Introduction To Materials

Management
Author J.R.Tony Arnold
Stephen N. Chapman
Taught by Faculty;
Dr.Alaa H. Saleh
Vocabularies always to remember
Inventory has the same meaning of;
Stock house, ware house, storage building.
.Production Process has the same meaning of;
Manufacturing Process, Transformation Process,
Producing activities.
Purchasing ,has the same meaning of ;
Buying, but in organization structure, we are using
purchasing department and purchasing manager.
Administrator; in this book is using the word
administrator to any person in the middle management
who implement the decisions, like production manager,
materials manager, purchasing manager, inventory or
warehouse manager etc
Definitions Of Terms;
Materials; Thing that has a physical shape can
recognize with feeling touch considered as
tangible, Materials always been use in certain
process as input to transform to output for
having better value.
Q. Can materials come in a form of service?
NO, since service is non-tangible and has no
physical shape, because of that cannot be
considered as material.

Definitions Of Terms Continue;
Materials Management; It is a coordinating function
responsible for planning and controlling materials flow
resources.
Q.What are the objectives of Materials Management?
1. Maximize the use of flow resources.
2. Provide the required of level of customer
service.
3. specialized design service to create a new
product from using a material as in-put to have
another one as out-put.
Definitions Of Terms Continue;
Q. What are the objectives of companies to
have materials management?
1. Provide best customer service.
2. Provide lowest production costs.
3. Provide lowest inventory costs.
4. Provide lowest distribution costs.
Definitions Of Terms Continue;
Q. What are the objectives of Materials Management
to materials manager?
1. Provide information about production planning and
control.
2. Provide information to lowest price in purchasing
materials.
3. Provide data to cover forecasting.
4. Look at the available physical inventory materials.
5. Examine the elements of distribution systems
including transportation, packaging and material
handling.


Definitions Of Terms Continue;
Q. Where is the area that we use
materials management?
1. Industrials & Manufacturing firms are in badly
needed of materials management.
2. Distribution companies.
3. Inventories & Storages organizations.
4. Recycling firms where material can converted
from one shape to other with different uses.
Related to Recycling
Why we use recycling materials in
production process as inputs?
Ans.)1.To save cost in purchasing low
price materials than the new materials.
2. When there is a shortage in availability
of materials from the suppliers or the main
sources.
What are the disadvantages of using
recycling materials as materials manager?
1. Loose part of quality during production to less
quality product (saving materials cost as inputs).
2. less safety for machinery and equipments
during production.
3.Add another cost in ware housing and
materials handling for recycling materials.
Definitions Of Terms Continue;
Administrator; refers to one who is responsible
for execution of work performed by other.
Purchasing Order; A written request issued for
purchase order for materials.
Designing; is being handled by design engineer
to provide specialized design service to create a
new product from using a material as in-put to
have another one as out-put.
Definitions Of Terms Continue;
Value added ;The amount of value added
to inputs to create the final value of a
product, example, recycle plastic and
plastic powder with low price(cost) in
purchasing(buying) it as input in
transforming it to plastic toys and chairs
with reasonable price.
Definitions Of Terms Continue;
Transformation process; At a factory the
transformation is the physical change of material
as inputs into products as outputs, such as
transforming Of leather and rubber into bags,
denim into jeans, re-cycle plastic and plastic
powder into kids' toys , plastic tables and Chairs.
Transformation process has another
vocabularies, such as Production process,
Manufacturing process, Producing process.

Types of production Planning
1.Short time planning.
2.Middle time planning.
3.Long time planning. (Strategic planning)
There are three basic strategies that can be
used in developing a production plan
1. Chase strategy; means producing the
amounts demanded at given time, Inventory
levels remain stable while production varies to
meet demand.
OR The firm manufactures just enough at any
one time to meet demand exactly.
2.Production leveling ; is continually producing
an amount equal to the average demand .


Conditions of production
leveling
1.In such time demand is less than the amount
produced and an inventory builds up. And some
cost been registered.
2. At other times demand is greater and
inventory is used up, more profit is achieving
and market is expanding.
Basic strategies continue
3.Contracting & Subcontracting ;it is always
producing at the level of minimum demanding
and meeting any additional demand through
contracting & subcontracting.
Subcontracting can mean buying the extra
amounts demanded or turning away extra
demand . This can be done by increasing prices
when demand is high or by extending lead
times. the major advantage of this strategy is
cost. And because production is leveled and
there is no changing in the production leveled in
the subcontracting method.
Who can get benefits from
subcontracting method (plan)?
Few companies make everything or buy
everything they need .the decision about
which items to buy and which items to
manufacture depends mainly on cost, but
there are several other factors that may
considered like speed, customer
satisfaction, limitation of production
capacity, market extending
Developing Production Plan
In developing production plan which is considering as part of basic
Production plan strategy. production plan development consist of
three plans are;
1.Make to stock: goods are made before an order or demand
been there.
2.Make to order: goods are made to customer specifications after
an order has been received.
3.Assemble to order: goods add options according to customer
specifications with standard parts and limitation of customer
needs.
4.Engineer-to-order; which it is depending heavily on the
customer needs with special specifications by using special
components (parts & spare parts, machinery, and special type of
skilled personnel's and long production time as delivery lead time.
.

Developing a Make-to-Stock
production plan
In a Make-to-Stock environment ,products
are made and put into inventory before an
order is received from a customer .
What are the benefits of make-to-stock?
1.To extend in the market at any time.
2. To take advantage of low cost of
materials when available .
3.To have stable flow of products and
materials in the market.
Developing a Make-to-Stock
production plan Continue;
Disadvantages Of Adopting Make-to-Stock
Management;
1.Make-to-Stock registered cost.
2.Heavy investment in materials needed in
production process.
what are the reasons let the firms decided
for make-to-stock plan?
1.Demand is fairly constant and
predictable.
2.There are few product options.
3. Delivery times demanded by the
marketplace are much shorter than the
time needed to make the product.
4.Product has a long shelf life.
Is there any other name for make-
to-Stock delivery?
In sometimes we called it Back Orders
Because these are orders that are late for
delivery, also any past-due customer
orders , so in this case we have to prepare
for any future order , we planned it by
make-to-stock.
Give a clear example about make-
to-stock production planning .
Televisions , washing machines items are
considering a clear items for make-to-
stock production planning , since these
items and other consumer products are
assembled from many components, they
are not perishable, changing models take
some time, easy, smooth to enter and
extend in the market , because of that,
these items are considering a standard
items for make-to-stock production plan.
Case Study
Example; Salem factory produced an expensive fresh juice and want
to develop a production plan , The expected opening inventory is 100
cases, and he want to reduce that inventory to 80 cases by the end
of the planning period. There are no back orders. The following
information is needed.
___________________________________________________
Period 1 2 3 4 5 Total
Forecast (cases) 110 120 130 120 120 600
Production
Ending
Inventory 100
Find the following:
a. How much should be the production each period?
b. What is the ending inventory for each period?
Case Study Continue;
c. If the cost of carrying inventory is 5 O.R per
case per period based on ending inventory, what
is the total cost of carrying inventory?
d. What will be the total cost of the plan?
e. When the cost of carrying inventory is
increased to 7 O.R per case per period for
ending inventory, What will happen to the
carrying inventory figure?
f. Differences between c & e.
Case Study continue;
Answer the question
Facts from the question:
a. Since the opening inventory is 100 cases.
Also the ending inventory is 80 cases, with a not
that opening and ending inventories are
considering temporary inventory and also cause
cost but less than other inventory since the
products are finding its way to the market soon
even there is no back order,

Case study continue;

Total production required = 600 + 80 100 = 580 cases
Production each period = 580/ 5 = 116 cases
b. Ending inventory = opening inventory + Production Demand
Ending inventory after the first period=100+116-110= 106 cases
Similarly, the ending inventories for each period are calculated.
The ending inventory for period 1 becomes the opening inventory
for period 2;
Ending inventory (period 2) = 106 + 116 - 120 =102 cases
Ending inventory (period 3) = 102 + 116 - 130 = 88 cases
Ending inventory (period 4) = 88 + 116 - 120 = 84 cases
Ending inventory (period 5) = 84 + 116 - 120 = 80 cases
Case Study continue;
c. The total cost of carrying inventory = Total ending inventory
X inventory cost per case.
The total cost of carrying inventory would be:
(106+102+88+84+80)(5 O.R) = 2300 O.R
d. Since there were no stock outs and no changes in the level of
production , this would be the total cost of the plan.
Which it is 2300 O.R
e. Total cost of carrying inventory after additional increase
will be;
(106+102+88+84+80)(7 O.R) = 3220 O.R
f. 3220 2300 = 920 O.R