Materials Management in Projects

MATERIALS MANAGEMENT
Definition
Function responsible for coordination of planning, sourcing, purchasing, storing, moving and controlling of materials in a optimum manner for providing a pre-decided service to the customer at a minimum cost.
Planning and Control of the functions supporting the complete cycle of materials.

The functions include Identification, cataloguing, standardisation, need determination, scheduling, procurement, inspection, quality control, packaging, storage, inventory control, distribution and disposal.

Need for Materials Manager Integrated Materials Management Need of Industries

MATERIALS MANAGEMENT
Average Materials Expenditure
Average Expenditure of Industry Groups materials per cent

Above 65

Cotton Yarn, Earthmoving equipment, sugar, wool, jute, commercial vehicles, fabrication Cotton textiles, bread Engineering, non-ferrous Ship building, chemicals, tyre, machine tools, cement, electricity Pharmaceuticals Steel, newspaper, fertilizer, aircraft.

60 65 55 60 50 55

45 50 40 45

To maintain optimum level of inventory of materials so as to free the working capital To increase the supplier base To ensure timely delivery of materials to production To enhance transparency .MATERIALS MANAGEMENT Objectives and Goals of Materials Management To procure materials at a competitive price with Consistency in both in quality and continuity of supply.

MATERIALS MANAGEMENT Input Marketing / commercial Output Purchase Design Materials planning Quality Assurance Production Planning Quality Control Stores Production .

Procedures involved ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ Equipment numbering procedure Vendor qualification procedure Procedure for obtaining DGTD clearance and import license General conditions of purchase Ordering procedure Purchase ordering number procedure Quality assurance and inspection procedure Vendor evaluation procedure Customs clearance procedure Packing. marking and dispatch procedure Insurance and claims procedure Warehouse management procedure Billing and payment procedure Materials status reporting procedure Bulk material control procedure Expediting procedure .

Purchase Tendering Preparation and Issue of tender Lead time Technical Evaluation Acceptance Comparison of Prices Negotiation Ordering Rate Contracts Follow up with suppliers Establish LC Transportation Shipping Documents Custom Clearance Collection of Materials .

PURCHASING ‡ ‡ ‡ ‡ Purchase policy Works policy Delegation of powers Guidelines issued on various terms and conditions .

PURCHASING ‡ ‡ ‡ ‡ ‡ ‡ ‡ Single tender Limited tender Open tender Reverse Auction Repeat ordering MoU E-Procurement .

STORES MANAGEMENT Objectives ‡ Minimizing cost of production through minimizing cost of materials ‡ Maintaining the value of materials ‡ Services to user departments ‡ Establishing coordination with other departments ‡ Advising materials manager .

Functions of store keeping ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ Identification of materials Receipt of materials Storage Inspection Material verification and stock taking Issue and dispatch Record keeping and accounting Preservation and protection of materials Inventory control Advice to the purchase officer .

. ‡ 2) Promote efficiency in production and purchasing by minimizing the cost of providing an adequate level of customer service.Objectives of Inventory Control ‡ 1) Maximize the level of customer service by avoiding understocking.

order replenishment of quantity EOQ.Q .System Inventory Control ‡ based on reorder point .When inventory is depleted to ROP. .

complex.P-System Periodic Review Method ‡ an alternative to ROP/Q-system control is periodic review method ‡ Q-system .can be reordered together ‡ higher carrying costs .not optimum. no economies of scope or common prod. but more practical .each stock item reordered at different times .inventory levels for multiple stock items reviewed at same time ./transport runs ‡ P-system .

Inventory Costs ‡ Procurement costs ‡ Carrying costs ‡ Out-of-stock costs .

Procurement Costs ‡ Order processing ‡ Shipping ‡ Handling .

Carrying Costs ‡ ‡ ‡ ‡ Capital (opportunity) costs Inventory risk costs Space costs Inventory service costs .

Out-of-Stock Costs ‡ Lost sales cost ‡ Back-order cost .

at the right time. implementing. finished goods and related information from the point of origin to the point of consumption for the purpose of meeting customer requirements. cost effective flow and storage of raw materials. at the right place. and controlling the efficient. . inprocess inventory. ‡ Logistics means having the right thing.Logistics ‡ Logistics can be defined as the process of planning.

2. Inventory Management. Information Systems. Transportation. 1. Packaging. 3.Logistics should integrate the following activities which deserve special attention. 5. 4. Warehouse Management. Material handing and 6. .

Important in Logistics ‡ ‡ ‡ ‡ Mode of shipment and transport Transit time. Cost of transportation. Nature of cargo. .

‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ Customs duty International competitive bidding Excise duty Mega power projects Letter of credit (LC) Bonded Warehouse CFS Risk purchase clause Dead freight Intermodalism Dangerous goods End use certificate TREM card Material Safety Data Sheet (MSDS) Incoterms Documents Original invoice Bill of lading Test certificates .

Lift on and Lift off ( LOLO). Terminal Handling charges.Freight and other charges ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ Freight collect or prepaid. SDDC Store Door Delivery Charges. Pre shipment Inspection agencies. PCC Port Congestion charges. General Rate Increase. WRIC War Risk Insurance Charge. DDC Destination Delivery Charges. BAF Bunker Adjustment Factor. Port dues. CAF Currency Adjustment Factor. Laboratories testing charges. Inland haulage charges. PSC Peak Season Charge. .

‡ Non-Vessel operating common carrier(NVOOC) They operate in ocean freight industry. They consolidate part cargo and offer to the main liners.Global Logistics Intermediaries ‡ International Freight Forwarders : The freight forwarders consolidate and assemble small shipments into full loads and disperse them. consolidate and disperse the containers. inland transportation etc. ‡ Customs Brokers/ Custom House Agents: They do the documentation for customs and facilitate movement of goods through customs and port. They extend other services like insurance. They handle both air and sea shipments. packing. They do not own or operate any ship. freight negotiation. . Clearance of import and export shipments are done by them.

The agents will assist in berthing of ship. loading and unloading of cargo. clearance. . co-ordinate with customs and port for complying the formalities. maintaining the ship at port and ensure timely movement of ship from the port to keep the schedule.Global Logistics Intermediaries ‡ Ship Brokers : They assist shippers in chartering a vessel to transport the goods. They act as the sales representative for ocean freight carriers and as purchasing agents for the shipper. ‡ Ship Agents : Ship agents are representing shipping companies and ship operators.

.Incoterms ‡ The Incoterms rules or International Commercial terms are a series of pre-defined commercial terms published by the International Chamber of Commerce (ICC) widely used in international commercial transactions.

Rules for Any Mode(s) of Transport EXW Ex Works (named place of delivery) FCA Free Carrier (named place of delivery) CPT .Carriage Paid To (named place of destination) CIP Carriage and Insurance Paid to (named place of destination) ‡ DAT Delivered at Terminal (named terminal at port or place of destination) ‡ DAP Delivered at Place (named place of destination ‡ DDP Delivered Duty Paid (named place of destination) ‡ ‡ ‡ ‡ .

Rules for Sea and Inland Waterway Transport ‡ FAS Free Alongside Ship (named port of shipment) ‡ FOB Free on Board (named port of shipment) ‡ CFR Cost and Freight (named port of destination) ‡ CIF Cost. Insurance and Freight (named port of destination .

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