1. 1.Define material management?

 Materials management is a core function of supply chain management, involving the

planning and execution of supply chains to meet the material requirements of a company or
organisation. These requirements include controlling and regulating the flow of material
while simultaneously assessing variables like demand, price, availability, quality, and
delivery schedules.
 Material managers determine the amount of material required and held in stock, plan for
the replenishment of these stocks, create inventory levels for each type of item (raw
material, work in progress or finished goods), and communicate information and
requirements to procurement operations and the extended supply chain. Materials
management also involves assessing material quality to make sure it meets customer
demands in line with a production schedule and at the lowest cost.
 Material management systems embrace all of the activities related to materials and are a
basic business function that adds value to a finished product. It can also include the
procurement of machinery and other equipment needed for production processes as well as
spare parts..
 ”Materials management deals with controlling and regulating the flow of material in relation
to changes in variables like demand, prices, availability, quality, delivery schedules etc.”
 ” Materials management is the planning, directing, controlling and coordinating those
activities which are concerned with materials and inventory requirements, from the point of
their inception to their introduction in to the manufacturing process. It begins with the
determination of materials quality and quantity and ends with its issuance to production to
meet customer’s demand as per schedule and at the lowest cost.”
 “Materials management is concerned with planning, organizing and controlling the flow of
materials from their initial purchase through internal operations to the service point
through distribution.”
 “Materials management is a scientific technique, concerned with planning, organizing and
control of flow of materials, from their initial purchase to destination.”
 “Materials management can be defined as that function of business that is responsible for
the coordination of planning, sourcing, purchasing, moving, storing and controlling materials
in an optimum manner so as to provide service to its customer, at a pre-decided level at a
minimum cost.”
 Essentially, materials management is the process of uniting the activities involved in the
acquisition and use of materials employed in the production of finished goods.

2. What are the activities of material management?

 Activities of Materials management is simply the process by which an organization is
supplied with the goods and services which it requires to achieve the objectives of buying,
storage and movement of materials.
  It is concerned with the flow of materials from suppliers to the organizational stores and to
the user in the production department.
 It is related to planning, procuring, storing and providing the appropriate materials of right
quality, right quantity at right place in right time so as to coordinate and schedule the
production activity in an integrative manner in the organization.
 It includes activities of purchase of various types of materials, manage and control of their
storage, and flow and supply of these materials to various places.
 The materials planning, purchasing, inventory planning, storage, inventory control,
materials supply, transportation and materials handling are the activities which are part of
the materials management.
 Almost all the organizations, regardless of their nature, have the requirement of proper and
efficient management of materials.
 Furthermore, both real and contrived shortage of materials make materials management an
important and difficult organizational function.
 The reason is that material, especially components and sub-assemblies, have specific uses
and have low flexibility and they need more care in procurement, storage handling, and
distribution.
3. .Discuss the two types of forecasting?
 Most businesses aim to predict future events so they can set goals and establish plans.
 Quantitative and qualitative forecasting are two major methods organizations use to
develop predictions.
 Understanding how these two types of forecasting vary can help you decide when to use
each one to develop reliable projections.
 In this article, we define quantitative forecasting and qualitative forecasting and share the
pros and cons of each method.

A. Quantitative forecasting
 Quantitative forecasting is the act of making business predictions using exact numbers. For
example, a theme park manager might predict ticket sales during a holiday weekend by
examining data from that weekend over the past five years.
 When evaluating information for quantitative forecasting, you can weigh recent data more
heavily for a more accurate depiction of future trends.
 Quantitative forecasting models are used to forecast future data as a function of past data.
 They are appropriate to use when past numerical data is available and when it is reasonable
to assume that some of the patterns in the data are expected to continue into the future.
 These methods are usually applied to short- or intermediate-range decisions. Examples of
quantitative forecasting methods are last period demand, simple and weighted N-Period
moving averages, simple exponential smoothing, poisson process model based forecastin
and multiplicative seasonal indexes.
Here are some common types of quantitative forecasting:
 1. Naive method: Businesses review historical data and assume future behavior will reflect
past behavior.
2. Straight-line method: Businesses evaluate recent growth and predict how growth might
continue influencing data.
3. Seasonal index: Businesses analyze historical data to find seasonal patterns.
4. Moving average method: Businesses determine averages over a large time period.
B. Qualitative methods:
 These types of forecasting methods are based on judgments, opinions, intuition, emotions, or
personal experiences and are subjective in nature.
 They do not rely on any rigorous mathematical computations.
 Qualitative vs. quantitative methods
 Qualitative forecasting techniques are subjective, based on the opinion and judgment of
consumers and experts.
 they are appropriate when past data are not available.
 They are usually applied to intermediate- or long-range decisions.
 Examples of qualitative forecasting methods are citation needed informed opinion and
judgment, the Delphi method, market research, and historical life-cycle analogy.
4. What are the consequence takes place after inspection?

The consequence takes place after inspection

1. It Provides an "Out"
2. Safety.
3. Reveal Illegal Additions or Installations
4. Protection
5. Negotiating Tool
6. Forecast Future Costs
7. Determine "Deal-Breakers"
8. Learn to Protect Your Investment
9. Reveal the Big Picture
10. Insurance
1. It Provides an "Out"
 A quality home inspection can reveal critical information about the condition of a home and its
systems. This makes the buyer aware of what costs, repairs and maintenance the home may
require immediately, and over time. If a buyer isn't comfortable with the findings of the home
inspection, it usually presents one last opportunity to back out of the offer to buy.

2. Safety

 A home inspection can detect safety issues like radon, carbon monoxide, and mold, which all
homes should be tested for. Make sure that your home-buying contract states that should such
hazards be detected, you have the option to cancel the offer to buy.
 3. Reveal Illegal Additions or Installations

 A home inspection can reveal whether rooms, altered garages or basements were completed
without a proper permit, or did not follow code, according to Chantay Bridges of Clear Choice
Realty & Associates. "If a house has illegal room additions that are un-permitted, it affects the
insurance, taxes, usability and most of all the overall value. In essence, a buyer is purchasing
something that legally does not exist," she explains. Even new homes with systems that were
not installed to code will become the new homeowners' financial "problem" to fix (and finance).

4. Protection

 Home inspections are even more critical if you are buying an "as-is" foreclosed property or short
sale. Dwellings that have been boarded often develop hazardous mold problems, which are
costly to remedy and pose health concerns. Greg Haskett, VP of shared services at HomeTeam
Inspection Service says it's common for home inspectors to find that copper plumbing lines and
outdoor compressors have been removed from foreclosed properties by people trying to sell
copper to recyclers for money.

5. Negotiating Tool

 Realtor Jennifer De Vivo of Orlando-based De Vivo Realty says the home inspection report
presents an opportunity to ask for repairs and/or request a price reduction or credit from the
seller. Work with your realtor to understand what requests can and should be made to
negotiate a better deal.

6. Forecast Future Costs

 A home inspector can approximate the installation age of major systems in the home like
plumbing, heating and cooling, and critical equipment like water heaters. They can diagnose the
current condition of the structure itself, and tell you how long finishes have been in the home.
All components in the home have a "shelf-life." Understanding when they require replacement
can help you make important budgeting decisions, and it will determine what type of home
insurance coverage or warranties you should consider.

7. Determine "Deal-Breakers"

 De Vivo suggests that home inspections can help buyers identify how much additional money or
effort they are willing and able to spend to take the home to a condition that is personally
acceptable. If you are unwilling to repair issues like faulty gutters, cracked walls, or ceilings,
perhaps you are not ready to end your home buying search.

8. Learn to Protect Your Investment

 The home inspector is a valuable educational resource. They can suggest specific tips on how to
maintain the home, and ultimately save you thousands of dollars in the long term, according to
De Vivo.

9. Reveal the Big Picture

 Haskett advises that people use home inspection to understand the nuances of what may be the
biggest purchase they ever make. "People fall in love with a piece of property based on the color
of the walls, the location of the home, or something else; they are completely blind to the issues
that can make that dream home a nightmare," he says.

10. Insurance

 Some insurance companies will not insure a home if certain conditions are found, or without the
presence of certifications like Wind Mitigation and four-point inspections, according to Haskett.
"Qualified home inspectors can do these things at the same time as their other services and save
the home buyer time and money in the long run."
5. Define purchasing procedure, objectives
PURCHASING PROCEDURE:-
 A purchasing procedure is outlines the process of obtaining goods and services through your
supply chain.
 As a business, you need to purchase goods and services to meet your needs, in turn, meeting
your customers’ needs.
 Customers want and expect quality in the services or products they purchase. As a business, you
want and expect the same from your suppliers.
 Every business needs an efficient method to manage its purchasing. How well your company
implements its purchasing procedure can have a major impact on its performance, profit, risk,
and reputation.
Following are the objectives of purchasing:
 To maintain continuity in supply
 To maintain quality standards
 To avoid duplication, wastage and obsolescence
 To sustain organization’s competitive position
 To maintain good image of the organization
 To develop alternate sources of supply
 To maintain continuity in supply – The purchasing function needs to ascertain that the materials,
supplies and equipment are available in continuity, to avoid any disruption in production and
maintain a production schedule. This also requires investments to be made in reserve
inventories. The efficiency though can only be achieved if these factors are properly balanced
that is dependent on experience, assessment of planned activities and activities forming part of
purchasing authority.
 To maintain quality standards – The purchasing function should ascertain that the purchased
materials should be of desired quality such that the goods can be purchased as per
specifications and quality standards are maintained.
 To avoid duplication, wastage and obsolescence – The purchasing department head should
possess accurate knowledge of items in hand and material requirements for a set period of time,
to take informed decisions on both long range as well as short range plans. This is very
important to avoid any duplication, wastage and obsolescence of the items purchased.
 To sustain organization’s competitive position – The purchasing authority is responsible for
evaluating his specifications on purchasing the right material. This will help ensure that the
quality standards maintained are neither higher nor lower when compared to those of arch
rivals as well as to maintain the goodwill of the organization in the industry.
 To maintain good image of the organization – The purchasing agent should build a good image
of the organization before the vendors for smooth functioning of the purchasing operation as
well as to explore new areas and materials, apart from reducing their costs and enhancing
product quality.
 To develop alternate sources of supply – The purchasing department should identify alternate
sources of supply to increase the bargaining power of the buyer and cut down on the purchase
expenditure. This also eases down the pressure when a particular supplier fails to deliver the
required items; the same can be sourced from the selected alternate suppliers.
6.Discuss the features of good forecasting?
 There are various methods of forecasting demand of product in market. Of them, some are very
costly and a few are cheap. Some forecasting methods are flexible and some require skill and
sophistication. Therefore, there is a problem of choosing the best method for a particular
demand situation.
The criteria of a good forecasting method They are:
1. Plausibility
 The management should have good understanding of the technique chose and they should have
confidence in the technique adopted. Then only proper interpretation will be made.

2. Simplicity
 The method chosen should be of simple nature or ease of comprehension by the executives.
 Elaborate mathematical and econometric procedures are less desirable, if the management
does not really understand what the forecaster is doing.
3. Economy
 Cost is a primary consideration which should be weighed against the importance of the forecasts
to the business operation.
 There is no point in adopting very high levels of accuracy at great expense, if the forecast has
little importance in the business.
4. Availability
 Immediate availability of data is a vital requirement in forecasting method. The technique
should yield quick and meaningful result.
 Delay in result will adversely affect the managerial decision.
  To conclude, the ideal forecasting method is the one which yields good returns and costs in
accuracy meets new circumstances with flexibility.
7. By what situation the organizations select the buying or making decision discuss?
 A make-or-buy decision refers to an act of using cost-benefit to make a strategic choice between
manufacturing a product in-house or purchasing from an external supplier. It arises when a
producing company faces a diminishing capacity, experiences problems with the current
suppliers, or sees changing demand.
 The make-or-buy decision compares the costs and benefits that accrue by producing a good or
service internally against the costs and benefits that result from subcontracting. For an accurate
comparison of costs and benefits, managers need to evaluate the benefits of purchasing
expertise against the benefits of developing and nurturing the same expertise within the
company.
 A make-or-buy decision refers to an act of choosing to develop a product in-house or outsource
its production from external vendors.
 Companies use the total transaction costs accrued in developing products to reach a make-or-
buy decision.
 Make-or-buy decisions reward firms with a competitive advantage and reduce the cost of
production and capital investment.

Understanding Make-or-Buy Decisions

 Managers must incorporate in-house production costs when considering in-house production. It
includes all the transaction costs involved in creating the product or service. It can also include
extra labor needed for production, monitoring costs, storage requirements costs, and waste
product disposal costs resulting from the production process.
 Similarly, businesses must focus on both the production and transaction costs when considering
outsourcing from outside suppliers. For example, the product’s price, sales tax charges, and
shipping costs must be factored in. Companies must also include inventory holding costs, which
comprise warehousing and handling costs, as well as risk and ordering costs.
 The make-or-buy decision is sometimes treated as a financial or accounting decision. While it is
important to conduct an accounting assessment and settle for the low-cost approach, it is more
crucial to understand the basis of the decision.
 Thus, companies must consider the strategic dimension of make-or-buy choices because they
determine the profitability of the company and play an important role in its financial health.
They can impact corporate strategy, core competence, cost structure, customer service, and
flexibility.

Make-or-Buy Decision Triggers

 A company’s decision on whether to make or buy is based on its core competence. The
production cost and quality problems are the major triggers of a make-or-buy decision. Other
factors are managerial decisions and a company’s long-term business strategy that dictate the
current operations pattern.
 Historical policy decisions may also compel a company to consider in-sourcing or outsourcing.
Businesses can use such patterns to procure some parts of services from outside suppliers
regardless of the company’s capability. Within the framework, the trend towards in-sourcing can
be attributed to better quality control, existing idle production capacity, or unsatisfactory
performance of outside suppliers.
 In contrast, factors that may trigger a company to outsource a part rather than produce
internally include the need for multiple sourcing, lack of internal expertise, cost reduction, the
introduction of a new product or modification of an existing product or service, and reduced risk
exposure. A company with a previous reputation for successfully providing outsourcing services
may be considered to sustain a long-term relationship.

Make-or-Buy Decision Criteria

 Setting up a standard make-or-buy process that applies to all companies is a complicated

process. It is partly due to companies’ distinct behavior patterns and the fact that businesses
operate in different business environments that are unique to each business. However, cost
accounting remains the primary dimension of the make-or-buy decision.
 Companies evaluate outsourcing to determine if the current overhead costs can be minimized to
access new resources. While cost remains the hallmark of any business decision, other factors
such as strategic, technological, core competency, risks, and relationships, also constitute
outsourcing decisions, not to mention factors involved in developing and introducing a new
product.

Benefits of a Make-or-Buy Decision

 A make-or-buy decision framework relates to autonomy, and a company selects from the many
advanced options to account for various factors associated with outsourcing.

1. Lower costs and higher capital

 One of the most notable advantages that a company enjoys when embracing a make-or-buy
decision approach is that it can lower costs and increase capital investments, regardless of
whether it decides to make materials in-house or subcontract from an external vendor.

2. Source of competitive advantage

 A rigorous make-or-buy analysis can also act as a source of competitive advantage. For example,
a company can increase the value it delivers to customers and shareholders from its core service
and skills. It can also stay flexible by adopting a make-or-buy decision approach.
 Such a company is better placed to weather the storm of a market downturn. To realize the
benefits, companies must consider the internal and external environment in which they
operate. In particular, the culture in which such decisions are reached, and the agenda of the
parties involved can influence the decisions and their implementation, as well as the
sustainability of the policy.
 8. Discuss the Objectives, functions and types of inventory?
A. The objectives of inventory management are as follows:
 To ensure a continuous supply of materials and stock so that production should not suffer at the
time of customers demand.
 To avoid both overstocking and under-stocking of inventory.
 To maintain the availability of materials whenever and wherever required in enough quantity.
 To maintain minimum working capital as required for operational and sales activities.
 To optimize various costs indulged with inventories like purchase cost, carrying a cost, storage
cost, etc.
 To keep material cost under control as they contribute to reducing the cost of production.
 To eliminate duplication in ordering stocks.
 To minimize loss through deterioration, pilferage, wastages, and damages.
 To ensure everlasting inventory control so that materials shown in stock ledgers should be
physically lying in the warehouse.
 To ensure the quality of goods at reasonable prices.
 To facilitate furnishing of data for short and long-term planning with a controlled inventory.
 To supply the required material continuously.
 To maintain a systematic record of inventory.
 To make stability in price.
B. Function of inventory management are as follows:
 The main function of inventory is to provide operations with an ongoing supply of materials. To
achieve this function effectively, your business should strive to find a sweet spot between too
much and too little, without ever running out of stock. This successful balance will improve cash
flow and profitability, and keep your company running smoothly.
 Inventory is there to provide you business with exactly the right amount of resources: not so
few that you run out of materials, and not so many that you accumulate more than you can use.
 The function of inventory is to have what you need when you need it, without accumulating
more than you can use. Aim to only keep on hand an amount that your business will turn over in
a reasonable time frame. There are industry averages for inventory turnover rates, and these
averages make useful guidelines and target amounts. However, it is more important that your
business maintain adequate supplies without generating clutter than that you meet a targeted
average benchmark.
 If you purchase and store too much inventory, your cash flow may suffer, because your cash is
tied up in items that are sitting on your shelves unused or unsold rather, than being available for
immediate needs such as rent and payroll. Excessive inventory amounts can also cost you
money in storage and handling, and occupy space that could be better used for other purposes.
 If you don’t have enough inventory, you won’t be able to meet customers’ needs and they could
end up taking their business elsewhere. This loss of business may not be just a matter of losing a
particular sale on a particular day, but also losing longer term business if your customers come
to believe that other alternatives are more dependable. On the surface, it may seem that
keeping lower inventory levels saves you money in purchasing expenses, but it will cost you
more in lost sales but you won’t have enough product on hand to sell.
 Inventory levels will most effectively fulfill their purpose, if you develop successful systems for
managing and replacing supply. Create metrics for optimal inventory levels, based on sales
records over time. Identify the critical points at which you should reorder, and introduce digital
or paper systems for communicating to your purchasing department when inventory levels drop
below these points.
 Build relationships with suppliers who can resupply your stock quickly if you experience a
sudden surge in demand. It’s worth paying extra to restock your inventory quickly in an
emergency, as long as you use less expensive options as your default, and you don’t allow stock
to drop to precarious levels too often
C. types of inventory
 The four types of inventory most commonly used are Raw Materials, Work-In-Process (WIP),
Finished Goods, and Maintenance, Repair, and Overhaul (MRO). You can practice better
inventory control and smarter inventory management when you know the type of inventory you
have. That includes choosing the best inventory management software to keep track of all that
inventory.
1. Raw Materials
 Materials that are needed to turn your inventory into a finished product are raw materials.
These inventory items are bits and pieces of component parts that are currently in stock but
have not yet been used in either work-in-process or finished goods inventory.
 There are two types of raw materials: direct materials—which are used directly in finished
goods, and indirect materials—which are part of overhead or factory costs.
 Inventory example: For example, direct raw materials might be leather to make belts for your
company would fall under this category. Or, if you sell artificial flowers for your interior design
business, the cotton used would be considered direct raw materials, too.
Indirect raw materials might be lightbulbs, batteries, or anything else that indirectly contributes
to keeping your shop running.
2. Work-In-Process
 Inventory that is being worked on is Work-In-Process (WIP), just like the name sounds. From a
cost perspective, WIP includes raw materials (plus, sometimes labor costs) that are still “in
production” when the accounting period ends.
 In other words, whatever direct and indirect raw materials your business is using to create
finished goods is WIP inventory.
 Inventory example: If you sell medical equipment, the packaging would be considered WIP.
That’s because the medicine cannot be sold to the consumer until it is stored in proper
packaging. It’s literally a work-in-process.
 Another example would be a custom wedding dress that’s not quite finished when the end of
the fiscal year rolls around. That lace, silk, and taffeta are no longer raw materials, but they’re
not quite a “finished goods” wedding dress, either.
3. Finished Goods
 Maybe the most straightforward of all inventory types is finished goods inventory. That
inventory you have listed for sale on your website? Those are finished goods. Any product that is
ready to be sold to your customers falls under this category.
 Inventory example: Finished goods could be a pre-packaged fruit salad, a monogrammed
bathrobe, or a custom-built laptop ready for an employee to use.
 4. Overhaul / MRO
 Also known as Maintenance, Repair, and Operating Supplies, MRO inventory is all about the
small details. It is inventory that is required to assemble and sell the finished product but is not
built into the product itself.
 Depending on the specifics of your business, this inventory might be in storage, at a supplier, or
in transit out for delivery.
 Inventory example: For example, gloves to handle the packaging of a product would be
considered MRO. Basic office supplies such as pens, highlighters, and paper would also be in this
category.
9. Elaborate the various methods of describing the quality of a product?
 Quality control methods of products are strategic procedures that ensure the maintenance or
improvement of a product's quality. Generally, these processes include training employees,
creating measurable standards for output quality, and periodically testing items to detect any
inconsistencies.
 With quality management, businesses will enhance the visibility of issues within their
manufacturing practices, allowing for corrective actions to be made. Quality testing also
guarantees that end products fulfill all production requirements so that consumer expectations
can be met.
 Strategies for thorough quality assurance are implemented throughout various industries,
ranging from automobile manufacturing to food production. While procedures will vary
depending on what item is being created and sold, there are 2 main approaches that all
businesses must consider for their management systems - inspection and statistical quality
control.
 Various elements of production - including machinery, materials, and methodology - must be
systematically evaluated and controlled to create goods that meet standards of quality.
1. Inspection
 Inspection is a predominant quality control process and it requires organizations to perform
visual and testing examinations on the output and manufacturing processes. This evaluation
occurs throughout each step of production - from input, transformation, to output. The 3
important aspects of quality assurance inspections include-

1.1. Product Inspection

 Organizations must assess an item's quality and isolate defective products to prevent them from
being sold.
 For efficient quality control, inspections should occur regularly. When and how frequently these
tests should be done is determined by the company's budgets. However, it is important to keep
in mind that skipping the inspection stage altogether will lead to loss of resources due to flawed
outputs.
 This quality control process involves thoroughly assessing all items of a product. Using this type
of product quality control will make sure there is more accuracy and will eliminate any chance of
selling flawed products.
 The 100% inspection method is typically implemented to evaluate valuable goods, like gold and
silver, or when items are prone to becoming faulty during production processes, like meats and
produce.
 When conducting 100% inspections, it is necessary to have data about the manufacturing
process on hand. Using inventory analysis software would make this easier because users can
keep track of wasted items and manage their inventory of finished goods.
 However, this method to control quality assurance can be difficult for manufacturers because
examining every single item can be costly and can cause some products to be unusable. For
example, all bakery goods cannot be inspected because it can lead to broken and unmarketable
food items.
1.2. Sample Inspection
 Sample inspection, or partial inspection, uses only a select quantity of a product for evaluation
and its results will lead to either accepting or rejecting the entire unit. If a sample is deemed
poor quality, businesses may conduct a 100% inspection of the entire stock to confirm the
original report.
 This process saves money and time for organizations. It also promotes actively monitoring goods
at different stages of manufacturing because it can be done quickly.
1.3. process Inspection
 Process inspection assesses the total quality of raw materials, equipment, and machinery that is
used during production. These elements contribute to the creation of a final product and
thoroughly inspecting them will ensure high-quality outputs. Process quality inspection
minimizes process bottlenecks and reduces wasted resources.

1.4. Inspection Analysis

 Once all inspections are completed, organizations can analyze the information and locate the
source of defective products. Using data from inspections, management teams can further
understand their production process and assess any necessary changes for quality
improvement. They can also confirm that their products meet specifications and calculate extra
costs to repair defective products.
 An efficient way to streamline analysis is to use a web-based inventory management system
because it will provide reports with key insights about spending and waste. This allows
organizations to make informed decisions on whether to change raw materials, purchase new
machinery, or continue with their business plans.
2. Statistical Quality Control of product
 Statistical quality control utilizes statistical measures, such as sampling and probability to uphold
quality standards. Industries responsible for mass production or continuous processes
commonly use statistical deduction as a tool for quality assurance.
This method can be split into 3 parts-
 1. Acceptance Sampling and Analysis
 For this approach, a unit of final products must be sampled based on its defining traits and
functions. Using acceptance sampling, the batch is tested to determine if it fits standard quality
and specifications.
 Some defective items can be tolerated and sold in the market, depending on a company's
established standards. Acceptance sampling clarifies the degree of marketability and guarantees
that only a certain percentage of faulty products are accepted.
 To maximize productivity, more samples can be analyzed and the sample size can be increased
to represent more products.
2. Process Control and Control Charts
 Process sampling should be conducted in tandem with a control chart, which are graphs that
indicate changes in manufacturing. This is a common tool for statistical process control because
it can identify the tolerable limits of variations in products.
 Due to the difficulty of correcting issues caused by probability, differences in quality are
acceptable only if it is contained between the range of upper quality and lower quality levels. A
control chart can also be used for variations caused by humans or machines and can aid with
sourcing the issue. To create a control chart, businesses can follow 3 simple steps.
 Extract a sample from the unit of goods and measure the characteristics that define its quality,
such as weight.
 Calculate the mean of the measurements and quantify the range of dispersion.
 With this data, graph, and plot the corresponding numbers.
 3. Corrective Measures
 The metrics gathered from these statistical methods will increase the visibility of the problems
within operational processes. Quality tools, like control charts, will help managers to identify
product deviations that occur beyond tolerable limits, to which they can then further investigate
and take corrective action.
10. There are two basic systems controlling inventories explain them.
There are two key types of inventory control systems.
1. Perpetual inventory system.
 A perpetual inventory control system tracks inventory in real-time. As soon as a product is sold,
its barcode is scanned and it is removed from a global inventory database. When one is
received, it is scanned and added to the inventory database. Each part of the system has access
to the same database and information.
 A perpetual inventory provides a highly detailed view of inventory changes and an accurate
accounting of inventory levels without the need for manual inventory counts. It is suitable for all
sizes of businesses and is necessary for stores with high sales volume or multiple locations.
2. Periodic inventory system.
 A periodic inventory system is kept up to date by a physical count of goods on hand at specific
intervals. With a periodic inventory system, a business will not know how many products it has
until after the physical count is completed. It is easy to see how this can be a problem when it
comes to filling orders. Your stock count was accurate weeks or months ago, but now when a
customer wants to buy, you have to physically check your inventory to see if you have it to sell.
 Counting stock manually is a process that takes a lot of time and manpower. Each and every SKU
has to be counted. This would not work well for a large store. A periodic system is only
acceptable for smaller businesses with minimal amounts of inventory.
11. Discuss the Functions of storage
 Functions of Storage:
1. Creation of Time Utility:
 There are products which are produced continuously throughout the year while consumption is
seasonal. Storage enables goods to be made available to buyers whenever they are in demand.
2. Creation of Place Utility:
 Another function of storage is to make goods available to a buyer at his place of business when
he needs them. It creates place utility by warehouse location, e.g., a retailer can obtain goods
within a few hours or minutes by contacting the wholesaler’s storage.
3. Finance Function:
 Storage helps to obtain or raise loans by providing collateral security of the goods stored.
4. Creation of Form Utility:
 Certain commodities improve in quality or desirability while in storage, e.g., curing of tobacco,
liquor etc. Thus, storage created form utility in certain goods.
5. Stabilising Prices:
 Another function of storage is to stabilise prices by making the goods available in the market
whenever there is demand.
6. Regular Production:
 Storage performs the function of smoothing out irregularities in production. In the present age
of competition, every manufacturer tries to produce in anticipation of demand so as to provide
free supply in the market well in time.
7. Ability to Face Natural Calamities:
 Storage enables the society to face natural calamities such as floods, famine, drought etc. In
such emergencies, commodities can be made available from the storage.
8. Reduction of Risk:
 Storage reduces the risk of owner of goods as the owner of goods can store merchandise with
reputed warehouses which absorb a part of the risk.
9. Saving in Transportation Costs:
 Storage allows accumulation of stocks to be transported in bulk quantities so as to reduce the
transportation costs.
10. Economies of Large-Scale:
 Storage enables a concern to achieve the economies of large-scale production, large-scale
buying and selling, etc. as the goods may be kept in stores.
12. Identity and explain the steps in the purchasing process.
 The purchasing process is important because it gives businesses a structured way to address
their needs. It also allows for more informed financial planning. An effective purchasing process
can help prevent theft, fraud or irregular spending since it requires documenting all business
transactions.
 Below are the steps of a typical purchasing process:
 1. Identify the need
 The purchasing process begins when the business recognizes that they have a need for a
product, tool or service that will enhance their operations. Team members can help identify
needs as they complete their daily work by notifying their supervisors of any challenges they
encounter. Once the organization identifies a need, they can begin the purchasing process.
2. Specify the requirement
 During this stage, leaders investigate the need further and come up with a plan for exactly what
they require. For example, a frequent shortage of printer paper becomes the need for weekly
deliveries of 500 sheets of inkjet printer paper to ensure a continuous supply.
 The person who identified the need often works with other team members and management to
come up with the right solution to the problem, especially when concerning a larger purchase.
For example, the employee who identified the need for more printer paper may have the power
to specify the requirement on their own, while the need for new computer systems throughout
the entire office likely requires input from others.
3. Find and choose a supplier
 Find potential suppliers who can provide the specific product or service you want to purchase.
You can conduct your own research online or contact those in your professional network to ask
for recommendations. If shipping costs are a factor in your purchase, look for businesses in your
local area.
 During this stage, it is a good idea to consider several suppliers and compare them against one
another. When necessary, contact the supplier and request a quote or proposal from them. As
you are considering suppliers, consider factors such as cost, reliability and delivery time.
4. Negotiate costs
 In many situations, it is possible to negotiate costs with a supplier, especially when placing high-
priced orders or orders you expect to recur regularly. Contact the supplier you are considering
and ask if they are open to negotiating the price. Suppliers may negotiate if it means they can
secure a large or long-term contract for their business.
 Read more: Negotiation Skills: Definition and Examples
5. Get order approval
 Before your business can initiate the transaction, you may need to get approval for the order.
This could include working with upper management and the accounting department to ensure
there are enough available funds within the budget for the purchase. In some scenarios, the
business may also need to establish a line of credit with the supplier. If you haven't already,
explain to management why this purchase is necessary and how you achieved a reasonable
price from the supplier.

6. Place the order

 Once both sides agree to the transaction, you can formally place the order. Have both sides
agree to the specific details, such as price, delivery times, fees and installations. Get everything
in writing and have representatives from both organizations sign it. Then keep a copy of this
agreement in your files for future reference.
7. Receive and approve the order
 When the order arrives, check for any issues with the product or anything the supplier failed to
deliver on. Timeliness is key because if there are any problems, the supplier should address
them before you release the rest of the payment.
8. Review supplier performance
 Whether you work with a supplier on a onetime transaction or set up recurring transactions,
make it a regular practice to review your suppliers' deliveries for quality and timeliness. A record
of these reviews can help you identify and track any issues that might arise later in your
contract. Continue relationships with suppliers who continue to meet your business' needs.
13. Identity any three factors favoring the making decision of an item or product.
 Factors Favoring a “Make” Decision products
These factors include:
1. Costs Concerns
 When buying from outside sources is expensive, organizations opt for in-house production.
2. A Desire to Focus on Manufacturing
 Organizations intending to venture into manufacturing will select the “buy” decision.
3. Untrustworthy Suppliers
 This is common in manufacturing industries. Here, businesses have doubts about the reliability
of outsourcing partners. These doubts lead to in-house production.
4. Quality Control Requirements
 When an organization carries out production activities, they have control over product quality.
But when they outsource a part of the production, they don’t have control over the product
quality. For the best quality control, in-house production is the best option.
5. Emotional Motives
 This reason is usually overlooked when analyzing make-or-buy decisions. A company can decide
to manufacture a product or offer a service based on emotional responses such as pride or
contempt instead of logical reasoning.
6. Transportation Costs
 Sometimes, transportation costs play a key role in the make-or-buy analysis. Unstable and high
transportation costs can lead businesses to in-house production.
Other factors leading to a “make” decision include:
 Concerns about intellectual property
 Concerns about quality
 Inadequate supply of qualified suppliers
 To preserve a backup source
 Environmental considerations
 Political considerations
 Factors Favoring a “Buy” Decision
 These factors include:
A. Lack of Skills
 When a business lacks skills for manufacturing a product, outsourcing is the best choice.
Suppliers with expertise can offer the product cheaper; therefore, the “buy” option is best for a
business.
 Financial Considerations
 When manufacturing a product or providing a service is expensive, businesses turn to
outsource.
B. Lack of Facilities
 Outsourcing is a better option when the business lacks facilities or capacity, equipment,
resources, etc.
C. Low Demand Quantity
 Depending on the product quantity, a company can outsource or decide to produce. For smaller
quantities, businesses can go for a “buy” decision.
 A product or service that isn’t essential to the core business is usually outsourced.