CHAPTER 7

Managing Materials Flow

Materials Management Activities
• Anticipating materials requirements • Sourcing and obtaining materials • Introducing materials into the organization • Monitoring the status of materials as a current asset

7-2

McGraw-Hill/Irwin

Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

Objectives of Integrated Materials Management
• • • • • Low costs High level of service Quality assurance Low level of tied-up capital Support of other functions

7-3

McGraw-Hill/Irwin

Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

Differences Between Inbound and Outbound Transportation
• Market demand that generates the need for outbound movement is more uncertain and fluctuating • Inbound transportation tends to involve bulk raw materials, supplies, or parts • Firms exercise less control over inbound transportation due to total delivered pricing programs
McGraw-Hill/Irwin

7-4

Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

Types of Forecasts
• Demand forecast • Supply forecast • Price forecast • Long-term • Midrange • Short-term

7-5

McGraw-Hill/Irwin

Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

Total Quality Management (TQM)

7-6

the application of quantitative and human resources to improve the material services supplied to an organization, all the processes within the organization, and the degree to which the needs of customers are met - now and in the future.

McGraw-Hill/Irwin

Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

Administration and Control of Materials Flow
• Kanban/Just-in-time systems
» Kanban (Toyota Production System) » JIT & JIT II

7-7

• MRP systems
» Materials requirements planning (MRP I) » Manufacturing resource planning (MRP II)

• DRP systems
» Distribution requirements planning (DRP I) » Distribution resource planning (DRP II)
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

Benefits Resulting from Implementing Just-in-Time
• Improved inventory turns. • Improved customer service. • Decreased warehouse space. • Improved response time. • Reduced logistics costs. • Reduced transportation costs. • Improved quality of vendor products. • Reduced number of vendors. • Reduced number of transportation carriers.

7-8

McGraw-Hill/Irwin

Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

Elements of an MRP I System
Inventory transactions Customers’ orders Forecasts Engineering changes

7-9

Inventory status file (finished items, work in progress, planned orders)

Master production schedule (which products to produce, in what quantity, and when)

Bill-of-materials file (product structure and routing)

MRP I system Planned schedules and various other reports
McGraw-Hill/Irwin
Source: MCB University Press Ltd., Amrik Sohal, and Keith Howard, "Trends in Materials Management," International Journal ofCopyright © 2001 by The McGraw-Hill Companies, Inc. p.11.rights reserved. Physical Distribution and Materials Management 17, no. 5 (1987), All

Elements of an MRP II System
Order (production plan) Order (production plan)
Materials requirements planning (MRP) Capacity requirements planning (CRP)

7-10

Inventory records

No
Realistic ? Execute capacity plans Execute material plans
McGraw-Hill/Irwin
Source:Karl Copyright © 2001Big Deal about MRP II?” Winning Manufacturing 5,rights(1994), p. 2. A. Hatt, ‘What’s the by The McGraw-Hill Companies, Inc. All no. 2 reserved.

Yes

Elements of a DRP II System
Customers Distribution center Distribution center Distribution center Distribution center

7-11 7-11 a

Distribution center

Distribution center

Regional warehouse

Regional warehouse Plant warehouse

Distribution resource planning

McGraw-Hill/Irwin

Source: “How DRP Helps Warehouses Smooth Distribution,” Mondern Materials Handling 39, no. 6 (April 9, 1984), p. 53. Copyright © 2001 by Publishing Company, Division of Reed Holdings. Modern Materials Handling, copyright 1984 by CahnersThe McGraw-Hill Companies, Inc. All rights reserved.

Elements of a DRP II System (cont.)
Plant warehouse

7-12 7-11 b

Material requirements planning
Subassembly B

Final assembly (manufacturing) Part C Subassembly C

Subassembly A

Part C

Part D

Part E

Part A

Part B

Raw materials

McGraw-Hill/Irwin

Source: “How DRP Helps Warehouses Smooth Distribution,” Mondern Materials Handling 39, no. 6 (April 9, 1984), p. 53. Copyright by Cahners The McGraw-Hill Companies, Inc. All rights reserved. Modern Materials Handling, copyright 1984 © 2001 byPublishing Company, Division of Reed Holdings.

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