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Ch.1- Introduction: Introduction: Materials Management

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Ch.1- Introduction: Introduction: Materials Management Ch.1Ch.1-- Introduction: Materials Management Prof. PrashantB. Kalaskar Syllabus •• Evolution, Importance, Scope and Objectives of Materials Management •• Interface of Material Management with other functions. •• Concept of Logistics and Supply Chain Management •• Evolution to 4PL Prof. PrashantB. Kalaskar Introduction to Material Management •• MaterialsMaterials--AA keyresource in any manufacturing activity •• Cost of production depends upon the materials and hence material management is important •• Low level of inventory may interrupt manufacturing •• High level of inventoryinventory,, excessive investments •• Optimum inventory of materials is a crucial phenaomenon Prof. PrashantB. Kalaskar Definition of Material Management ‘’ The process of controlling the kind, amount, location, movement & timing of various resources used in & produced by the industrial enterprise ’’. ‘’ Material management is an approach for planning, organizing, and controlling all those activities principally concerned with the flow of materials into an organisation.’’ Prof. PrashantB. Kalaskar Definition of Material Management • The planning and control of the functions supporting the complete cycle (flow) of materials, and the associated flow of information. These functions include- (1) identification, (2) cataloging, (3) standardization, (4) need determination, (5) scheduling, (6) procurement, (7)inspection, (8) quality control, (9) packaging, (10)storage, (11) inventory control, (12) distribution, and (13)disposal. • Also called materials planning. Prof. PrashantB. Kalaskar Evolution of MM •• During WWWW--I,I, materials supply got hapmeredhapmered.. •• Last 3 decades of industrial revolution and advancement in technology lead industry to mass production and marketing •• Increasing population & income levels fueld MM •• Resource conservation & effective utilization focused from 70’s •• Concept of TQM •• In IndiaIndia,, Armed forces brought the concept of MM in the name of logistic management Prof. PrashantB. Kalaskar Importance of MM •• If we analyze the total cost of any production, nearly 60 to 70% is because of materials. •• Only the rest is for labourlabour,, overhead and profit. •• So any reduction in the material cost, new techniques to reduce the cost, give rise to maximization of profits •• Profitabilty is the maximum ROI, aim of any organization Prof. PrashantB. Kalaskar Importance of MM • Rate of Return (ROR)= Return - Capital Rate of Return (ROR)= ---------------------- X 100 Capital 120-100 Ex.- ROR= --------------- X 100 = 20% 100 Prof. PrashantB. Kalaskar Objectives of MM • The fundamental objectives of the Materials Management function ( 5 R’s)- • Of the Right quality • In the Right quantity • At the Right time • From the Right source • At the Right place Prof. PrashantB. Kalaskar Objectives of MM •• Management objectives of MM areare-- • To buy at the lowest price , consistent with desired quality and service • To maintain a high inventory turnover , by reducing excess storage , carrying costs and inventory losses occurring due to deteriorations , obsolescence and pilferage • To maintain continuity of supply , preventing interruption of the flow of products and services to users • To maintain the specified material quality level and a consistency of quality which permits efficient and effective operation Prof. PrashantB. Kalaskar Objectives of MM •• Management objectives of MM areare-- •• To develop reliable alternate sources of supply to promote a competitive atmosphere in performance and pricing. •• To hire, develop, motivate and train personnel and to provide a reservoir of talent •• To develop and maintain good supplier relationships in order to create a supplier attitude and desire to furnish the organization with new ideas , products, and better prices & services Prof. PrashantB. Kalaskar Objectives of MM •• Management objectives of MM areare-- •• To achieve a high degree of cooperation and coordination with other departments •• To maintain good records and controls that provide an audit trail and ensure efficiency and honesty •• To participate in Make or Buy decisions. Prof. PrashantB. Kalaskar Logical Fun Prof. PrashantB. Kalaskar Scope of MM • Materials Management strives to ensure that, the material cost comprising the total product cost be the least. In order to achieve this, the control is exercised in the following fields. • 1. Materials Planning. • 2. Purchasing. • 3. Store Keeping. • 4. Inventory Control. • 5. Receiving, Inspection and Dispatching. • 6. Standardization and Variety Reduction. • 7. Materials Handling. • 8. Disposal of Scrap and Surplus, Material Preservation. Prof. PrashantB. Kalaskar Interface of Material Management with other functions • Resources can be classified as- - Tangible & Intangible resources In any production units, inputs are converted into outputs i.e. final product Conversion process varies with technology Output may be Tangible or Intangible product This process involves 3 activities- - Inputs (Materials) supply - Conversion process (Manufacturing) - Distribution of product (Marketing) Prof. PrashantB. Kalaskar Interface of Material Management with other functions External Environment ( Suppliers and Customers) Inputs Output Men Products (Goods or Materials Services) Money Profits and Machines customer Management satisfaction Manufa cturing Internal Resources- Finance, Marketing, HR, MIS, Production Prof. PrashantB. Kalaskar Logistics & SCM Concept Logistics: Planning, implementing, and controlling the efficient, effective flow and storage of goods and materials between the point of origin and the point of consumption. (from source up to within Organization) Supply Chain-- A supply chain is a network of facilities and distribution system that perform the functions of procurement of materials, transformation of these into intermediate and finished products and then distribution of finished products to the customers. (From Source point up to distribution of finished products up to end user) Prof. PrashantB. Kalaskar Facilities • The sequence of supply chain begins with basic suppliers and extends all the way to the final customer • Warehouses • Processing centers • Distribution centers • Retail outlets • Offices Prof. PrashantB. Kalaskar Functions and Activities in SCM • Forecasting • Purchasing • Inventory management • Information management • Quality assurance • Scheduling • Production and delivery • Customer service Prof. PrashantB. Kalaskar Fun Moment Ek Student roz Maths teacher ke ghar phone lagata hai. Sir ki wife- Kitni bar tumhe bataya hai, ke sir mar gaye hai, fir tum bar bar kyo phone karte ho Student- Sun ke accha lagta hai.. Prof. PrashantB. Kalaskar Concept of Logistics & SCM • There is a difference between the concept of supply chain management and the traditional concept of logistics. • Logistics typically refers to activities that occur within the boundaries of a single organization. • Supply chains refer to networks of companies that work together and coordinate their actions to deliver a product to market. Prof. PrashantB. Kalaskar Concept of Logistics & SCM • Traditional logistics focuses its attention on activities such as procurement, distribution, maintenance and inventory management. • Supply chain management acknowledges all of traditional logistics and also includes activities such as marketing, new product development and customer service. Prof. PrashantB. Kalaskar Concept of Logistics Management Thus logistics management allows--allows • Smooth flow of all types of materials • Satisfaction of consumer needs of goods • Helps delivery of good quality products • Best possible customer service at least possible rates • Integration of various managerial functions of organizations for optimization of resources • It enhances profitability and productivity to the organization Prof. PrashantB. Kalaskar Concept of Logistics Management • The concept of logistics management can be explained in four phases- 1) Independent Business Function Era 2) Limited Internally Integrated Business Function Era 3) Fully Internally Integrated Buisness Function Era 4) Externally Integrated Business Function Era Prof. PrashantB. Kalaskar Concept of Logistics Management 1)1)--IndependentIndependent Business Function Era (till 1950’s) - This era emphasized on increasing productivity & profitability - Less manufacturers, hence mass production dominated - Logistics was limited to warehousing of Raw Materials & tansportation of finished goods - All business functions were indpendent. - Warehousing of RM & finished goods were fragmneted & hence high cost involved Prof. PrashantB. Kalaskar Concept of Logistics Management 2) Limited Internally Integrated Business Function Era (1960-70) The limitations & high cost of fragmented functioning led to this concept of- 1) Material Management & 2) Physical Distribution -- Material ManagementManagement-- delas with planning,implementing & controlling flow of materials within organization ((Inbound Logistics)) -- Physical DistributionDistribution-- Planning, Implementing & Controlling all the activities related to flow of finished goods ((OutboundOutbound LogisticsLogistics)) - The major objective was to control cost & output, so that organizations can survive in cost based competitive environment Prof. PrashantB. Kalaskar Concept of Logistics Management 3) Fully Internally Integrated Buisness Function Era (1980’s)(1980’s)-- In this eraera,, business situations were more critical due to internal & external factors-- factors °° Cost of transportation
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