12 Material Mgmt

8/3/2019 12 Material Mgmt

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MATERIALS

MANAGEMENT


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MATERIALS MANAGEMENT

Short range decisions about supplies, inventories

production levels, schedules and distribution.


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MATERIALS MANAGEMENT CYCLE

Acquisition of raw materials

Distribution storage

Storage conversion


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TASKS OF MATERIALS

MANAGEMENT

Supplier selection

Issuing purchase releases

Inbound transportation

Initiating purchase request

Inventory control on sight

Assigning priorities to work

Outbound transportation

Inventory control at distribution centers


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MAKE OR BUY DECISIONS

The factors for make or buy decisions include

Available capacity

Expertise

Quality considerations

Nature of demand

Cost


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PURCHASING

The management of acquisition process which includes

deciding which suppliers to use, negotiating contract anddeciding whether to buy locally or centrally


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THE ACQUISITION PROCESS

Recognize need

Select suppliers

Place orders

Track orders

Receive orders


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OUT SOURCING

Out sourcing is buying goods or services from outside

sources instead of making the goods or services withinhouse.


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REASONS OF OUTSOURCING

Outside sources can provide materials better

cheaper and more efficiently because of economy of

scale

Expertise and knowledge

Supplier may hold a patent on a necessary part

Outsourcing gives added flexibility

Outsourcing enables the company to focus on core

activities


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RISKS OF OUTSOURCING

Loss of control

Greater dependency on suppliers

Not possessing ability to perform in house


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INFORMATION ON EXTERNAL SOURCES OF

SUPPLY

Industrial advertisement in news papers andperiodicals

Supplier catalogues

Supplier salesman

Trade journals

Telephone directory yellow pages

Trade directories

Enquiries through advertisement

Records of past purchases


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JIT

JIT (Just in Time ) is both a philosophy and a set

of methods for manufacturing.

JIT emphasises :

1. Waste Reduction and Adding Value

2. Total Quality Control 3. Devotion to Customers

JIT is a manufacturing system whose goal is to

optimise processes and procedures by continuouslypursuing waste reduction.


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JIT7 Wastes

1. Overproduction

- reduce set up time, synchronise time and quantity betweenprocesses, compacting layout. Make only what is needed now.

2. Waiting

- balance uneven loads, synchronise workflow, use flexibleworkers and equipment.

3.Transportation

- reduce through correct choice of location, layout, materialhandling.

4. Processing

- question each parts requirement, then process (Is itrequired?)


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JIT

7 Wastes

5. Stocks/Inventory

- reduce load times, reduce stocks, reduce

other wastes

6. Motion

7. Defective/poor quality products


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JIT Purchasing

JIT Purchasing Traditional Purchasing

1. Purchase lot Small lots with Large lots with less

size frequent purchasing frequent deliveries

2. Selecting Single source in Multiple sources &

suppliers nearby area with short term contracts

long term contract

3. Evaluating Zero % of defect 2% reject acceptability

suppliers acceptable

4. Receiving Eliminate Buyer is responsible for

inspection counting & inspection

5. Negotiating Quality & fair price Lowest price

& bidding

process


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JIT Purchasing

JIT Purchasing Traditional Purchasing

6. Mode of On time delivery Delivery schedule left totransport Delivery schedule suppliers. Concern for

left to buyer cost

7. Product Loose. Suppliers to Rigid specs

specification innovate. Buyer

relies more on

performance specs than

on product specs

8. Paper work Less delivery time & More

quantity level can bechanged by telephone calls

9. Packaging Small standard containers Big size


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SUPPLIER SELECTION

Factors for supplier selection include

Lead time & on time delivery

Quality & quality assurance

Flexibility

Location

Price

Product or service changes

Reputation & financial stability

Dependency of supplier on other buyers


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SUPPLIER AUDITS

As a means of supplier feed backAreas covered in audits

Management style

Quality assurance

Materials management

Design process

Procedures

Scope of improvement


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SUPPLIER CERTIFICATION

Detailed examination of the policies & capabilities of a

supplier

Advantages

Inspection & testing activities can be eliminated

Less risk of problems with supplied goods


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SUPPLIER PARTNERSHIP

Stable relationship with relatively few reliable suppliers

who can

Provide high quality supplies

Maintain precise delivery schedules

Remain flexible to changes

Suppliers can be a source of ideas that contribute to

competitiveness of an organization.


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OBSTACLES

Supplier hesitant to enter into partnership

Supplier may have to increase his investment in

equipment

Cultures of buyer & supplier are different


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VENDOR EVALUATION AND RATING

1. Evaluating the performance before the vendor has

delivered anything.

2. Evaluating the performance of vendor after the

deliveries have been made.


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FACTORS FOR VENDOR EVALUATION

Reliability

Technical capabilities

Convenience

Availability

After sales service

Sales assistance


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QUALITY RATING

RQ = Q1 + Q2 X1 + Q3 X2 + Q4 X3 x 100

Q

Q quantity supplied

Q1 quantity accepted

Q2 quantity accepted with concession

Q3 quantity accepted with rectification

Q4 quantity rejected


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PRICE RATING

Rp = PL x 100

P

PL lowest price quoted

P price agreed by supplier

DELIVERY RATING

RD = promised delivery time x 100

Actual delivery time of full consignment


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QUANTITY RATING

Rqty = qty supplied within delivery time x 100

Quantity promised

SERVICE RATING

Rs is assigned for all service factors so that

a1+ a2+ a3+ a4 = 100


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COMPOSITE VENDOR RATING

f1RQ + f2 RP + f3 RD + f4 Rqty + f5 Rs

f1+f2+f3+f4+f5 = 1


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VENDOR DEVELOPMENT

Communication of essential & helpful information

like design, specifications, standards, practices etc.

Communication of engineering changes

Developing methods for detecting deviations from

standard promptly

Helping the vendors in resolving quality problems

Rendering necessary technical assistance

Providing quality data in lieu of incoming

inspection

Review vendors performance periodically &

providing feedback


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ETHICS IN PURCHASING

Do not accept gifts from vendors

Reject offers for favors like lunch, liquor week

end resorts etc.

Code of conduct should be laid down

Purchase managers should be selected on the basis of

competency and should be rewarded suitably


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CONTRACT NEGOTIATIONS

Negotiation are on the basis of

Price

Delivery schedule

Payment for freight

Quality standards

Technical specifications


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OBJECTIVES OF CONTRACT NEGOTIATION

Most economic purchase of materials

Establish long term relations with suppliers


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PURCHASE ORDER

A legal document that authorizes the supplier to

produce the goods.

Represents buyers obligation to buy the material

against the specified terms

Confirms approval of suppliers quotation by

ordering organization

Needs acceptance and acknowledgement of

supplier


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PURCHASE ORDER SHOULD CONTAIN

Name and address of organization

Name and address of supplier Identification number

Quantity

Description of product

Any relevant technical data

Reference to any certification

Price

Delivery schedule

Delivery instructions

Cost allocation

Purchasers signatures

Conditions of business


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STORES FUNCTIONS

The major functions of stores are as follows

Receipt

Storage

Retrieval

Issue

Records

Housekeeping

Control

Surplus management

Verification

Coordination & cooperation


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RECEIPT SYSTEM

The receipt system involves

Receipt of copy of purchase orders

Receipt of advice note from supplier and

consignment note from transporter

Unpacking of goods received & checking quantityof goods as per packing list & its condition

Preparing provisional goods inward note

Inspection & testing against purchasespecifications

Preparation of clearance or rejection note

Preparation of final goods inward note


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STORAGE SYSTEMS

Closed store system

Open stores system

Random access stores system


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STORE RECORDS SYSTEM

Two records are usually kept of materials and other

goods received, issued or transferred.

Bin card

Shows details of quantities of each type of material

received, issued and on hand each day. One card isattached to each bin on shelf containing the material

Stores ledger

Identical with bin card except that here money values are

shown.


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ISSUE SYSTEM

Receipt of program and bill of materials

Receipt of work order / material requisition

Issue against material requisition


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STORE ACCOUNTING SYSTEMS

FIFO system

LIFOsystem

Average cost system

Market value system

Standard cost system


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STOCK VERIFICATION SYSTEMS

To reconcile the store records and documents for

their accuracy and usefulness,

Identification of areas deserving tighter document

control,

To backup the balance sheets, stock figures, and

To minimize the pilferage and fraudulent

practices


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LAYOUT AND DESIGN OF STORES

The space for receipt and inspection should beprovided adjacent to the main stores.

Use of third dimension must be made effectively.

Different storage facilities should be situated in

clearly defined lanes, so that items are quickly stored &

located.

Main lanes should usually be 1.5 to 3 meters wide,depending upon the type of material & the amount of

traffic involved.

Clear markings should be made at storage space to

facilitate location & identification.


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The fast moving items should be stored near the

dispensing window.

The layout should permit the use of modern

material handling equipment.

Stores layout should encourage the FIFO

Due space should be left for expansion purposes.

A pleasing and hygienic environment must be

provided within store room

Adequate lighting arrangement should be provided.

Adequate safety arrangement should be provided.

12 Material Mgmt

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