8/7/2019 The economic order quantity

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y The economic order quantity y The economic order quantity is that quantity at which acquisition cost is equal to

Inventory carrying costy Stock Discrepancy voucher SDVy Im port export codey Spare parts which are not normally required for routine maintenance but would

ease long shut down of vital equipment or entire plant in case of non availabilityare termed as insurance spares.

y The Negative Lists may consist of goods, the import or export o f which isprohibited, restricted through licensing or otherwise or canalized.

y Purchase = Closing stock + consumption (Opening stock + Advance) y The history card of the equipment if and when rigorously maintenance would

reflect the failure rates and outages with causes. y Variety reduction is, therefore, a very important technique for cost reduction . y Materials Management can be defined as the function responsible for the

coordination of Planning. Purchasing, Moving, Storing and ControllingMaterials in an optimum manner so as to provide customer service in line with

the organization goals. y inventories comprise the largest single asset in the balance sheet of a

company accounting for 90% of the working capital y Purchasing means procuring goods and services from outside the organization in

return for a price y The fundamental objectives of purchasing for a manufacturing industry To

maintain continuity of supply to support the manufacturing schedule:

y There are three basic parts to a negotiationintroductory part

discussions/arguments

stating the agreementy Successful negotiations depend to a considerable extent on advance planning

and analysis. y Two copies of the purchase requisition may be sent to Purchase Department and

one copy each to Finance and Stores Department and of course, a copy needs tobe retained by indentor for future reference.

y The tenders collected are opened in the presence of two officials of thePurchase Department, one official of the Finance and the authorizedrepresentatives of the bidders who may like to be present at the time of opening

y In order to evaluate the prices of various tenders a comparative statement maybe prepared (showing the base price, excise duty, sales tax, estimated freight,point of delivery etc)

y Purchase Committee for Purchases in which representative of Finance, Purchaseand Indenting department forms the committee

y Records Of Purchase Department :- Open Orders. Close Orders y Vendor development is a very important function of materials management.y Two methods of vendors rating generally used are :1. The Categorisation

method.2. The weighted point method. y The first step in Vendor Registration would be to identify and categories the items

for the purpose of Registration