Materials Management

-Mathiarasu

The
Themanagement
managementfunction
functionthat
thatisis
responsible for planning, sourcing,
responsible for planning, sourcing,
purchasing,
purchasing,moving,
moving,storing
storingand
and
controlling
controllingmaterials
materialsatatan
anoptimum
optimum
level
levelso
soas
asto
toprovide
provideservice
serviceto
tothe
the
customer,
customer,atataapre-decided
pre-decidedlevel.
level.
 OBJECTIVES.
1.
1.
Materials
MaterialsPlanning
Planning
2.
2.
Purchasing
Purchasing
3.
3.
Receiving -Inward Materials Check
Receiving -Inward Materials Check
4.
4.
Handling
Handlingand
andTransportation
Transportation
5.
5.
Storage
Storageand
andInventory
InventoryControl
Control
6.
6.
Standardization
Standardizationand
andCost
CostControl
Control
7.
7.
keeping
keepingproper
properrecords
records
8.
8.
Analyzing and reporting
Analyzing and reporting
9.
9.
Scrap
Scrapand
andsurplus
surplusDisposal
Disposal
 Focus
Right product
Right product
Right
Rightquantity
quantity
Right
Rightquality
quality
Right
Rightplace
place
Right
Righttime
time
Right cost
Right cost
 best practices


 Save cost wherever possible!
Save cost wherever possible!

 Accelerate
Accelerateinventory
inventoryturnover!
turnover!

 Ensure
EnsureContinuity
Continuityofofsupply!
supply!

 Insist
Insistconsistency
consistencyofofquality!
quality!

 Utilize
Utilizethe
theresources
resourcesefficiently!
efficiently!

 Reduce
Reducedamages
damagesandandobsolesce!
obsolesce!

 Standardize
Standardizeandandimprove
improveProducts
Products! !

 Maintain
Maintainharmony
harmonywith
withdepartments
departments

 Forecast
Forecastthe
thefuture
futuremarket!
market!
Optimize the utility of Resources like
Man, Money, Machine, Material and
methods!

Measure
Measureeverything!
everything!
Use
Usewhat
whatisisexactly
exactlyRequired!
Required!
Reducing
Reducingwastage
wastageisisequal
equalto
tocreating
creatingvalues!
values!
There is a
science for
everything and
only one best =
way of doing
things.
Inventory
Inventory Control
Control
What is Inventory ?
Inventory is a stock of goods in any form
like raw materials, work in progress or
finished goods
 Inventory conversion period
The
Theaverage
averagetimetimerequired
requiredtotoconvert
convert
materials into finished goods and then in
materials into finished goods and then in toto
Cash.
Cash.

Inventory conversion period = Inventory/Sales

Inventory conversion period = Inventory/Sales
per
perday
day
For
ForTemple
TempleBay
Bay
ICP = 60,00000/10,00000= 06
ICP = 60,00000/10,00000= 06 daysdays
 How to control?
We
Wecan’t
can’talways
alwayscontrol
controlall
allthe
the
thousands
thousandsof ofproducts
productskept
keptinin
the
thestore.
store.
We
Wecan
canuse
useselective
selectiveinventory
inventory
control
controlmethods
methodsandandanalysis
analysis
CONTROL METHODS

HML ANALYSIS
VED ANALYSIS
SDE ANALYSIS
EOQ
MUSIC-3D
% of total annual consumption value A-B-C ANALYSIS
100 In Most of the organization 80% of the consumption value is
90 Represented only by 15 to 20% of the items, Better to control
this A class items first
80
70 Policies for A Items

60 Only exact quantities to be procured

Have more than one source
50
Centralize procurement
40 Individual postings , accurate records
Continuous checks, low safety stock
30 Reduce Lead Time: Regular follow up
20 Very strict consumption control
Very accurate requirement forecasting!
10
0 10 20 30 40 50 60
70 80 90 100
A B C
% of total number of items
 HML Analysis

High,
High,Low
LowMedium
Mediumvalue
value
Assess storage and security requirements
Assess storage and security requirements
To
Tokeep control over
keep controlhead consumption
overlevel at
consumption at thethe
departmental
departmental head level
Determine
Determinethe thefrequency
frequencyofofstock
stockverification
verification
To
Toevolve
evolvebuying
buyingpolicies
policiestotocontrol
controlpurchases
purchases
To
To delegate
delegate authorities
authoritiestotodifferent
differentbuyers
buyerstoto
make petty cash purchases.
make petty cash purchases.
 VED Analysis
Vital,
Vital,Essential
EssentialDesirable
Desirable
Based
Basedononcriticality.
criticality.
Vital – production would come to
Vital – production would come to halt. halt.
Essential
Essential––whose
whosestock
stockout
outcost
costisisvery
veryhigh.
high.
Desirable
Desirable––items
itemswhich
whichdodonot
notcause
causeanyany
immediate loss of production
immediate loss of production
 SDE Analysis
 Scarcity-Short in supply
 Scarcity-Short in supply
 Longer lead time
 Longer lead time
 Geographical location of suppliers
 Geographical location of suppliers
 Available but not easy to procure
 Available but not easy to procure
 Reliability of suppliers
 Reliability of suppliers
 Best to procure once in a year
 Best to procure once in a year
 Reduce the effort and expenditures
 Reduce the effort and expenditures
 EOQ (Economic Ordering
Quantity)

Important
Importantassumptions
assumptions
Demand is known, constant, and independent
Demand is known, constant, and independent
Lead time is known and constant
Lead time is known and constant
Quantity discounts are not possible
Quantity discounts are not possible
Only variable costs are setup and holding
Only variable costs are setup and holding
Stock outs can be completely avoided
Stock outs can be completely avoided

Q *=* optimal order quantity

Q = optimal order quantity
Q = order quantity,
Q = order quantity,
D = annual demand quantity of the product
D = annual demand quantity of the product
P = purchase cost per unit
P = purchase cost per unit
C = fixed cost per order
C = fixed cost per order
H = annual holding cost per unit
H = annual holding cost per unit
 PHYSICAL STOCK VERIFICATION

Use duly identified color codes -Search Free

Use duly identified color codes -Search Free
Follow
FollowBanking
BankingMethod
Methodininpostings
postings
Issue
Issuephysical
physicalusing
usingFIFO
FIFOmethod.
method.
Costing
Costingweighted
weightedaverage
averageMethods.
Methods.
Verify
Verifystock
stockofoften
tenitems
itemsdaily
dailyrandom
random
Verify stock of ten items fast moving weekly
Verify stock of ten items fast moving weekly
Verify
Verifystock
stockofofevery
everyitem
itemmonthly.
monthly.
Important Vs Urgent
If you are not doing some important thing
Then everything will become as an urgent thing…

Planning
Planningisisan
animportant
importantthing…
thing…
Forecasting
Forecastingisisaadifficult
difficultart
art
Mutual Cooperation is must with all
Mutual Cooperation is must with all the the
Internal
InternalDepartments
Departments
Whole
Wholeisismore
morethan
thanthe
thesum
sumofofparts!
parts!
 SUPPLY CHAIN
MANAGEMENT

AAsupply
supplychain
chainininaaorganization
organizationwill
will
comprise
compriseofofaanetwork
networkofoffacilities
facilitiestoto
 Procure the material from the vendors
 Procure the material from the vendors
 Transform the material to the end product
 Transform the material to the end product
 Distribute the finished product to the
 Distribute the finished product to the
Consumer
Consumer
 Green Purchasing

Re-duce,
Re-duce,Re-use,
Re-use,Re-cycle
Re-cycle!!!!
*Establish
*Establishaawaste
wasteReduction
ReductionProgram
Program
*Buy Recycled, Repairable materials
*Buy Recycled, Repairable materials
*Buy
*Buyenergy
energyefficient
efficientequipment,
equipment,materials
materials
*Reduce
*Reduceuse
useofofPlastics
Plastics
*Involve
*InvolveVendors-Is
Vendors-Isititenvironmentally
environmentallysound
sound??
*Ensure
*EnsureSafety,
Safety,Health
Health&&Environment
Environment
**SA-8000-standards
SA-8000-standardsfor
forpurchasing
purchasing
 Standardization

More
Morethethesuppliers
suppliersmore
morethethevariations!
variations!
Two unreliable suppliers are worse
Two unreliable suppliers are worse than than
One
OneReliable
Reliablesupplier!
supplier!
Overcome
Overcomefeeling
feelingofofinsecurity!
insecurity!
Initiate
Initiatekey
keysupplier
supplieracct
acctmanagement!
management!
Develop
Developthethereliable
reliablesupplier!
supplier! Develop
Develop
self-certified
self-certifiedsuppliers
supplierstotoreduce
reducethe
theinspection
inspectionlevels.
levels.
 Cost control
Since Material is the major Part of the total expenses in
our organizations It is quiet natural to control it first..

Moreover If you cut the payroll

cost employee will cry
Profit

Overheads *
Material
But if you cut material cost
material will not cry…
Labour Interest
And it is very difficult to cut
the overheads!
 Scrap disposal
Reduce scrap inventory
Dispose scrap at regular intervals
Segregate scrap properly to generate more value
Take care for the environment
Reports!
Information
Informationshould
shouldbebeaaProactive
Proactivesubmission
submissionrather
rather
than
thanaareactive
reactiveexplanations
explanations!!!!
We
Weknow
knowallallthe
thebusiness
businessmanagements
managementsare are
more
moreconcern
concernabout
aboutthe
theReturn
Returnononinvestment
investment!!!
!!!
Speak
Speakininthe
thelanguage
languageofofBusiness…
Business…
InInterms of money !!!!
terms of money !!!!
Thank
ThankYou
You! !