Material Definition

an equipment,supplies procured, stocked, moved and

utilized by an organization.

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 Definition of Material Management

Material Management is a scientific

technique, concerned with Planning,
Organizing &Control of flow of
materials, from their initial purchase to
destination.

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 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
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PURPOSE 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

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 Objective of Material
Management
Primary Secondary
•Right price •Forecasting
•High turnover •Inter-departmental
•Low procurement
•& storage cost
harmony
•Continuity of supply •Product
•Consistency in improvement
quality •Standardization
•Good supplier •Make or buy
relations decision
•Development of
•New materials &
personnel
•Good information products
system •Favorable reciprocal
relationships
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Four basic needs of Material Management
1.To have adequate materials on hand when
needed
2.To pay the lowest possible prices,
consistent with quality and value
requirement for purchases materials
3.To minimize the inventory investment
4.To operate efficiently

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Basic principles of material management
1. Effective management & supervision
It depends on managerial functions of
• Planning
• Organizing
• Staffing
• Directing
• Controlling
• Reporting
• Budgeting
2. Sound purchasing methods
3.Skillful & hard poised negotiations
4.Effective purchase system
5.Should be simple
6.Must not increase other costs
7.Simple inventory control programme
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Points to remember while purchasing
•Proper specification
•Invite quotations from reputed firms
•Comparison of offers based on basic price, freight‫& الشحن‬
insurance, taxes
•Quantity & payment discounts
•Payment terms
•Delivery period, guarantee
•Vendor reputation
(reliability, technical capabilities, Convenience, Availability, after-
sales service, sales assistance)
•Short listing for better negotiation terms
•Seek order acknowledgement

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Storage
•Store must be of adequate space
•Materials must be stored in an appropriate place
• in a correct way
•Group wise & alphabetical arrangement helps in
•identification & retrieval
•First-in, first-out principle to be followed
•Monitor expiry date
Issue & use
Can be centralized or decentralized

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 Inventory control

It means stocking adequate number and

kind of stores, so that the materials are
available whenever required and wherever
required.
Scientific inventory control results in
optimal balance

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Functions of inventory control

•To provide maximum supply service,

consistent with maximum efficiency &
optimum investment.

•To provide cushion‫ تحذير‬between

forecasted & actual demand for a material

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•Re-order level: stock level at which fresh
order is placed. This equal to =
Average consumption per day x lead
time + buffer stock
•Lead time: Duration time between placing
an order & receipt of material
•Ideal – 2 to 6 weeks.

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 Raw materials:- These are materials that are
used in the product which is in an
unprocessed condition.

 Purchased Parts:- These are the items used in

the assembly of the product.

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 In-progress materials:- They are called ‘work
in progress’ inventories. These goods require
further processing.

 Finished materials:- These are fully

manufactured goods, inspected and ready for
delivery to the customers.

 Supplies:- These are consumable goods used

in the process of manufacturing.

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 Four factors affecting the purchase of raw materials
are
1) Quality :- The suitably of an item to accomplish the
intended work.
The raw materials should satisfy the following
requirements.
i. A- Efficiency of the material.
ii. B- Cost and the shelf –life ‫عمر المنتج‬.
iii. C- For equipments, power consumption and power
requirement.

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 From the inventory point of view, quantity standards
are decided on the following parameters;
i. A- Maximum inventory
ii. B- Minimum inventory
iii. C- Standard order
iv. D- Reorder point
3) Price
4) Delivery Date

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 Definition:- It is a systematic study of every
element for it’s cost in a part, material or service to
make certain that it performs it’s function at the
lowest possible cost.
 Benefits of value analysis:-
i. A- Decrease in existing cost of the product or
service.
ii. B- Unnecessary expenditure is identified and
eliminated.
iii. C- Product value improves for new materials and
processes.
iv. D- More profits.
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 In this technique (n) number of questions are applied, like:-
o what must I do?
o What else does the item do?
o What does it cost?
o What else will the job do?
o What will be alternative costs?

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Centralized :- the purchasing
procedure of materials for
different department is
done together from one
purchasing department.
This is seen in small
organizations.
Advantages
 A- Efficient system
 B- Bargaining capabilities
increased‫زيادة القدرة على‬
‫المفاوضة‬
 C-Good raw material
obtained at lower price
Decentralized:- different
department purchase their
requirement seperately.
This is basically seen in
large organizations.
Advantages
 A-Flexible purchasing
system
 B- Procurement‫ الش راء‬is
faster
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 The supplier or the person who sells the required
materials or services for the production is known as a
vendor.

The purchase of raw materials/service from a specific

vendor is known as the vendor development.

There are four stages of vendor development:-

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Four stages of vendor development

Stage Name Development

Survey stage Identifying the potential
1st sources of suppliers.
Seeking information.
Provisional vendors list.
Enquiry stage Analysis of information in
standard enquiry format.
2nd
Accreditation, FDA
approval, ISO certification.
Personal visits.
Negotiations and Quality control
specifications, clarification,
3rd selection stage
credit, quantity discounts.
Experience and Performance appraisal,
Quality, delivery time.
4th evaluation stage

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The following sources are considered for information
 Trade directories‫ دالالت تجاريه‬:-
 Trade journals:- e.g. Pharmatimes
 Telephone directories
 Supplier’s catalogue
 Salesmen

Other ways are like interchanging‫ تبادل‬of

information with other companies, tracing‫ البحث‬of
public tenders and advertisements in the press.

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 After getting the information of the suppliers, detailed
analysis of the supplier is being carried out. A
comparison is being made between the different
suppliers on basis of the following points:-

a. Technological competition,
b. service competition,
c. price competition,
d. delivery time.

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The following aspects can be verified by the first hand
visit:-
 Internal facilities of the vendor
 Financial adequacy, stability and reputation of the

vendor
 Location of vendor’s factory
 After sales service
 Industrial relations

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 The vendors who clear the enquiry stage are selected and
negotiations are being carried out with them.

 The various aspects such as credit‫الثقة‬, quantity discount,

quality specifications are being discussed.

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 The buyer evaluates and appraises the performance of
the vendor.
 The objective is to improve the performance of the

vendors.
Few ways of evaluating a vendor are:-
o Categorial method
o Weighted point method
o Cost ratio method

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The buyer sets up some category on which the evaluation of the vendor is done.
Specimen‫ عينه‬of supplier’s evaluation form is given below.
Grading

Factors Always Usually Seldom Never

9 8 7 6 5 4 3 2 1 0

Supplies are as per

quantity selected
Deliveries are on
time

Rigorous ‫دقيق‬follow
up is not necessary
Willing to
accommodate
‫استيعاب‬when
production schedules
are suddenly
changed
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Here the rating points are divided between quality,
delivery and price.

For example quality – 50 points

delivery- 30 points
price – 20 points so total is 100
points.

The rating can be obtained by following equation.

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 Quotations ‫الع روض‬:- It is a kind of an inquiry
done to know whether the vendor can supply the
desired material and at what price.
 They are not the purchase order. They just contain

all the details including freight, taxes and many

other costs.
 The highly used quotation techniques are
 Spot quotations
 Floating a limited enquire

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 Spot quotations:- this is basically used for the small
items not related to the technical purpose.

The prospective buyer goes to the market and gets the

quotations from the different suppliers.

 Floating a limited enquire:- this method is used when the

value of the purchase is small. In this technique the
reliable vendors are called upon and asked to provide the
quotations.

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 Tenders:-
It is a written letter or a published
document that is aimed at finding the price for
procuring‫ للحصول على‬certain materials.

Tenders are invited from recognized firms. A few

types of tenders are:
# single tender
# Open tender
# Closed tender or limited tender

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 Single tender:- It is invited from one reliable
supplier. This kind of tender is floated‫ يط رح‬only
when the items are required urgently.
 Open tender:- Also known as ‘ press tender’. This
is used when the value of item to be purchased is
very high. It is used to locate more suppliers.
In this tender procured, a small amount of the
deposit money is taken from the supplier so that
they do not withdraw from the submitted rates.
‫هنا المزود ال يستطيع االنسحاب من االسعار المقدمة‬

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 Closed tender or limited tender (Negotiations):- It is done
to arrive at the mutual understanding between the
supplier/vendor and the buyer.

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What’s the need for negotiation?
@ prices are related to large volumes or to a large
value.
@ terms and conditions are required for large volumes.
@ contract is desired for a longer period.
@ variations in quantity to be purchase are possible.
@ when supplies or services can be obtained from only
one source.
@ when no acceptable quotations‫ عروض‬are received
from the other vendors.

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Process of negotiations:- It is a kind of win-win situation.
Both the parties try to benefit to the maxima through the
negotiation.
It is not a kind of bargaining but a mutual understanding
between the two parties.

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 Discounts:- They are cash concessions‫ تنازل‬offered by the vendor
to the buyer, in order to enhance the volume of the business
opportunities.
Reasons for offering discounts?????
! When there is a bulk purchase‫شراء ذو حجم كبير‬.
! When the bills are cleared immediately. ‫عند دفع الفاتورة‬
‫مباشرة‬
! And also to maintain the good rape ‫ اي عالقة وثيقة‬with
the buyer
Types of discounts:-
1) Volume contracts.
2) Deals
3) Discounts
4) Consignment terms

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# Volume contracts:- This kind of discount is offered
proportionate‫ متناسب مع‬to the volume of material ordered.

# Cash discount:- Cash discount is given on the basis of

the time of the payment done by the purchaser. The
normal credit period is 90 days.

# Cumulative discount:- It is a method of offering the

discount on the basis of actual purchases and appropriate
to the quantity range in a year.

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 The purchasing department of the company is
responsible for the purchase of all the raw materials as
well as the requirements.
The following steps are followed in the purchasing cycle.
1) Recognition of need and receipt of requisition‫المطل وب‬:
The requisition includes the following information:-
- Name
- Quality and quantity specifications
- Date by which material is required
- Place at which material is to be delivered

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2) Selection of potential sources of supply
3) Making request for quotation‫العروض‬
4) Receipt and analysis of quotations
- material specifications and quality
- price of the material
- taxes
- terms of payemeny
- place of delivery
- delivery period
- guarantee period
- validity of tender

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5) Selection of right source of supply
6) Issuing the purchase order
7) Follow-up of the order
8) Receipt of materials,reports and analysis
9) Checking and approving of vendor’s invoice for
payment
10) Closing of completed order
11) Maintenance of record and file
Purchasing cycle flow chart has been given in the
following slide.

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 Location of Stores :

It depends up on nature and value of items to

be stored and frequency with which items are
received and issued

Objectives :
 Minimum wastage of space
 Maximum ease‫ سهولة‬of operation
 Minimum handling cost‫تكلفة النقل او التدبير‬
 Minimum other operational cost

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 Functions of stores

 Maintenance of Stock (materials and

tools)

 Maintenance of hygiene‫النظافة‬,
sanitation‫الجانب الصحي‬, and pest
control‫مكافحة االفات‬
 Maintenance of material handling
equipment
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 Functions of stores

 Receiving & recording of raw materials

 Quarantine storage – Sampling & approval by QC
 Positioning & Storage
 Issuing & recording of materials
 Receiving & Dispatching‫ اتالف‬of finished goods
 Distribution

Optional functions :
 Dispensing‫توزيع‬, Maintenance of weights &
measures

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 RightDefinition :
Material handling uses the
right method to provide the right amount
of the right material at the right place, at
the right time, in the right sequence, in
the right position, in the right condition,
and at the right cost.

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Involves handling, storing, and controlling
material
 The raw materials, in-process materials and
finished goods are moved from one place to
another in the plant‫المؤسسة‬.
 Adds value through time and place utility
 Impacts space requirement, profits, quality,
safety, and productivity
 On an average, 20% of production cost is
spent on material handling system

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1. Planning principle. Plan all material handling
and storage activities to obtain maximum
overall operating efficiency.

2. System principle. Integrate as many handling

activities as is practical into a coordinated
system of operations, covering vendor,
receiving, storage,
production,inspection,packaging,
arehousing‫تخزين‬, transportation. etc.

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3. Material flow principle. Provide an
operation sequence and equipment layout
‫تصميم‬optimizing material flow.

4. Simplification principle. Simplify handling

by reducing, eliminating, or combining
unnecessary movement and/or equipment.

5. Gravity‫ نوعي‬principle: Utilize gravity to

move material wherever practical.

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6. Space utilization principle. Make optimum
utilization of space .

7. Unit size principle. Increase the quantity,

size, or weight of unit loads or flow rate.

8. Mechanization principle. Mechanize

handling operations.‫التعامل مع العمليت بطرقة الية‬

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9. Automation principle. Provide automation
to include production, handling, and
storage functions.

10. Equipment selection principle. In

selecting handling equipment, consider all
aspects of the material being handled.

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11. Standardization principle. Standardize
handling methods as well as types and sizes
of handling equipment.

12. Adaptability principle. Use methods and

equipment that can best perform a variety
of tasks and applications where special
purpose equipment is not justified.

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13. Dead weight principle. Reduce ratio of
dead weight of mobile handling equipment
to load carried.‫تخفيض نسبة المواد المفقوده‬

14. Utilization principle. Plan for optimum

utilization of handling equipment and
manpower.

15. Maintenance principle. Plan for preventive

maintenance and scheduled repairs of all
handling equipment.

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16. Obsolescence principle:‫ مبدأ التقادم‬Replace
obsolete handling methods and equipment
when more efficient methods or equipment
will improve operations.

17. Control principle. Use material handling

activities to improve control of production
inventory and order handling.

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18. Capacity principle. Use handling
equipment to help achieve desired
production capacity.

19. Performance principle. Determine

effectiveness of handling performance in
terms of expense per unit handled.

20. Safety principle. Provide suitable methods

and equipment for safe handling.

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 Safely
 Efficiently
 At low cost
 In a timely manner
 Accurately (the right materials in the
right quantities to the right
locations)
 And without damage to the materials

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 Increase in cost of raw material and finished
products
 Delay in production schedule and long
production cycle
 Waste of machine time and personnel time
 Increase in in-process inventories
 Damage or loss of material and employee
safety liabilities‫متطلبات‬
 Employee frustration and reduced morale
 Customers dissatisfaction

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 Salvage :
It is defined as the processing of materials
(items) for advantageous use or disposal of
company property, which is no longer
economically useful in its present position.

Salvage operation :
 Waste materials are properly collected and
stored at one place continuously, so that
these can form a separate batch in
production.
 Recoverable materials ‫مواد قابلة العادة استعمالها‬are
stored in a scientific way as other items
stored.

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 Disposal ‫مستهلكات‬of scrap‫المتبقية‬,
waste and surplus materials can be
effected by several way :

 Surplus material should be returned to the

original supplier. Alternatively a customer
who needs them should be explored.
 As a social obligation, some material are
defected or broken before selling them as
scrap.
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 Materials may be sold by inviting
quotations from potential buyers or
through various contracts such as fixed
price contract, varying
pricecontract,specificbids‫مزايدة‬and
negotiations.

 It is worth considering that scrap like any

other material represents money and to that
extent it has a value.

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 Containerization :

Different types of containers are used

according to the type of material.
e.g
Boxes, cartons, sacks‫اكياس‬, drus, barrels‫براميل‬,
crates‫صناديق‬,, machinery‫مكائن الية‬, and processed
timber‫اخشاب مصنعة‬
 Tank containers for bulk liquids and
dangerous goods.

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 It eliminates unproductive handling of the
materials like back-tracking‫التتبع‬ ‫اعادة‬,
rehandling‫ اعادة المعالجة‬etc.

 It reduces idle machine capacity and thus

ensures better turnover on investment.
 ‫يقلل من خمول طاقة االجهزة والمواد وهذا يساعد على زيادة العائد‬
 It reduces considerably the idle time of the

workers.‫يقلل الوقت الضائع من العاملين‬

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 The quality of the materials is also
maintained through minimum human
touches, elimination of breakages‫الكسور‬, etc.

 Every inch of the space is properly utilized.

 The issue of materials is also facilitated.

 It helps in maintaining effective production

planning and control.

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 Reduced operating costs and timely
production.

 Greater job satisfaction on the part of both

the workers and the employer.

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