2. 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.

3. 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.

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

5. 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

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

7. 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.

8. 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.

9. 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.

10. 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.

11. 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.

12. 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.

13. 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) 50130,00010 5022,80,00015 5033,00010 5041,10,0005 5054,0005 5062,20,00010 50715,0005 50880,0005 50960,00015 5108,00010

14. SOLUTION……………………… Model Number (1) Annual Consumption (2) Unit Price ( In Paise) (3) Usage Value (In Rs.) (4)=(3)*(2) Ranking (5) 50130,0001030006 5022,80,0001542,0001 5033,000103009 5041,10,00055,5004 5054,000520010 5062,20,0001022,0002 50715,00057508 50880,00054,0005 50960,000159,0003 5108,000108007

15. 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) 123123 502 506 509 10 20 30 42,000 64,000 73,000 48.0 73.0 83.0A 45674567 504 508 501 510 40 50 60 70 78,500 82,500 85,500 86,300 90.0 94.0 98.0 98.6 B 8 9 10 507 503 505 80 90 100 87,050 86,350 87,550 99.4 99.6 100 C

16. 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.

17. 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)

18. Typical categorization plan POINTSCLASSIFICATION 100 – 160 161 – 230 231 - 300 DESIRABLE ESSENTIAL VITAL

19. 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.

20. 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