1. 5 M’s
Men
Machines
Methods
Money
Materials

2. Reasons for popularity of materials
Materials offer considerable scope for reducing cost and improving profit
Improving return on investment depends on the effective utilisation of materials.
Materials add value to product
Quality of end product depends on materials
The efficiency of any organisation depends upon the availability of right materials, in right quantity, at right time and at right price.
Materials are life-blood of man’s development

3. Materials management involves planning, programming, organising, directing, controlling, and co-ordinating the various activities concerning the materials. The production managers found it necessary to develop an organised body of knowledge on this subject. The resulting set of related disciplines is known as materials management.

4. Materials Management
Materials are any commodities used directly or indirectly in producing a product such as raw materials, component parts or assemblies.
Thomas F. Wallace & John R. Dougherty

5. Materials management is the management of the flow of materials into an organisation to the point, where, those materials are converted into the firm’s end product(s)
Bailey & Farmer
The executive who engage in materials management are concerned with three basic activities: buying, storage of materials and movement.

6. Functions of Materials Management
Materials planning and programming
Raw material purchase
Receiving, store keeping, and warehousing
Issuing of material
Inventory control
Value engineering
Transportation of materials
Vendor development
Vendor rating
Disposal of scrap and surpluses

7. Focus of Material Management
To procure right materials
In Right Quantity
Of Right Quality
At Right Time
From Right sources
At Right prices
5 R’s, principles of purchasing

8. Primary Objectives Buying the best item at the lowest cost
Reduction in inventory cost and High inventory turnover
Maintaining the flow of production
Maintaining the consistency of quality
Optimisation of acquisition and possession, resulting in lower cost

9. Advantages or benefits of M M
Risk of inventory loss minimised (theft, pilferage )
Reduction in loss of time of direct labour
Cost of material used in different department ascertained
Control of manufacturing cycle
Material congestion in storage places avoided
Improvement in delivery of the product

10. Phases in M M
Planning (Plans for capacity or production levels and required inventory levels
Material utilisation (efficiency of the flow of materials through the plant)
Physical (storing, receiving and issuing of materials and physical checking of inventory of raw materials, work in process, finished goods, record keeping)
Control or follow up (feedback and corrective action involved)

11. Challenges of M M Selection of appropriate vendors
Land and storage cost increase
Difficulty in forecasting demand accurately
Scarce capital for investment in materials inventory
Diversification of product lines
Optimising time and quantity for products
Management of information

12. Main depts. Of M M Materials planning Purchase Stores
Inventory control

13. Purchasing
Purchasing is to procure the materials, supplies, tools, equipment etc.
5 R’s – Material, Quantity, Source, Time, Price
Procurement – purchase, material supervision and management as inventory control, receiving and salvage operations.

14. Importance of Purchasing
Purchasing function provides materials to the factory without which the machines cannot move
Purchasing manager is the custodian of his firm’s purse as he spends more than 50% of his company’s earnings on purchases
Can contribute to import substitution and can save foreign exchange

15. Objectives of Purchasing
Procurement of required quantity and quality of materials at the most economical price
Procuring the material well in advance to meet the needs of the production dept., to save production losses from lack of materials
Buying an optimum quantity, neither too much nor too less, not affecting capital or holding up production.

16. Functions Obtaining prices Selecting vendors Awarding purchase orders
Following up on delivery promise
Adjusting and settling complaints
Selecting and training of purchase personnel
Vendor relations

17. Kautilya in Arthasastra
“Stores and purchase personnel should definitely be expert in his job, adept in the art of negotiations, intelligent, loyal to the organisation’s goals, suppressing personal greed.”

18. Value analysis ( value engineering)
Purchasing & methods engineering
This activity is aimed at modifying the specifications of materials, parts, and products to reduce their costs
Focus is on the value of the product- what function is to be performed by the product- and how that value can be achieved at the lowest cost.
Primary attention is devoted to the materials.
Suppliers – suggest improvement & cost reduction ideas.

19. Inventory Management
The term inventory includes materials – raw, in process, finished packaging, spares and others stocked in order to meet an unexpected demand or distribution in the future.
Inventory can be used to refer to the stock on hand at a particular time, of raw materials, goods-in –process of manufacture, finished products, merchandise purchased for resale, and the like, tangible assets which can be seen, measured and counted.

20. Types Finished goods inventories Maintenance, Repair and Operating
Stock in trade –ready for shipment
Maintenance, Repair and Operating
inventories
- cutting tools , grinding wheels, jigs
Maintenance inventory
Electrical – switches, fuses, lamps, lubricants, safety goggles
Stationary inventories
Canteen provisions, medical supplies, uniforms

21. Objectives of Inventory
To facilitate smooth operation of the manufacturing process.
To minimise investment in inventory
To reduce material handling costs
Reasonable utilisation of people

22. Inventory costs Ordering cost Carrying cost
Out of stock or shortage cost
Capacity cost

23. Ordering Costs Cost of placing an order with a vendor of materials
Preparing a purchase order
Processing payments
Receiving and inspecting the material
Ordering from the plant
Machine set up
Start up scrap generated from getting a production run started

24. Carrying costs Costs connected directly with materials Financial costs
Obsolescence
Deterioration
Pilferage
Financial costs
Taxes
Insurance
Storage
Interest

25. Capital costs Storage space costs
Interest on money invested in inventory
Interest on money in land and building
Storage space costs
Building rent
Depreciation
Cost of maintenance

26. Out of stock costs Capacity costs Lost sales, transportation
Overtime when capacity is low
Idle time when capacity is large

27. Benefits of Inventory management
Inventory control ensures an adequate supply of materials, stores, etc. minimises stockouts and shortages, and avoids costly interruptions in operations.
It keeps down investments in inventories, inventory carrying costs and obsolescence losses to the minimum
It facilitates purchasing economies through the measurement of requirements on the basis of recorded experience

28. It eliminates duplication in ordering or in replenishing stocks by centralising the source from which purchase requisitions emanate
It permits a better utilisation of available stocks by facilitating inter departmental transfers within a company
It provides a check against loss of materials through carelessness or pilferage

29. It serves as a means for the location and disposition of inactive and obsolete items of stores
Perpetual inventory values provide a consistent and reliable basis for preparing financial statements.