You can move a mountain and you canWhatever the mind of man can conceive and believe it can achieve. When you believe “I Can Do It, The How to Do It Develops!!

Suppliers CustomersCompany

Supply Chain Management

Supply Side Demand Side

Supply chain management is a set of approaches used to efficiently integrate suppliers, manufacturers, warehouses, and customers so that merchandise is produced and distributed at the right quantities, to the right locations, and at the right time in order to minimize system wide costs while satisfying service-level requirements.

INBOUND LOGISTICS

- Demand forecasting and planning

- Materials planning and management

- Inventory management and control

- Vendor development & management

- Purchasing and sourcing

OUTBOUND LOGISTICS

- Dispatch planning and scheduling

- Distribution

- Warehouse management

- Order Fulfillment

- Customer Service

MANUFACTURING LOGISTICS

- Capacity planning

- Production planning and scheduling

- Operations

- Manufacturing

Any organisation has several resources these include 4 M’s namely MEN, MONEY, MACHINES, MATERIALS. It is the function of Another ‘M’ namely MANAGEMENT optimally plan & utilise these resources within the framework of 2 T’s namely TIME, TECHNOLOGY & Environmental Forces so as to produce products or services of acceptable quality (for customer satisfaction) and a reasonable amount of profit.

While any two organisations may have identical resources of 4 M’s at their disposal, one may produce good profits and the other may not do as well or even make losses. What is the ingredient that is causing this difference?

Inventory (Raw Materials, Components, Work in Process, Finished Goods, MRO Items) may be defined as “usable but idle resource which has an economic values awaiting for further use or process. It contributes anything between 40%-60% of cost of any product. Inventory carrying cost is very high (27%-33% in the Indian Context).

Inventory Control is a process of deciding what and how much of various items are to be kept in stock. It also determines the time and quantity of various items to be procured.

Why Inventory Control??

1. Minimize financial Investments in Inventory

2. To Facilitate Production Operations

3. To Avoid Losses from Inventory Obsolescence

4. To Improve Customer Service

Purchase Goals

In Right Quantity

At Right Price

At Right Time

Of Right Quality

At Right Place

From Right Source

Buying Materials

MD

Dir Dir Dir COF

Manager (Import & Export)

Accounts Personnel

Production In charge

HOD (Stores & Purchase)

Administrative Staff

Supervisor 1

Supervisor 2

Supervisor 3

Supervisor 4

Storekeeper 1 Storekeeper 2

MD

Dir

HOD (Stores & Purchase)

Storekeeper (Raw Materials)

Storekeeper(Sub Contracting Comp.)

Storekeeper(Consumables & Misc.)

Storekeeper(Bought out Components)

Asst

Asst

Asst

Asst

Asst

Asst

Asst

Asst

Stores & Pur. Plant A

ProductionMaterial Requisition

Supply of Material

SupplierEnquiry

Quotation

Plant BStock Transfer

Component Process

Purchase Order

Follow Up

Accounts H.O.

Payment Advise Copy

Stock Statement

GRN, Invoice

PO Copy

Pa

yme

nt

HO

PlantMaterial Requisition

PO Copy

Domestic Supplier

Enquiry

Quotation

GR

N &

Invo

ice

Fo

llow

Up

Purchase Order

Fo

llow

Up

Overseas Supplier

Follow Up

Purchase Order

Quotation

Enquiry

Pa

yme

nt

Go

od

s A

rriv

al I

nfo

.

Payment

Calculation of Material Requirement of upcoming financial year in advance i.e., first week of January every year based on yearly production schedule.

Release of tentative yearly purchase schedule (blanket order) to the supplier.

Confirmation of monthly requirement, release of purchase orders (taking into consideration the stock lying in store, materials in transit or in process with sub contractor and quantity on order) for upcoming month in view of lead time.

Weekly review of stock at par with production schedule

Daily review of stock level and replenishment

Lead Time

Maximum

Reorder

Minimum

Time (in Days)

Un

its I

n S

tock

Safety Inventory

Average Average Cycle

Inventory

Lot Size Reorder Point Policy

Fixed Order Interval Scheduling Policy

Optional Replenishment Policy

Inventory Related Cost

Ordering Cost Inventory Carrying Cost Stock Out Cost

Economical Ordering Quantity (EOQ Model) to minimize ordering cost and inventory carrying cost

Qty Per Order (Q)

Total Cost

Inventory Carrying Cost

EOQ

Ordering Cost

Cos

t of

Cov

erA

nnua

l Req

uire

men

t o

f an

item

EOQ= 2AS

Ci

Where

Q= Qty per Order

A= Annual Requirement

in Unit

S = Ordering Cost per Order

C = Cost per Unit or Item

i = Inventory carrying Cost

expressed as % of value

Identification and grouping of Items depending upon Value of item (cost per unit) as HML, Criticality as VED, Usage frequency as FSN, Usage Value as ABC, Availability Position as SDE.

100

90

75

10 25 100

A

BC

Cu

mu

lativ

e P

erc

en

t V

alu

e

Cumulative Percent Number

Where are we going wrong??

Vendor Rating Index (Quality) = No. of Lots Rejected

No. of Lots Received

Vendor Rating Index (Delivery) = Delivery On Schedule

Total No. of Deliveries

Rush Order Cost (Index) = Price Paid for Rush Order Material

Price Normally Paid for this Material

Inventory Turnover Ratio = Annual Sales

(Finished Goods) Average Inventory

Out of Stock Index = No. of Times of Out of Stock

No. of Times Requisitioned

The presented Perspective for Year 2010 can only be achieved by TEAM Work!!

End Thought

Together

Everyone

Achieve

More

Sales

Finance

Production

Engg.Design

StoresPurchase