materialmanagement-130130011117-phpapp01

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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..

19 July 2012 3KLE College of Pharmacy, Nipani.

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.


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.


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


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


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


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


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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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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19 July 2012 KLE College of Pharmacy, Nipani. 42

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


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


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.


f


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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.



T t P i i l f M t i l H dli


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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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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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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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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.




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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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Selecting Material Handling System

Systematic Approach

1. Define the problem



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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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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


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


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


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


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


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.


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)


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 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 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).




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Training and development program

Methods :

I. On-the job training

II. Off-the job training




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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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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.


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


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.


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.


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.




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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.



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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.



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Reduced operating costs and timely

production.

Greater job satisfaction on the part of both

the workers and the employer.


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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