Materials & Logistics Management An Overview

Material Management Controlling the kind, amount, location, movement & timing of the various commodities used in and produced by the industrial enterprise

Functions of Material Management Material Planning Purchasing Inventory Control Store Keeping Stores Accounting Transportation Disposal of Surplus Material Material Economics Waste Management

Return on Investment Rate of ROR = Profit / Capital Type I Type II Profit / Sales X Sales / Capital = = Profit Margin X Capital Turnover Ratio ROR Improvement- Increase Profit by Keeping Capital Constant Reduce Capital by Keeping Profit Constant

Importance of Material Management Increasing Profit by Keeping Capital Constant Increase Number of Units Sold Increase Production Increase Unit Price Reduce Unit Cost

A) Increasing Profit Keeping Capital Constant Lifeline of Any Organization Dividend Distribution to Shareholders Employees- Wages & Job Security Additional Capital for Business Expansion Capital for Maintenance & Replacement Improves Quality of life

Profit Sales - Cost (Units Sold (Units Produced X Unit Price) - X Unit Cost) Example- Car Production Cost- Rs. 3,25,000/ Unit Car Sales Cost - Rs. 4,25,000/ Unit Profit per Car Sale - Rs. 1,00,000/ Unit Increase Sale OR Increase Production Increase Unit Price OR Reduce Unit Cost

Capital Reduction Fixed Capital- Land, Buildings, Plant & Machinery etc. Working Capital- Salary, Maintenance, Inventory, Raw Material Purchase etc. ROR = Profit / Capital

Material Management Cost Raw Material Cost Govt. Levies & Taxes Procurement Cost Inventory Cost Packaging Cost Material Handling Cost Freight Cost Insurance Cost Wastage during Receipt, Storage, Production

Activity Chart of Materials Management Department Materials Planning Make- or- Buy Decisions Purchasing Receiving & Inspection Storage Inventory Control Material Distribution Transportation Disposal of surplus & scrap material Developing new suppliers Import substitution Vendor Development Insurance Management Cost reduction & control Waste Management Material Research

Benefits of Integrated Material Management Department Fast & accurate decision making Fault finding or improvement activities Improved Coordination bet departments Improvement of Inter-department relationship Data collection & analysis for decision making Systematic approach to every aspect of process

Materials Department Interface with Other Departments Operations Accounting & Finance Design & Engineering Stores Inspection & Quality Control Maintenance Department Suppliers or Vendors Material Planning Personnel & HR Sales & Marketing

Supply Chain Management Definition- It is a sequence of organizations – their facilities, functions & activities- that are involved in producing & delivering a product or a service. SCM is nothing but designing, managing & controlling of this sequence efficiently resulting into customer satisfaction with increase in profits.

Evolution of SCM

Need of SCM To Improve operations Increase in outsourcing services/ products Control on transportation cost Market Competition Globalization E-commerce Inventory Management Complexity of various functions of Supply Chain

Benefits of SCM Lower Inventory Lower Cost Higher Productivity Greater Agility Shorter Lead Times Higher Profits Increased Customer Loyalty

Elements of SCM Element Issues Customers Determine Demand for product / services Forecasting Prediction of Customer Demand Design Improvement in quality/ characteristics of product/ services Capacity Plan Matching Demand & Supply Processing Quality Control & Working Schedule Inventory Maintaining Optimum Inventory Levels Purchase Make or buy Decision at times Supplier Monitoring, Developing & Maintaining Location Selection of Location Logistics Choosing Mode of Flow of Materials & Information

SCM Approach Mode I- OLD Suppliers & Others Purchase & Planning Production Sales Customers Mode II- NEW Supplier I,II & Others Manufacturer I, II & III with subcontractor Warehouses I, II, III Retailer I,II,III, IV Customers

Logistics It is a channel regarding Flow of Material & Information in the organization. Internal Logistics From Stores to Packaging Department External Logistics From Packaging Dept. to Customer 3 PL – Third Party Logistics Packaging Dept to Warehouse to Customer

Assignment I Explain all functions & responsibilities of Materials Manager from forecasting till disposal of scrap. Also Highlight the principles followed. Explain fully the interface and interdependence of Materials Management function with functions of a company involved into final product manufacturing & selling. Define SCM. Explain Need, Benefits & Elements of SCM. Short Notes- Advantages of Materials Management in Globalised Competitive Economy Objectives of Materials Management Function