what is material management? definition: a process encompassing acquisition, shipping, receiving,...
TRANSCRIPT
WHAT IS MATERIAL MANAGEMENT?
Definition: A process encompassing acquisition, shipping, receiving, evaluation, warehousing and distribution of goods, supplies and equipment
The scope of material management lies on :1. Material Planning.2. Material Obtaining.3. Material Controlling.4. Material Storing.5. Material Handling.
OBJECTIVE OF MATERIAL MGMT 1. Maintain steady flow of material. 2. Achieve economy in terms of
material. 3. Ensure consistency of quality. 4. Reduction of inventory cost. 5. Conservation of the materials. 6. Minimize operational cost. 7. Improve competitive strength of
the co.
Materials management functions
Material planning and programming
Purchasing and outsourcing
Inventory control
Storekeeping and warehousing
Codification
CONTINUES…………………
Standardization and evaluation of all products
Transportation and material handling
Inspection and quality control
Cost reduction through value analysis
Disposal of surplus / obsolete material
Distribution
THE MATERIAL CYCLE
Design Stage
Sourcing Stage
Planning Production
Ordering Process
Receiving Process
Inventory Control
Final Stage
INVENTORY CONTROL
Inventory generally refers to the material in stock. It is also the idle resource of an enterprise . Inventories are those items which are either stocked for sale or they are in the WIP or they are in the form of raw materials.
TYPES OF INVENTORIES
1. RAW MATERIAL INVENTORIES.
2. BOUGHT OUT PARTS INVENTORIES.
3. WIP INVENTORIES.
4. FINISHED GOODS INVENTORIES.
5. MAINTANENCE, REPAIR & OPERATING STORE.
6. TOOLS INVENTORIES.
REASONS FOR KEEPING INVENTORIES
1. TO STABALIZED PRODUCTION.
2. TO TAKE ADVANTAGE OF PRICE DISCOUNT.
3. TO MEET THE DEMAND DURING THE REPLISHMENT PERIOD.
4. TO PREVENT LOSS OF ORDER.
5. TO KEEP PACE WITH CHANGING MARKET CONDITION.
A.B.C. ANALYSIS ABC analysis is a basic tool which helps the mgmt
to place their efforts where the results would be useful to the greatest possible extent. First important step in inventory mgmt is to have a selective approach to fix up inventory levels, order quantities & the extent to which the control can be exercised.
ABC ( Always Better Control ) analysis is an effective tool for such selective control. This technique involves the classification of inventory items into three categories A,B and C in descending order of annual consumption and monetary value of each items.
A.B.C. Continues………
COMPARISON OF A, B & C ANALYSIS
CATEGORY PERCENTAGE OF ITEMS
PERCENTAGE OF MONETARY VALUE
A 5-10 (%) 75-85 (%)
B 10-15 (%) 10-15(%)
C 70-80 (%) 5-10(%)
CLASS ‘A’ ITEMS CLASS ‘B’ ITEMS CLASS ‘ C’ ITEMS
1. Close control required
1.Moderate control required
1. Loose control required
2. Size of order is based on calculated requirement.
2. Size of the order based on their consumption.
2. Size of the order based on their level of inventory.
3. Procured from many sources.
3. Procured from 2 or 3 sources.
3. Procured from 2 sources.
4. More effort is made to reduce lead time.
4. Moderate effort to reduce lead time.
4. Minimum effort to reduce lead time.
CONTINUES………………….
‘A’ ITEMS ‘B’ ITEMS ‘C’ ITEMS
5. Close check on schedule revision are required.
5. Some check on changes are required on need.
5. No checks are required against any need.
6. Frequent ordering is required.
6. Less frequent ordering is required.
6. Bulk ordering is required.
7. Accurate forecast needed
7. Less accurate forecast needed
7. Approximate forecast needed.
8. Low safety stock for less than two weeks.
8. Large safety stock up to two to three months.
8. Large safety stocks more than three months.
9. High consumption value.
9. Avg consumption value.
9. Low consumption value.
CLASSIFICATION OF A,B & C OF MATERIALS
The following information known about a group of items. Classify them in A, B & C classification.
MODEL/NUMBER Annual consumption Unit Price (In paise)
501 30,000 10
502 2,80,000 15
503 3,000 10
504 1,10,000 5
505 4,000 5
506 2,20,000 10
507 15,000 5
508 80,000 5
509 60,000 15
510 8,000 10
SOLUTION………………………Model
Number(1)
Annual Consumpti
on(2)
Unit Price ( In Paise)
(3)
Usage Value
(In Rs.)(4)=(3)*(2)
Ranking(5)
501 30,000 10 3000 6
502 2,80,000 15 42,000 1
503 3,000 10 300 9
504 1,10,000 5 5,500 4
505 4,000 5 200 10
506 2,20,000 10 22,000 2
507 15,000 5 750 8
508 80,000 5 4,000 5
509 60,000 15 9,000 3
510 8,000 10 800 7
CONTINUED…………………Now computing cumulative total no. of items & their usage values we are classifying the materials :
Rank
(1)
Model No.
(2)
% of Items
(3)
Cumulative Usage
Value(Rs.)(4)
Cumulative % In
(Rs.)
(5)
Category
(6)
123
502506509
102030
42,00064,00073,000
48.073.083.0 A
4567
504508501510
40506070
78,50082,50085,50086,300
90.094.098.098.6
B
8910
507503505
8090100
87,05086,35087,550
99.499.6100
C
VED ANALYSIS VED ( VITAL-ESSENTIAL-DESIRABLE )
analysis represents classification of items based on their criticality.
VITAL- This category encompasses those items for want of which production would come to halt.
ESSENTIAL- Items whose stockout cost is very high.
DESIRABLE –Items which do not cause immediate halt in production or their stockout cost nominal & cause very minor disruption for a short duration.
CONTINUED……………………. VED analysis categorization plan : Assign points/weightage to the factors according to
their importance for the company. Examples of the weightage to the above four factors may be 30, 30, 20 & 20 points. FACTOR FIRST
DEGREESECOND DEGREE
THIRD DEGREE
1. Stock out cost (30)
Above Rs. X (30)
Between Rs. X & Y (60)
Above Y (90)
2. Lead time for procurement (30)
1-4 weeks (30)
4-8 weeks (60)
Over 8 weeks (90)
3. Nature of items (20)
Produced to commercial std. or off the shelf (20)
Produced to suppliers design (40)
Produced to buyers design or proprietary items (60)
4. Source of supply (20)
Availability Local ( 20 )
Outstation ( 40 )
Imported , quota items(controll-ed)supply (60)
Typical categorization plan
POINTS CLASSIFICATION
100 – 160
161 – 230
231 - 300
DESIRABLE
ESSENTIAL
VITAL
F-S-N ANALYSIS F-S-N analysis is based on the
consumption figure of items. The items under this analysis are classified into three groups : F ( fast moving ) ,
S ( slow moving ) & N ( non moving ).
To conduct this analysis the last date of receipt or the last date of issue whichever is later taken into account and the period, usually in terms of no. of months, that has elapsed since the last movement is recorded.
Importance of F-S-N analysis It helps to identified : 1. active items which require to review
regularly.
2. surplus items whose stocks are higher than their rate of consumption.
3. non moving items which are not being consumed. The last two categories are viewed further to decide on disposal action to deplete their stocks & thereby release co.’s productive capital