Materials Management Planning and controlling the flow of materials Objectives: – Maximize the use...

Materials Management

• Planning and controlling the flow of materials

• Objectives:– Maximize the use of the firms resources– Provide the required level of customer service

Company Objectives

Income = Revenue - Expense

• Need to increase income with:– Best customer service– Lowest production costs– Lowest inventory investment– Lowest distribution costs

Manufacturing Planning and Control

• Planning and controlling the flow of materials through the manufacturing process through:– Production Planning– Implementation and Control– Inventory Management

Production Planning

• To meet the demands of the marketplace• Establish priorities• Ensure capacity

• Activities–Forecasting–Master Planning–Materials Requirements Planning–Capacity Planning

Implementation and Control

• Putting into action and achieving the plans– (made by production planning)

• Purchasing

Inputs to the Manufacturing Planning and Control System

1. Product description2. Process specifications3. Time needed4. Available facilities5. Quantity required

• Bill of Material– Components used to make the product

Process Specifications

• Recorded on a Route Sheet• Describe how the product is made

– Operations required to make the product– Sequence of operations– Equipment and accessories required– Standard time to perform each operation

Quantities Required

• Information from– Forecasts– Customer Orders– Production Planning

Physical Supply / Distribution

• All the activities involved in moving goods – from the supplier to the beginning of the

production process– from the end of the process to the customer

• Transportation • Distribution Inventory• Warehousing • Packaging

• Materials Handling

Materials ManagementA Balancing Act

CustomerService

Costof the

Service

Inventory Transportation

Artemisinin based combined medicinesFebruary 23-27, 2009, Kampala, Uganda 12 |

MaterialsMaterials

: Packaging materials Finished products Rejected and recovered materials Recalled products Returned goods Waste materials

DefinitionIt is concerned with planning, organizing and

controlling the flow of materials from their initial purchase through internal operations to the service point through distribution.

AIM OF MATERIAL MANAGEMENT

To get

1. The Right quality

2. Right quantity of supplies

3. At the Right time

4. At the Right place

5. For the Right cost

PURPOSE OF MATERIAL MANAGEMENT

•To gain economy in purchasing

•To satisfy the demand during period of replenishment

•To carry reserve stock to avoid stock out

•To stabilize fluctuations in consumption

•To provide reasonable level of client services

Primary•Right price•Low procurement & storage cost•Continuity of supply•Consistency in quality•Good supplier relations•Development of personnel•Good information system

Objective of material management

Secondary•Forecasting•Inter-departmental harmony•Product improvement•Standardization•Make or buy decision•New materials & products

Economy in material management

•Containing the costs

•Instilling efficiency in all activities

Four basic needs of Material management

1. To have adequate materials on hand when needed

2. To pay the lowest possible prices, consistent with

quality and value requirement for purchases

materials

3. To minimize the inventory investment

4. To operate efficiently

Basic principles of material management Effective management & supervisionIt depends on managerial functions of • Planning• Organizing• Staffing• Directing• Controlling • Reporting• BudgetingSkillful & hard poised negotiationsEffective purchase systemShould be simpleMust not increase other costsInventory control

Elements of material management

1. Demand estimation

2. Identify the needed items

3. Calculate from the trends in Consumption.

4. Review with resource constraints

Objectives of procurement system

•Acquire needed supplies as inexpensively as possible

•Obtain high quality supplies

•Assure prompt & dependable delivery

•Distribute the procurement workload to avoid period of

idleness & overwork

Points to remember while purchasing•Proper specification

•Invite quotations from reputed firms

•Comparison of offers based on basic price, freight & insurance,

taxes and levies

•Quantity & payment discounts

•Payment terms

•Delivery period, guarantee

•Vendor reputation

(reliability, technical capabilities, Convenience, Availability, after-

sales service, sales assistance)

Storage

•Store must be of adequate space

•Materials must be stored in an appropriate place in a correct way

•Group wise & alphabetical arrangement helps in identification &

retrieval

•First-in, first-out principle to be followed OR ..

•Monitor expiry date

Inventory control

It means stocking adequate number and kind of stores, so that the materials are available whenever required and wherever required.

Functions of inventory control

•To provide maximum supply service, consistent with maximum efficiency & optimum investment.

•To provide cushion between forecasted & actual demand for a material

•Re-order level: stock level at which fresh order is placed.•Average consumption per day. lead time. buffer stock•Lead time: Duration time between placing an order & receipt of material

PROCURMENT OF EQUIPMENTPoints to be noted before purchase of an equipment:

•Latest technology•Availability of maintenance & repair facility, with minimum down time•Post warranty repair at reasonable cost•Upgradeability•Reputed manufacturer•Low operating costs

•Installation

HISTORY SHEET OF EQUIPMENT:

History sheet

Name of equipmentCode numberDate of purchaseName of supplierName of manufacturerDate of installationPlace of installationSpare parts inventory

After sales arrangementWarranty periodLife of equipmentCost of maintenanceDate of replacement

Maintenance sheet:Annual maintenance contract [AMC]

Starting dateExpiry dateService / repair descriptionMaterials / spares usedCost of repairs

In-houseOutside agency

EQUIPMENT MAINTENANCE & CONDEMNATION

Maintenance & repairs:Preventive maintenanceMaster maintenance planRepair of equipment

PREVENTIVE MAINTENANCE•Purchase with warranty & spares.•Safeguard the electronic equipments with: (as per guidelines)

•Voltage stabilizer, UPS•Automatic switch over generator

•Requirement of electricity, water, space, atmospheric conditions, etc. Must be taken into consideration•Well equipped maintenance cell must be available•All equipment must be operated as per instructions with trained staff•Maintenance cell•Communications between maintenance cell & suppliers of the equipment.•Follow-up of maintenance & repair services

•Repair of equipment•Outside agencies•In-house facility

DISPOSAL1. Circulate to other units, where it is needed2. Return to the vendor, if willing to accept3. Sell to agencies, scrap dealers, etc4. Auction5. Local destruction

Material handling system

Right Definition : Material handling uses the

right method to provide the right amount of the right material at the right place, at the right time, in the right sequence, in the right position, in the right condition, and at the right cost.

19 July 2012 33KLE College of Pharmacy, Nipani.

Value Analysis Defined…Value Analysis Defined…• Value Analysis is defined as a cross-functional

objective evaluation used to improve and analyze the value of a product, system or service. The overriding goal of a Value Analysis program is to decrease cost while improving performance and/or quality.

• Value Analysis is effective because it is the

analysis of both function and cost.

Chapter 4Management of Business Logistics, 7th

Ed. 35


Ed. 36

Materials Management Definition - Materials management is the

planning and control of the flow of materials that are part of the inbound logistics system.

Materials Management Activities(procurement, warehousing, production planning, inbound

transportation, receiving, materials quality control, inventory management, and salvage and scrap disposal)


Ed. 37

Materials Management: 1.Procurement

Buying goods and services for a firm, a process of obtaining goods and services for the firm

Importance Contributes to the competitive

advantage of the firm Significant portion of the logistics

costs


Ed. 38


Definition of Procurement 12 Activities

1. Identify or reevaluate needs2. Define and evaluate user

requirements3. Decide whether to make or buy4. Identify the type of purchase5. Conduct a market analysis6. Identify all possible suppliers


Ed. 39


Definition of Procurement Activities…

8. Prescreen all possible sources9. Evaluate the remaining supplier base10. Choose a supplier11. Receive delivery of the product or

service12. Make a post purchase performance

evaluation


Ed. 40

Materials Management: 2.Importance of Item and Service Purchased

Products and services purchased by a company are not all the same. Some are more important than others and require greater procurement attention.


Ed. 41

Materials Management: 2. Managing the Procurement Process in 4 Steps

1. Determine the type of purchase

New purchase Straight rebuy Modified rebuy


Ed. 42

Materials Management: 2. Managing the Procurement Process in 4 Steps

2. Identify levels of investment Determine the necessary levels of

investment of time and information. The more complex the purchase, the

more time needs to be spent and more information needs to be gathered to get it right the first time.


Ed. 43

Materials Management: Managing the Procurement Process in 4 Steps

3. Perform the procurement process Do those activities that are necessary

to effectively make a purchase and satisfy the user’s requirements.

4. Evaluate the effectiveness of the procurement process Were the user’s needs satisfied?


Ed. 44

Materials Management: 2.Managing the Procurement Process

Supplier/Vendor Evaluation and Relationships Maintaining a healthy vendor

relationship is a critical part of a successful supply chain.

Developing a true partnership relationship with a firm’s vendors.

TQM begins with the vendors.


Ed. 45

Materials Management: 2.Managing the Procurement Process Vendor Selection Criteria

1. Quality2. Reliability3. Capability4. Financial5. Vendor Location


Ed. 46

Materials Management: 4. Other Materials Management 5 Activities

1. Warehousing Type of facilities

required (such as open air …

Chapt 8)

2. Production Planning and Control (forecasting, see Figure 4-7)

Coordinating product supply with product demand

3. Transportation Vendor control Modal choice (rail,

water..)

Rush shipments Inspection Damage claims


Ed. 47

Materials Management: Other Materials Management Activities

4. Quality Control Quality standards

did customer receive what was ordered?

Sample inspection statistical QC from vendor to assure

100% quality


Ed. 48

Materials Management: Other Materials Management Activities

5. Salvage and Scrap Disposal Value of scrap may be income to the

firm. Disposal must adhere to

environmental regulations.


Ed. 49

Electronic Procurement

Disadvantages Security of electronic messages Lack of face-to-face contact


Ed. 50

Advantages of Electronic Procurement

GHS Pictograms


Ed. 52


Ed. 53

© 2006 Prentice Hall, Inc. 14 – 54

Master Production Schedule Master Production Schedule (MPS)(MPS)

Specifies what is to be made and whenSpecifies what is to be made and when Must be in accordance with the aggregate Must be in accordance with the aggregate

production planproduction plan Aggregate production plan sets the Aggregate production plan sets the

overall level of output in broad termsoverall level of output in broad terms As the process moves from planning to As the process moves from planning to

execution, each step must be tested for execution, each step must be tested for feasibilityfeasibility

The MPS is the result of the production The MPS is the result of the production planning processplanning process


Bills of MaterialBills of Material

List of components, ingredients, List of components, ingredients, and materials needed to make and materials needed to make product product

Provides product structureProvides product structure Items above given level are called Items above given level are called

parentsparents

Items below given level are called Items below given level are called childrenchildren






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Materials Management Planning and controlling the flow of materials Objectives: – Maximize the use...

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