MATERIALS MANAGEMENT

- process of management
concerned with planning,
organizing and controlling
of the flow of materials to,
through, and out of an
organization in an
integrated fashion
 MATERIALS
- any commodity used directly or
indirectly in producing a product or
service - considered as the lifeblood and
heart of any manufacturing system.
 CLASSIFICATIONS
a. PURCHASED MATERIALS
- these are the raw
materials, components, spare
parts, and items that are used
and usually do not appear in
the end product

b. WORK-IN PROCESS
MATERIALS
- these are materials that
are in the semi-finished stage.
 CLASSIFICATIONS
c. FINISHED GOODS
- these are the final products
which are ready for final delivery
or distribution

d. SUPPLIES
- these are the consumable
goods.
 AIM OF MATERIAL MANAGEMENT

To get
1. The Right quality
2. Right quantity of supplies
3. At the Right time
4. At the Right place
5. For the Right cost
PURPOSE / OBJECTIVES OF MATERIAL MANAGEMENT
•To gain economy in purchasing
•To satisfy the demand during period of replenishment
•To carry reserve stock to avoid stock out
•To stabilize fluctuations in consumption
•To provide reasonable level of client services
• Lower inventories, reduction in real cost, regular
supply of material.
• Efficient handling of material.
• Locating and developing future Executives.
 ACTIVITIES INVOLVED IN MATERIALS
MANAGEMENT/ FUNCTIONS

a.) Materials Requirements Planning

b.) Purchasing
c.) Inventory Control
d.) Expediting
e.) Transportation
f.) Materials Handling
g.) Packaging
h.) Production control
i.) Warehousing and distribution
 a. MATERIALS REQUIREMENTS
PLANNING
-encompasses the identifying,
quantifying and scheduling the
acquisition of materials and
equipment.

- necessary function in any

organization as inventory of
materials involved about 60% of
the total investment of the
organization
 MATERIALS REQUIREMENTS
PLANNING FLOWCHART
MASTER PRODUCTION OUTPUT
SCHEDULE *Forecast Demand
*Customer Orders

BILL OF MATERIAL MATERIALS INVENTORY RECORDS FILE

*Product Structure REQUIREMENTS *Current Inventory Levels
*Procurement Source PLANNING *Receipts & Withdrawals
*Lead Time

Purchasing Production Scheduling Shipping Receiving

 b. PURCHASING
-holds the responsibility for procuring goods for the project in
alignment with the specifications, standardization and in
compliance with the project schedule and budget.

Functions:
1.to select proper supplier for the materials requisitioned,
before placing an order.
2. to negotiate about the price of the materials from the
supplier.
3. to assure the quality of materials and should not be
compromised with the cost.
4. the materials should be purchased in right
quantity and quality at proper time and at
cheapest cost as possible.
5. to set proper purchase policy and procedures

Importance:

* 50% to 60% of sales turnover is spent on the

purchase of various materials

* every 1% saving achieved in purchasing results to

about 5% profit for an organization.
 c. INVENTORY CONTROL

- method where all stocks of goods

are properly and promptly issued,
accorded and preserved in the
best interest of the firm.

- monitor the stock of goods used

for production, distribution and
captive (self) consumption.
 INVENTORY
- a physical resource that a firm
holds in stock with the intent of
selling it or transforming it into a
more valuable state.
Functions:
* to meet anticipated demand
* to smooth production
requirements
* protect against stock outs
* to help hedge against price
increase
* to permit operations
IMPORTANCE
- Inventory Control can
help the business be more
profitable by identifying the
types of inventory in the
warehouse in terms of
profitability

- liquidating those
unwanted inventory, and
understanding the carrying
cost such as storage,
insurance, tax, etc. to
minimize the cost incurred.
 d. EXPEDITING
- the continuous monitoring as well as
ascertaining and maintaining the flow
and supply of materials to prevent stock
outs and stoppage of production.

factors affecting expediting:

* insufficient or zero inventories
* failure of materials handling devices
* uncertainty in demand and
production quantity.
 e. TRANSPORTATION
- involves the using of the safest and most
economical means to transport the materials to
the site where they are needed

Modes of Transportation

-aviation
-land transport
-ship transport
-pipeline
 f. MATERIALS HANDLING
- the movement of materials at the
lowest possible cost through the use of proper
method and equipment.
- applies the movement of raw
materials, parts in process, finished goods,
packing materials, and disposal of scraps.

Importance:
* reduces delays and damage
* promotes safety and improve working
conditions
* promotes productivity
* control inventory
* reduces total cost of production as materials
handling uses about 20%-25% of total
manufacturing cost.
 MATERIALS HANDLING EQUIPMENT

-industrial trucks
- automated guided vehicles
- monorails and other guided
vehicle
- conveyors
- cranes and hoist
 Why firms have implemented
Materials Management System?

- reduces the overall cost of materials

- better handling of materials
- reduction in duplicated orders
- materials will be onsite when needed
- improvement in project schedule
- quality control
- better relationship with suppliers
- reduces materials surplus
- better cash flow management
 ABC ANALYSIS
(ABC = Always Better Control)
This is based on cost criteria.
It helps to exercise selective control when confronted
with large number of items it rationalizes the number of
orders, number of items & reduce the inventory.
About 10 % of materials consume 70 % of resources
About 20 % of materials consume 20 % of resources
About 70 % of materials consume 10 % of resources
 ‘A’ ITEMS
Small in number, but consume large amount
of resources
Must have:
•Tight control
•Rigid estimate of requirements
•Strict & closer watch
•Low safety stocks
•Managed by top management
 ‘C’ ITEMS
Larger in number, but consume lesser amount of
resources
Must have:
•Ordinary control measures
•Purchase based on usage estimates
•High safety stocks
‘B’ ITEM
Intermediate
Must have:
•Moderate control
•Purchase based on rigid requirements
•Reasonably strict watch & control
•Moderate safety stocks
•Managed by middle level management
ABC analysis does not stress on items those are less costly but
may be vital
 ANNUAL COST CUMMULATIVE
ITEM % ITEM
[Rs.] COST [Rs.]
COST %
ABC
1 90000 90000
10 % 70 %
A 2 50000 140000
3 20000 160000
N 4 7500 167500
20 % 20 %
A 5 7500 175000
6 5000 180000
L
7 4500 184500
Y 8 4000 188500
9 2750 191250
S
10 1750 193000
I 11 1500 194500

S 12 1500 196000
13 500 196500 10 %
70 %
14 500 197000
15 500 197500
WORK 16 500 198000
SHEET 17 500 198500
18 500 199000
19 500 199500
20 500 200000
 VED ANALYSIS
• Based on critical value & shortage cost of an item
–It is a subjective analysis.
•Items are classified into:
Vital:
•Shortage cannot be tolerated.
Essential:
•Shortage can be tolerated for a short period.
Desirable:
Shortage will not adversely affect, but may be using more
resources. These must be strictly Scrutinized
SDE ANALYIS
Based on availability
Scarce
Managed by top level management
Maintain big safety stocks
Difficult
Maintain sufficient safety stocks
Easily available
Minimum safety stocks
FSN ANALYSIS
Based on utilization.
Fast moving.
Slow moving.
Non-moving.
Non-moving items must be periodically reviewed to prevent
expiry
& obsolescence