
Distribution
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Materials Management and Profits
Income = Revenue - Expense
Need to increase income with:
Best customer service
Lowest production costs
Lowest inventory investment
Lowest distribution costs
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Materials Management and Profits
Direct labor
Direct material Varies with volume sold
Overhead Does not vary with volume sold
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Materials Management and Profits
Dollars % of Sales
Sales Revenue $1,000,000 100
Cost of Goods Sold
Direct Material $500,000 50
Direct Labour $200,000 20
Overhead $200,000 20
Total Cost of Goods Sold $ 900,000 90
Gross Profit $100,000 10
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Materials Management and Profits
Reduce materials by 10% and labor by 5%
Dollars % of Sales
Sales Revenue $ 1,000,000 100
Cost of Goods Sold
Direct Material $ 450,000 45
Direct Labour $ 190,000 19
Overhead $ 200,000 20
Total cost of goods sold $ 840,000 84
Gross Profit $160,000 16
Profit has increased by 60%
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Materials Management and Profits
To get the same result (+ 60% profit) through sales
Dollars % of Sales
Sales revenue $ 1,200,000 100
Cost of goods sold
Direct Material $ 600,000 50
Direct Labour $ 240,000 20
Overhead $ 200,000 20
Total cost of goods sold $ 1,040,000 87
Gross Profit $160,000 13
Sales must increase by 20 %
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Manufacturing Planning and Control
Planning and controlling the flow of materialsthrough the manufacturing process with:
Production Planning
Implementation and Control
Inventory Management
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Production Planning
To meet the demands of the marketplace
Establish priorities
Ensure capacity
Activities
Forecasting Master Planning
Materials Requirements Planning
Capacity Planning
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Implementation and Control
Putting into action and achieving the plans
(made by production planning)
Production Activity Control
Procurement / Purchasing
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Inputs to the Manufacturing
Planning and Control System
1. Product description
2. Process specifications
3. Time needed
4. Available facilities5. Quantity required
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Product Description
Engineering Drawings
Specifications
Bill of Material
Components used to make the product
Sub-assemblies at stages of production
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Process Specifications
Recorded on a Route Sheet
Describes how the product is made
Operations required to make theproduct
Sequence of operations
Equipment and accessories required Time to perform each operation
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Time Needed to Perform Operations
Expressed as standard time
An average operator, working at a
normal pace Obtained from the routing file
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Available Facilities
What equipment is available
What labor is available
Obtained from the Work Center File
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Quantities Required
Information from
Forecasts
Customer Orders Production Planning
Expressed in the Shop Order
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Physical Supply / Distribution
All the activities involved in moving goods
From the supplier to the beginning ofthe production process
From the end of the production processto the customer
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Physical Supply / Distribution
Receiving & inspection
Material handling
Inventory management & control
Store keeping and warehousing
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Physical Supply / Distribution
Packaging, marking and labeling
Transportation
Distribution
Reverse logistics / disposal of scrap / surplus
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Materials Management
A Balancing Act
CustomerService
Costof the
Service
Inventory Transportation
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The role of TQM & JIT in
Material Management
The JIT & TQM philosophy
Continuously improve process & systems Maintain respect for all workers
Minimize waste in all forms
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The integrated approach in
Material ManagementIntegration of the material managementfunctions under one roof has numerousadvantages
Better accountability
Better coordination
Better performance
Adaptability to EDP
Team spirit / teamwork