Block 5 Section 2 Part I How is performance measured within organizations? Prepared by Hanady Ali Osman

What do we mean by materials? What do we mean by a materials systems? Chapter 7 Planning and control of work: the mgt of materials (pg. 202 & 203 Galloway, et. al) Learning Objectives; What do we mean by materials? What do we mean by a materials systems? What is materials management trying to achieve? What are the key questions for managers of materials What techniques are available to the manager? H.A.Osman

Introduction (pg 203 & 204) All Organizations need to acquire and use materials if they are to function properly. However, materials are used differently in goods manufacturing and service provision. H.A.Osman

Types of material (pg. 204 & 205) There are different classifications for materials: Raw materials Work in progress Inventory Consumable materials Buffer stocks H.A.Osman

Types of material (pg. 204 & 205) Raw materials: Are those items which are stored waiting to be worked on. Work in progress: Are materials that are being worked as a part of the process. Inventory: These are transformed inputs into their final stage/product. Usually referred to as finished goods H.A.Osman

Types of material (pg. 204 & 205) Consumable materials: Those materials that are used by the process but do not form a part of the direct material that is passed down the supply chain. e.g. Lubricants. Buffer stocks: Are materials that are being deliberately used to protect the operation from the otherwise disruptive effects of interruptions to supply or sudden increases in demand. H.A.Osman

The basic concepts of materials systems (pg. 206-207 Galloway, et. al) Stock Volume Amount of stock available on the site Reorder level Buffer Stocker Time Lead Time H.A.Osman

The basic concepts of materials systems (pg. 206-207 Galloway, et. al) Lead Time: This is the time which elapses from the placing of the orders to the actual delivery. H.A.Osman

The aims of material management (Pg. 207 Galloway, et. al) Adverse implications of going out of stock: The operation can stop running smoothly. Delay in outputs may dissatisfy customers. Can lead to lost support for the org. Idleness of the operation can incur costs associated with staff, equipment & facilities. Extra costs for unplanned stopping of the process. Cost penalties for delay in delivery of orders H.A.Osman

The aims of material management (Pg. 208 Galloway, et. al) Implications of access stock: Stock levels have financial implications. Stock represents certain risks. High stock levels can be a powerful force against improvement. H.A.Osman

Two of the main categories to measure both efficiency and the Performance measures for materials systems (Pg. 209-215 Galloway, et. al.) Two of the main categories to measure both efficiency and the effectiveness of stock management within an organization are: Customer service level Inventory investment H.A.Osman

Dependent & Independent Demand (Pg. 215-216 Galloway, et. al.) Independent Demand is defined as demand that is independent of the demand of others and/or demand is outside the control of the operation and is usually subject to trends and seasonal patterns. Dependent Demand is defined as demand which results from the demand for other items. H.A.Osman

Techniques for managing materials in the case of independent demand Techniques for managing materials in the case of independent demand. (pg. 217/18 Galloway, et. al) The economic order quantity concept is intended to assist managers in deciding amounts of material that need to be ordered. This is done by a formula that calculates the order quantity that minimizes the total incremental costs of holding inventory and processing orders. H.A.Osman

The economic order quantity (pg. 217/18 Galloway, et. al) Costs of holding stock derive from; interest insurance council tax deterioration in value stock management H.A.Osman

The economic order quantity (pg. 217/18 Galloway, et. al) Costs for placing orders derive from; Preparing the order Preparing material specifications Tracking the order Processing invoices Receiving & handling delivered ordered materials H.A.Osman

The economic order quantity (pg. 219-220 Galloway, et. al) Total holding costs Total ordering costs 1 3 5 7 9 500 300 100 $ $ 500 300 100 1 3 5 7 9 Volume (000s) Volume (000s) HC = Q x CU Where; Q is the volume of inventory CU is the cost of holding one unit No. of orders to be placed a year = R/Q Where; R is the annual number of units to be ordered Q is the quantity to be ordered H.A.Osman

The economic order quantity (pg. 219-220 Galloway, et. al) Holding and Ordering Cost Holding and ordering Costs summed The optimal Volume of units to hold is where the totals of the OC and HC is at its lowest point. 500 300 100 $ $ 500 300 100 1 3 5 7 9 1 3 5 7 9 H.A.Osman

The EOQ formula (pg. 220-221 Galloway, et. al) EOQ = 2 PN IC Where; P = the ordering cost per order N = annual usage I = storage cost per year as a decimal factor of the purchase price C = unit purchase price H.A.Osman

The EOQ model assumptions (Pg. 222 Galloway, et. al.) Average demand is at a constant level. Supply lead time is constant. The replenishment of the inventory item is not connected with the replenishment of any other item. The unit purchase price, the ordering cost and the storage cost do not change. The EOQ is equal to the amount which can actually be delivered by the supplier. H.A.Osman

The risk of obsolescence. The risk of deterioration. Other factors that limit the strict application of the EOQ (Pg. 222/223 Galloway, et. al.) The risk of obsolescence. The risk of deterioration. Limited storage space. The availability of money for stock purchases H.A.Osman

The reorder point (Pg. 226-227 Galloway, et. al.) It is important to know when to place an order. At what level should the existing stocks be when an order is placed i.e. reorder point: Situations of known demand Situations of uncertain demand H.A.Osman

Inventory Control Systems (Pg. 228-233 Galloway, et. al.) Two basic types of control system are used to help manage the flow of materials. They act as mechanisms to draw the attention of managers to the fact that action is required answering these questions: How often should stock levels be checked? When should an order for more stock be placed? What quantity should be ordered? H.A.Osman

Inventory Control Systems (Pg. 228-233 Galloway, et. Al.) The two basic types of control system are: The continuous review fixed reorder quantity system The periodic reorder system H.A.Osman

Scheduling (Chapter 8 Galloway, et. al, Pg 237) The master schedule: The MS shows the output required over the short term (usually 3 months). Presented normally as a time-phased calculations where (forecast – available stocks) + Production = on-hand and available inventory H.A.Osman

Table 8.5 (pg. 240 Galloway, et. al.) Weeks 1 2 3 4 5 6 7 8 9 10 11 12 Forecast 20 15 25 Available stock 14 Production On hand H.A.Osman

Table 8.5 (pg. 240 Galloway, et. al.) Weeks 1 2 3 4 5 6 7 8 9 10 11 12 Forecast 20 15 25 Available stock 14 13 Production On hand H.A.Osman

Table 8.5 (pg. 240 Galloway, et. al.) Weeks 1 2 3 4 5 6 7 8 9 10 11 12 Forecast 20 15 25 Available stock 14 13 17 Production On hand H.A.Osman

Table 8.5 (pg. 240 Galloway, et. al.) Weeks 1 2 3 4 5 6 7 8 9 10 11 12 Forecast 20 15 25 Available stock 14 13 17 21 Production On hand H.A.Osman

Table 8.5 (pg. 240 Galloway, et. al.) Weeks 1 2 3 4 5 6 7 8 9 10 11 12 Forecast 20 15 25 Available stock 14 13 17 21 Production On hand H.A.Osman

Table 8.5 (pg. 240 Galloway, et. al.) Weeks 1 2 3 4 5 6 7 8 9 10 11 12 Forecast 20 15 25 Available stock 14 13 17 21 Production On hand H.A.Osman

Table 8.5 (pg. 240 Galloway, et. al.) Weeks 1 2 3 4 5 6 7 8 9 10 11 12 Forecast 20 15 25 Available stock 14 13 17 21 Production On hand H.A.Osman

Table 8.5 (pg. 240 Galloway, et. al.) Weeks 1 2 3 4 5 6 7 8 9 10 11 12 Forecast 20 15 25 Available stock 14 13 17 21 -3 Production On hand H.A.Osman

Table 8.5 (pg. 240 Galloway, et. al.) Weeks 1 2 3 4 5 6 7 8 9 10 11 12 Forecast 20 15 25 Available stock 14 13 17 21 -3 -9 Production On hand H.A.Osman

Table 8.5 (pg. 240 Galloway, et. al.) Weeks 1 2 3 4 5 6 7 8 9 10 11 12 Forecast 20 15 25 Available stock 14 13 17 21 -3 -9 -10 Production On hand H.A.Osman

Table 8.5 (pg. 240 Galloway, et. al.) Weeks 1 2 3 4 5 6 7 8 9 10 11 12 Forecast 20 15 25 Available stock 14 13 17 21 -3 -9 -10 -6 Production On hand H.A.Osman

Table 8.5 (pg. 240 Galloway, et. al.) Weeks 1 2 3 4 5 6 7 8 9 10 11 12 Forecast 20 15 25 Available stock 14 13 17 21 -3 -9 -10 -6 Production On hand -2 H.A.Osman

Table 8.5 (pg. 240 Galloway, et. al.) Weeks 1 2 3 4 5 6 7 8 9 10 11 12 Forecast 20 15 25 Available stock 14 13 17 21 -3 -9 -10 -6 Production On hand -2 The inability to meet demand from week 8 will have to be discussed between production and sales H.A.Osman

Approaches to master scheduling (Pg. 242 Galloway, et. al) Make to stock Make to order Assemble to order H.A.Osman

The master plan is a basis for many scheduling approaches (pg The master plan is a basis for many scheduling approaches (pg. 249 Galloway, et. al) Material requirement planning (MRP ) system Enterprise resource planning (ERP) systems. The Optimized production technology (OPT) Just in time manufacturing H.A.Osman

Managing the performance of projects (pg Managing the performance of projects (pg. 49 binder) Chapter 9 Galloway, et. al A project is a set of activities that has a definable start and a definable end . They can be large or small in size, e.g. Building the Millennium Dome, or painting a room. Other examples of projects include: Developing a new software package Relocating an office Implementing a new information system Opening a new hospital Setting up a new business H.A.Osman

Project Characteristics (pg. 278 Galloway, et. al) A well-defined objective Most projects are usually a one-of-a kind undertaking Relationships between project activities can be complex. Project carry a certain amount of risk in terms of time, cost and resources due to changes in the environment that can occur. Once a project achieves its specific objective the resources used on the project are usually abandoned. All projects go through different stages. H.A.Osman

The role of a project manager (pg 279 Galloway, et. al) Manage the project’s work content to define the goals and the work to be done in detail Manage the people involved in the project Manage information and channels of communications within the project Manage time by planning and meeting a schedule Manage quality so that the project outcome is satisfactory Manage costs so that the project is performed within budget H.A.Osman

Stages in project planning and control (Pg. 279-282 Galloway, et. al) Effective planning and control of projects depends on clear understanding of the following stages in project management: Project environment Project definition Project planning Project control H.A.Osman

Stages in project planning and control (Pg. 279/80 Galloway, et. al) Project environment: Relates to factors which may influence the project during its life cycle, such as; supplier’s reliability, political instability, local laws, national culture of the host country, etc. Project definition: This is being clear as much as possible on what is going to be done. This includes the projects objectives, scope and strategy. H.A.Osman

Stages in project planning and control (Pg. 281/82 Galloway, et. al) Project planning: This determines the duration and cost of the project. It also assists in the allocation of work to people, monitoring progress and assessing the impact of any change on the project. Project control: This relates to mgt of activities that take place during the execution of the project i.e. decisions on monitoring the progress, measuring the performance, etc. H.A.Osman