Ch.1Ch.

1- Introduction: Materials Management

Prof. Prashant B. Kalaskar

Syllabus
Evolution, Importance, Scope and Objectives of Materials Management Interface of Material Management with other functions. Concept of Logistics and Supply Chain Management Evolution to 4PL

Prof. Prashant B. Kalaskar

Introduction to Material Management

Materials- A key resource in any manufacturing Materialsactivity Cost of production depends upon the materials and hence material management is important Low level of inventory may interrupt manufacturing High level of inventory, excessive investments inventory, Optimum inventory of materials is a crucial phenaomenon

Prof. Prashant B. Kalaskar

Definition of Material Management

The process of controlling the kind, amount, location, movement & timing of various resources used in & produced by the industrial enterprise . Material management is an approach for planning, organizing, and controlling all those activities principally concerned with the flow of materials into an organisation.

Prof. Prashant B. Kalaskar

Definition of Material Management

The planning and control of the functions supporting the complete cycle (flow) of materials, and the associated flow of information. These functions include(1) identification, (2) cataloging, (3) standardization, (4) need determination, (5) scheduling, (6) procurement, (7)inspection, (8) quality control, (9) packaging, (10)storage, (11) inventory control, (12) distribution, and (13)disposal. Also called materials planning.

Prof. Prashant B. Kalaskar

Evolution of MM
During WW-I, materials supply got hapmered. WWhapmered. Last 3 decades of industrial revolution and advancement in technology lead industry to mass production and marketing Increasing population & income levels fueld MM Resource conservation & effective utilization focused from 70s Concept of TQM In India, Armed forces brought the concept of MM in India, the name of logistic management
Prof. Prashant B. Kalaskar

Importance of MM
If we analyze the total cost of any production, nearly 60 to 70% is because of materials. Only the rest is for labour, overhead and profit. labour, So any reduction in the material cost, new techniques to reduce the cost, give rise to maximization of profits Profitabilty is the maximum ROI, aim of any organization

Prof. Prashant B. Kalaskar

Importance of MM
Rate of Return (ROR)= Rate of Return (ROR)= Return - Capital ---------------------- X 100 Capital

120-100 Ex.- ROR= --------------- X 100 = 20% 100

Prof. Prashant B. Kalaskar

Objectives of MM
The fundamental objectives of the Materials Management function ( 5 Rs) Of the Right quality In the Right quantity At the Right time From the Right source At the Right place

Prof. Prashant B. Kalaskar

Objectives of MM
Management objectives of MM areare To buy at the lowest price , consistent with desired quality and service To maintain a high inventory turnover , by reducing excess storage , carrying costs and inventory losses occurring due to deteriorations , obsolescence and pilferage To maintain continuity of supply , preventing interruption of the flow of products and services to users To maintain the specified material quality level and a consistency of quality which permits efficient and effective operation

Prof. Prashant B. Kalaskar

Objectives of MM
Management objectives of MM areare To develop reliable alternate sources of supply to promote a competitive atmosphere in performance and pricing. To hire, develop, motivate and train personnel and to provide a reservoir of talent To develop and maintain good supplier relationships in order to create a supplier attitude and desire to furnish the organization with new ideas , products, and better prices & services

Prof. Prashant B. Kalaskar

Objectives of MM
Management objectives of MM areare To achieve a high degree of cooperation and coordination with other departments To maintain good records and controls that provide an audit trail and ensure efficiency and honesty To participate in Make or Buy decisions.

Prof. Prashant B. Kalaskar

Logical Fun

Prof. Prashant B. Kalaskar

Scope of MM
Materials Management strives to ensure that, the material cost comprising the total product cost be the least. In order to achieve this, the control is exercised in the following fields. 1. Materials Planning. 2. Purchasing. 3. Store Keeping. 4. Inventory Control. 5. Receiving, Inspection and Dispatching. 6. Standardization and Variety Reduction. 7. Materials Handling. 8. Disposal of Scrap and Surplus, Material Preservation.

Prof. Prashant B. Kalaskar

Interface of Material Management with other functions

Resources can be classified as- Tangible & Intangible resources In any production units, inputs are converted into outputs i.e. final product Conversion process varies with technology Output may be Tangible or Intangible product This process involves 3 activities- Inputs (Materials) supply - Conversion process (Manufacturing) - Distribution of product (Marketing)
Prof. Prashant B. Kalaskar

Interface of Material Management with other functions

External Environment ( Suppliers and Customers) Inputs
Men Materials Money Machines Management

Output
Products (Goods or Services) Profits and customer satisfaction

Manufa cturing

Internal Resources- Finance, Marketing, HR, MIS, Production

Prof. Prashant B. Kalaskar

Logistics & SCM Concept

Logistics: Planning, implementing, and controlling the efficient, effective flow and storage of goods and materials between the point of origin and the point of consumption. (from source up to within Organization) Supply Chain- A supply chain is a network of facilities and Chaindistribution system that perform the functions of procurement of materials, transformation of these into intermediate and finished products and then distribution of finished products to the customers. (From Source point up to distribution of finished products up to end user)
Prof. Prashant B. Kalaskar

Facilities

The sequence of supply chain begins with basic suppliers and extends all the way to the final customer Warehouses Processing centers Distribution centers Retail outlets Offices

Prof. Prashant B. Kalaskar

Functions and Activities in SCM

Forecasting Purchasing Inventory management Information management Quality assurance Scheduling Production and delivery Customer service

Prof. Prashant B. Kalaskar

Fun Moment Ek Student roz Maths teacher ke ghar phone lagata hai. Sir ki wife- Kitni bar tumhe bataya hai, ke sir mar gaye hai, fir tum bar bar kyo phone karte ho Student- Sun ke accha lagta hai..

Prof. Prashant B. Kalaskar

Concept of Logistics & SCM

There is a difference between the concept of supply chain management and the traditional concept of logistics. Logistics typically refers to activities that occur within the boundaries of a single organization. Supply chains refer to networks of companies that work together and coordinate their actions to deliver a product to market.

Prof. Prashant B. Kalaskar

Concept of Logistics & SCM

Traditional logistics focuses its attention on activities such as procurement, distribution, maintenance and inventory management. Supply chain management acknowledges all of traditional logistics and also includes activities such as marketing, new product development and customer service.

Prof. Prashant B. Kalaskar

Concept of Logistics Management

Thus logistics management allowsallowsSmooth flow of all types of materials Satisfaction of consumer needs of goods Helps delivery of good quality products Best possible customer service at least possible rates Integration of various managerial functions of organizations for optimization of resources It enhances profitability and productivity to the organization

Prof. Prashant B. Kalaskar

Concept of Logistics Management

The concept of logistics management can be explained in four phases1) 2) 3) 4) Independent Business Function Era Limited Internally Integrated Business Function Era Fully Internally Integrated Buisness Function Era Externally Integrated Business Function Era

Prof. Prashant B. Kalaskar

Concept of Logistics Management

1)- Independent Business Function Era (till 1950s) 1)- This era emphasized on increasing productivity & profitability - Less manufacturers, hence mass production dominated - Logistics was limited to warehousing of Raw Materials & tansportation of finished goods - All business functions were indpendent. - Warehousing of RM & finished goods were fragmneted & hence high cost involved

Prof. Prashant B. Kalaskar

Concept of Logistics Management

2) Limited Internally Integrated Business Function Era (1960-70)
The limitations & high cost of fragmented functioning led to this concept of1) Material Management & 2) Physical Distribution - Material Management- delas with planning,implementing & Managementcontrolling flow of materials within organization (Inbound Logistics) Logistics) - Physical Distribution- Planning, Implementing & Controlling all the DistributionLogistics) activities related to flow of finished goods (Outbound Logistics) - The major objective was to control cost & output, so that organizations can survive in cost based competitive environment

Prof. Prashant B. Kalaskar

Concept of Logistics Management

3) Fully Internally Integrated Buisness Function Era (1980s)(1980s)In this era, business situations were more critical due to era, internal & external factorsfactorsCost of transportation is fuel price dependent Inflation was uncertain & associated with increased interest rates Reducing profitability due to increased production costs

Prof. Prashant B. Kalaskar

Concept of Logistics Management

3) Fully Internally Integrated Buisness Function Era (1980s)(1980s)Main objective in this era was to reduce to cost of logistics MM & Physical distribution made as an integrated function of logistics for smooth flow of operations
Supplier Inbound Logistics Production Outbound Logistics Customer

Materials Management

Physical Distribution

Logistics Management

Prof. Prashant B. Kalaskar

Concept of Logistics Management

3) Fully Internally Integrated Buisness Function Era (1980s)(1980s)Interface b/n traditional activities of physical distribution & MM with other functional departments like finance, marketing, production planning, sales forecasting, forecasting, Customer services etc.

Prof. Prashant B. Kalaskar

Concept of Logistics Management

4) Externally Integrated Business Function Era (1990s)(1990s) - In this era business scenario became more critical dut to- Liberalization of world economy (Concept of TQM) - Rapid innovation in the field of technology - Introduction of new inventory mgmnt. Techniques like- MRP, JIT etc. - Increased quantum of competition - Emergence of 3rd party logistics (3PL)
(Concept of TQM- Total Quality Management through Zero TQMdefect products & quick services to the customers) customers)

Prof. Prashant B. Kalaskar

Value Chain
Value chain are the activities that are done to provide value to the ultimate consumers throughMaking product available as per their needs & wants Making of Quality of products Making available raw materials for production. It can be dipicted as in following picture-

Prof. Prashant B. Kalaskar

Third-Party Logistics (3PL)

Prof. Prashant B. Kalaskar

Definition of Third-Party Logistics

Essentially, a third-party-logistics firm may be defined as an external supplier that performs all or part of a companys logistics functions, so that companies can work on their core competency of Mfg. 3PLs are the external suppliers that perform all or part of a companys logistics functions, including: Transportation Warehousing Distribution Financial services
(Terms contract logistics and outsourcing are sometimes used in place of 3PL)

Prof. Prashant B. Kalaskar

Third-Party Logistics

Prof. Prashant B. Kalaskar

Third-Party Logistics

Prof. Prashant B. Kalaskar

Types of 3PL Providers

Transportation-based Warehouse/distribution-based Forwarder-based Shipper/management-based Financial-based Information-based firms Prof. Prashant B. Kalaskar

Transportation-Based
Services extend beyond transportation to offer a comprehensive set of logistics offerings. Leveraged 3PLs use assets of other firms. Non-leveraged 3PLs use assets belonging solely to Nonthe parent firm. Ryder, Schneider Logistics, FedEx Logistics, and UPS Logistics are examples of 3PLs.

Prof. Prashant B. Kalaskar

Warehouse/Distribution-Based
Warehouse/Distribution-Based Warehouse/Distribution Many, but not all, have former warehouse and/or distribution experience. Transition to integrated logistics has been less complex than for the transportation based providers. DSC Logistics, USCO, Exel, Caterpillar Logistics, and IBM are examples of warehouse/distribution-based 3PLs.

Prof. Prashant B. Kalaskar

Forwarder-Based
Essentially very independent middlemen extending forwarder roles. Non-asset owners that capably provide a wide range of logistics services. AEI, Kuehne & Nagle, Fritz, Circle, C. H. Robinson, and the Hub Group are examples of forwarder-based 3PLs.

Prof. Prashant B. Kalaskar

Financial-Based
Provide freight payment and auditing, cost accounting and control, and tools for monitoring, booking, tracking, tracing, and managing inventory. Cass Information Systems, CTC, GE Information Services, and FleetBoston are examples of financial-based 3PLs.

Prof. Prashant B. Kalaskar

InformationInformation-Based
Significant growth and development in this alternative category of Internet-based, business-to-business, electronic markets for transportation and logistics services. Transplace and Nistevo are examples of information-based 3PLs.

Prof. Prashant B. Kalaskar

3PL, Why is it needed..

Advantages
o o o o Cost reduction Focus on core competency Improved efficiency, service and flexibility Industry-specific application build-to-order systems and e-merchants

Disadvantages
o Loss of control o Impact on in-house workforce

Prof. Prashant B. Kalaskar

Companies that have used 3PLs

Rank Shipper Company No. of 3PLs Used

1 2 3 4 5 6 7

General Motors Ford Motor Co. & Wal Mart VolksWagen Proctor & Gamble General Electric Siemens BMW

43 30 28 22 21 19 17

Prof. Prashant B. Kalaskar

Traditional Process
Vendor Inputs Procurement

Value Addition Product Distribution Customer

Prof. Prashant B. Kalaskar

Traditional Transportation
Mfg. Org. Plan Transport Activities Prepare Specification Contracting Transporter

Hire of Warehouse

Warehouse

Appoint A Distributor

Distribution

Payment

Customer

Prof. Prashant B. Kalaskar

Traditional System Plan Distributn.

3PL Concept
Prepare Specification For 3PL Own Transport Vehicle Hire Part Transport Vehicle Ware House 3PL Agency Deliver to Distributor All as per Specification Of Company Payment Customer Distributor

Plan Warehousing

Plan Transport Activities

Contracting

^
Mfg. Org.

Appoint a Distributor Payment

3PL

Evolution of 4PL
Logistics is a Science, the scope of which is ever expanding and quite soon it will expand to encompass various business functions and will become the Prime Driver of the business model of any organization

Prof. Prashant B. Kalaskar

Contact Details. Details.

Can contact me on

24 X 7 12 X 6
Mob- 7350520025, 9975770407 prashantkalaskar007@gmail.com

Prof. Prashant B. Kalaskar