4.

9 (JIT, MRP, ERP and Supply Chain Management)

Just-in-Time (JIT)

It is a philosophy of manufacturing based on planned elimination of all waste and continuous improvement of
productivity Or JIT is an approach that seeks to eliminate all sources of waste in production activities by
providing the right part at the right place at the right time. i.e. JIT means

 Producing the quantity of unit that is needed, no more no less

 Producing them on the date and at the time required, not before and not after.
 The supplier delivers the exact quantity demand at the schedule time and date.

Benefit of JIT system

 Inventory level are drastically reduced

 The time taken for products to get through the factory is generally reduced.
 Product quantity is improved and hence the cost of scrape is reduced.
 With less in process, less space is taken up by inventory inventory and material handling equipment.
 Better labour utilisation
 Elimination of unpleasant supplier such as those with late deliveries and acceptable quality.
 Reduction in customer related problem.
 Significant improvement in quality ,near to zero defect.
 Reduction in floor space needs due to lesser worker in process and smaller lot size.
 Shorter lead times of supplies, allowing them to respond more quickly to changing customer needs.

Type of wastage according to Toyota Company

 Over production – the extra part or product may not be needed or may not be available when needed or
may not be available when needed, so it is waste.
 Waiting time – the operator, the machine or the part will not be either working or worked upon.
 Movement – any unnecessary movement is a waste of energy.
 Process – some steps in the process may not be necessary to arrive at the required stage.
 Inventory – excess procurement or production build up stock of material which are not immediately
used.
 Efforts and movement – the people who work do not make a study as to how these are utilised in
realising the purposes for which they are made.
  Defect product – these are produced using the same equipment, workman and the the time that would be
used to make good product .This defective product result to losses.

Material Management

Material planning is the scientific way of determine the requirement of raw material, components, spares and
other items that go into meeting the production needs within economic investment policy.

Materials are the most important resources for any company, since no goods can be produced without them.

Objective of material management

 Maintenance of record

 Immediate flow of material

 Consistency of quality

 Improve corporate image

 Improve firm strength in the market

 Reduce inventory investment

 Preservation of material

 Reduction of wastage of material

 Disposal of surplus material

Function of material management

 Purchasing

 Inventory control

 Store keeping

 Transportation

 Store accounting

 Material economics

 Waste management

 Material planning
Cost involved in material management

 Cost of material

 Government taxes

 Ordering cost

 Carrying cost

 Packaging cost

 Material handling

 Shipping cost

 insurance

Bills of Material

A list indicating the quantities of all material, parts, components, subassemblies’ and major assembles that go
into end product. It gives details of the buildup of a product.

Material Requirement Planning (MRP)

MRP is a production planning, scheduling and inventory control system used to manage manufacturing

processes. Most MRP systems are software-based, but it is possible to conduct MRP by hand as well.

An MRP system is intended to simultaneously meet three objectives:

 Ensure materials are available for production and products are available for delivery to customers.

 Maintain the lowest possible material and product levels in store
 Plan manufacturing activities, delivery schedules and purchasing activities.

Function served by MRP

 Order planning and order – when to release order and for what quantities of material / componenets
 Priority planning and control – how to expected date of availability. Compare to the need data for each
components.
 Provision of a basis of planning capacity requiremnent and developing a broad plans.
MRP is a tool to deal with these problems. It provides answers for several questions:

 What items are required?

 How many are required?
 When are they required?

MRP can be applied both to items that are purchased from outside suppliers and to sub-assemblies, produced
internally, that are components of more complex items.

Supply Chain Management

SCM is a systematic approach to managing the entire flow of information, materials and services from raw
materials supplies through factories and warehouse to the end customer.

Supplier – Manufacturer – Wholesaler – Retailer – Consumer

Types of SCM

1. Upstream supply chain (inbound logistics) – Activities of manufacturing with its supplier
2. Internal Supply Chain – In house process for transformation of the input from the supplier into the
output.
3. Downstream Supply Chain (outbound logistics) – Activities involved in delivering the product to the
final customer.

Supply Chain Decision/SCM Tools and Technologies

 Location Decision
 Production Decision
 Inventory Decision
 Transportation Decision
 Warehouse Decision
 Insurance Decision
 Outsourcing Decision
 No of middle men Decision
 Technologies used Decision
  Bullwhip effect Decision
 Purchase Decision

Objective of SCM

 To control inventory by managing the flow of materials through the supply chain
 To reduce the supply chain ---- to the minimum possible level.
 Reduction of inventory
 Enhancement of satisfaction level of customer and clients
 Better utilization of resources-men, material, equipment and money
 Enhancement of value of product, operations and services
 To maximize the overall value generated

The Seven Principle of SCM

1. Group Customer by needs

2. Customise the Logistic Network
3. Listen to the signals of market demand and plan accordingly
4. Differentiate the product closer to the customer
5. Strategically manage the source of supply
6. Develop a supply wide technology strategy
7. Adopt channel spanning performance measures.

Bullwhip Effect in SCM

The Bullwhip effect is the uncertainty caused from distorted information flowing up and down the supply chain.
This has its affect on almost all the industries, poses a risk to firm that experienced large variation in demand
and also firm which are dependent on supplies, distributor and retailers.

Reasons of Bullwhip effect

 Political reasons
 Social reasons
 Accident
 Variation in lead time
 Increased transportation cost
 Dependence on many external sources
Solution/Optimal strategy

 Avoid multiple demand forecasting

 Blacking the single order into number of batch of order
 Stabilize the price
 Reduce the load time in the stage of the project

Always keep analysing the past figures and track current

Enterprise Resource Planning (ERP)

It is the integrated management of core business processes, often in real-time and mediated by software and
technology. These business activities can include:

 product planning, purchase

 production planning
 manufacturing or service delivery
 marketing and sales
 materials management
 inventory management
 shipping and payment
 finance

ERP is usually referred to as category of business-management software—typically a suite of

integrated applications—that an organization can use to collect, store, manage and interpret data from these
many business activities.

ERP provides an integrated and continuously updated view of core business processes using
common databases maintained by a database management system. ERP systems track business resources—
cash, raw materials, production capacity—and the status of business commitments: orders, purchase orders,
and payroll The applications that make up the system share data across various departments (manufacturing,
purchasing, sales, accounting, etc.) that provide the data.ERP facilitates information flow between all business
functions and manages connections to outside stakeholders

Enterprise system software is a multibillion-dollar industry that produces components supporting a variety of
business functions. IT investments have become the largest category of capital expenditure in United States-
based businesses over the past decade. Though early ERP systems focused on large enterprises, smaller
enterprises increasingly use ERP systems.

The ERP system integrates varied organizational systems and facilitates error-free transactions and production,
thereby enhancing the organization's efficiency. However, developing an ERP system differs from traditional
system development.ERP systems run on a variety of computer hardware and network configurations, typically
using a database as an information repository