WHAT IS MATERIAL MANAGEMENT? Definition: A process encompassing acquisition, shipping, receiving, evaluation, warehousing and distribution of goods, supplies and equipment The scope of material management lies on : 1. Material Planning. 2. Material Obtaining. 3. Material Controlling. 4. Material Storing. 5. Material Handling.

OBJECTIVE OF MATERIAL MGMT  1. Maintain steady flow of material.  2. Achieve economy in terms of material.  3. Ensure consistency of quality.  4. Reduction of inventory cost.  5. Conservation of the materials.  6. Minimize operational cost.  7. Improve competitive strength of the co.

Materials management functions  Material planning and programming  Purchasing and outsourcing  Inventory control  Storekeeping and warehousing  Codification

CONTINUES…………………  Standardization and evaluation of all products  Transportation and material handling  Inspection and quality control  Cost reduction through value analysis  Disposal of surplus / obsolete material  Distribution

THE MATERIAL CYCLE Design Stage Sourcing Stage Planning Production Ordering Process Receiving Process Inventory Control Final Stage

INVENTORY CONTROL  Inventory generally refers to the material in stock. It is also the idle resource of an enterprise. Inventories are those items which are either stocked for sale or they are in the WIP or they are in the form of raw materials.

TYPES OF INVENTORIES 1. RAW MATERIAL INVENTORIES. 2. BOUGHT OUT PARTS INVENTORIES. 3. WIP INVENTORIES. 4. FINISHED GOODS INVENTORIES. 5. MAINTANENCE, REPAIR & OPERATING STORE. 6. TOOLS INVENTORIES.

REASONS FOR KEEPING INVENTORIES 1. TO STABALIZED PRODUCTION. 2. TO TAKE ADVANTAGE OF PRICE DISCOUNT. 3. TO MEET THE DEMAND DURING THE REPLISHMENT PERIOD. 4. TO PREVENT LOSS OF ORDER. 5. TO KEEP PACE WITH CHANGING MARKET CONDITION.

A.B.C. ANALYSIS  ABC analysis is a basic tool which helps the mgmt to place their efforts where the results would be useful to the greatest possible extent. First important step in inventory mgmt is to have a selective approach to fix up inventory levels, order quantities & the extent to which the control can be exercised.  ABC ( Always Better Control ) analysis is an effective tool for such selective control. This technique involves the classification of inventory items into three categories A,B and C in descending order of annual consumption and monetary value of each items.

A.B.C. Continues……… COMPARISON OF A, B & C ANALYSIS CATEGORYPERCENTAGE OF ITEMSPERCENTAGE OF MONETARY VALUE A5-10 (%)75-85 (%) B10-15 (%) C70-80 (%)5-10(%) CLASS ‘A’ ITEMSCLASS ‘B’ ITEMSCLASS ‘ C’ ITEMS 1. Close control required1.Moderate control required 1. Loose control required 2. Size of order is based on calculated requirement. 2. Size of the order based on their consumption. 2. Size of the order based on their level of inventory. 3. Procured from many sources. 3. Procured from 2 or 3 sources. 3. Procured from 2 sources. 4. More effort is made to reduce lead time. 4. Moderate effort to reduce lead time. 4. Minimum effort to reduce lead time.

CONTINUES…………………. ‘A’ ITEMS‘B’ ITEMS‘C’ ITEMS 5. Close check on schedule revision are required. 5. Some check on changes are required on need. 5. No checks are required against any need. 6. Frequent ordering is required. 6. Less frequent ordering is required. 6. Bulk ordering is required. 7. Accurate forecast needed 7. Less accurate forecast needed 7. Approximate forecast needed. 8. Low safety stock for less than two weeks. 8. Large safety stock up to two to three months. 8. Large safety stocks more than three months. 9. High consumption value. 9. Avg consumption value. 9. Low consumption value.

CLASSIFICATION OF A,B & C OF MATERIALS  The following information known about a group of items. Classify them in A, B & C classification. MODEL/NUMBERAnnual consumptionUnit Price (In paise) 50130, ,80, , ,10, , ,20, , , , ,00010

SOLUTION……………………… Model Number (1) Annual Consumption (2) Unit Price ( In Paise) (3) Usage Value (In Rs.) (4)=(3)*(2) Ranking (5) 50130, ,80, , , ,10,00055, , ,20, , , ,00054, ,000159, ,

CONTINUED………………… Now computing cumulative total no. of items & their usage values we are classifying the materials : Rank (1) Model No. (2) % of Items (3) Cumulative Usage Value (Rs.) (4) Cumulative % In (Rs.) (5) Category (6) ,000 64,000 73, A ,500 82,500 85,500 86, B ,050 86,350 87, C

VED ANALYSIS  VED ( VITAL-ESSENTIAL-DESIRABLE ) analysis represents classification of items based on their criticality.  VITAL- This category encompasses those items for want of which production would come to halt.  ESSENTIAL- Items whose stockout cost is very high.  DESIRABLE –Items which do not cause immediate halt in production or their stockout cost nominal & cause very minor disruption for a short duration.

CONTINUED…………………….  VED analysis categorization plan :  Assign points/weightage to the factors according to their importance for the company. Examples of the weightage to the above four factors may be 30, 30, 20 & 20 points. FACTORFIRST DEGREESECOND DEGREE THIRD DEGREE 1. Stock out cost (30) Above Rs. X (30) Between Rs. X & Y (60) Above Y (90) 2. Lead time for procurement (30) 1-4 weeks (30)4-8 weeks (60)Over 8 weeks (90) 3. Nature of items (20) Produced to commercial std. or off the shelf (20) Produced to suppliers design (40) Produced to buyers design or proprietary items (60) 4. Source of supply (20) Availability Local ( 20 ) Outstation ( 40 )Imported, quota items(controll- ed)supply (60)

Typical categorization plan POINTSCLASSIFICATION 100 – – DESIRABLE ESSENTIAL VITAL

F-S-N ANALYSIS  F-S-N analysis is based on the consumption figure of items. The items under this analysis are classified into three groups : F ( fast moving ), S ( slow moving ) & N ( non moving ). To conduct this analysis the last date of receipt or the last date of issue whichever is later taken into account and the period, usually in terms of no. of months, that has elapsed since the last movement is recorded.

Importance of F-S-N analysis  It helps to identified :  1. active items which require to review regularly.  2. surplus items whose stocks are higher than their rate of consumption.  3. non moving items which are not being consumed. The last two categories are viewed further to decide on disposal action to deplete their stocks & thereby release co.’s productive capital