chapter 4

• Materials management is a function, which aims for integrated approach towards the management of materials in an undertaking
• Materials management


  The function responsible for the coordination of planning, sourcing, purchasing, moving, storing and controlling materials in an optimum manner so as to provide a pre-decided service to the customer at a minimum cost
• Material planning and control


  Based on the sales forecast and production plans, the materials planning and control is done
• Purchasing


  1. Selection of sources of supply

  2. Finalization in terms of purchase

  3. Placement of purchase orders

  4. Follow up maintenance of smooth relations with suppliers

  5. Approval of payments to suppliers

  6. Evaluating and rating suppliers
• Stores management or management


  1. Physical control of materials

  2. Preservation of stores

  3. Minimization of obsolescence and damage through timely disposal and efficient handling

  4. Maintenance of stores of records

  5. Proper location and stocking

  6. Physical verification of stocks and reconciling them with book figures
• Inventory control or management


  Refers to the material in stock, it is also called the idle resource of an enterprise
• Standardization


  Producing maximum variety of products from the minimum variety of materials
• Simplification


  Closely related to standardization
• Specification


  A precise statement that formulizes the requirements of the customer
• Value analysis


  Concerned with the cost added due to inefficient or unnecessary specifications and features
• Ergonomics (Human Engineering)


  Human engineering is concerned with man-machine system
• Material planning


  1. Determining in advance the requirements of raw materials, ancillary parts and components, spares etc, as directed by the production programme

  2. A sub-system in the overall planning activity
• Macro factors affecting material planning


  • Price
  • Trends
  • Business cycles
  • Government import policy
• Micro factors affecting material planning


  • Plant capacity
  • Utilization
  • Rejection rates
  • Lead times
  • Inventory levels
  • Working capital
  • Delegation of powers
  • Communication
• Purchasing


  Buying of equipment, materials, tools, parts required for industry
• Inventory


  Materials in stock, idle resources of an enterprise, materials in the process of manufacturing, materials yet to be utilized
• Inventory control


  A planned approach of determining what to order, when to order, how much to order, and how much to stock so that costs are optimal without interrupting production and sales
• ABC Analysis

  1. A-Items: very tight control, high value
  2. B-Items: moderate control, moderate value
  3. C-Items: low value
• HML Analysis

  High Price, Medium Price, Low Cost items
• VED Analysis

  Vital, Essential, Desirable items
• FSN Analysis

  Fast Moving, Slow Moving, Non-moving items
• SDE Analysis

  Scarce, Difficult, Easy to acquire items
• GOLF Analysis

  Government supply, Ordinary available, Local availability, Foreign source of supply
• SOS Analysis

  Seasonal and Off-seasonal items
• Right Price


  The primary concern of any manufacturing organization to get an item at the right price
• Right Quality


  • Quality should be available, measurable and understandable as far as practicable
• Right Time


  • The purchase manager should have lead time information for all products and analyze its components for reducing the same
• Right Source


  • The material is produced should be dependable and capable of supplying items of uniform quality
• Right Quantity


  • The most important parameter in buying
• Right Attitude


  • Developing the right attitude, as one often comes across such statement: purchasing knows the price of everything and value of nothing
• Right Contracts


  • The buyer has to adopt separate policies and procedures for capital and consumer items
• Right Material


  • The production is an important in purchasing
• Right Transportation


  • Right mode of transportation has to be identified as this forms a critical segment in the cost profile of an item. It is an established fact that the cost of the shipping of ore, gravel, sand is normally more than the cost of the item itself
• Right Place of Delivery


  • Specifying the right place of delivery
• HML Analysis


  Classification of existing inventory based on unit price of the items. They are classified as High Price, Medium Price and Low cost items.
• VED Analysis


  Classification of existing inventory based on criticality of items. They are classified as Vital, Essential and Desirable items. It is mainly used in spare parts inventory.
• FSN Analysis


  The classification of existing inventory based on consumption of the items. They are classified as Fast Moving, Slow Moving and Non-moving items.
• SDE Analysis


  The classification of existing inventory based on the items. They are classified as Scare items generally imported/short supply, Difficult items and Easy to acquired.
• GOLF Analysis


  The classification of existing inventory based on sources of the items. They are classified as Government supply, Ordinary available, Local availability and foreign source of supply.
• SOS Analysis


  The classification of existing inventory based on nature of supply of items. They are classified as Seasonal and Off-seasonal items.