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MATERIALS MANAGEMENT
UNIT I - INTRODUCTION :
Syllabus :
Introduction to materials management – Objectives – Functions – Operating Cycle – Value analysis – Make or
buy decisions.
Materials management: Materials management is a core supply chain function and includes supply chain
planning and supply chain execution capabilities. Specifically, materials management is the capability
firms use to plan total material requirements.
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Value analysis:
Value analysis is a set of techniques, knowledge, and skills used to improve the value of a product by
eliminating unnecessary costs or improving its functions without compromising its quality, reliability, and
performance. It involves understanding the components of a product and related costs.
Types of Material Managemen:
Material Requirements Planning.
Purchasing.
Inventory Control.
Material Supply Management.
Quality Control.
5 R of material management:
Refuse, Reduce, Reuse, Repurpose, Recycle.
4 methods of inventory:
The first in, first out method (FIFO)
The last in, first out method (LIFO)
The specific identification method.
The weighted average method.
Manufacturing costs:
Raw Materials + Direct Labor Costs + Manufacturing Overhead = Manufacturing Costs
Cost of manufactured goods:
Total Manufacturing Costs + Beginning WIP Inventory – Ending WIP Inventory = COGM
Work in process inventory (WIP) formula:
Beginning WIP Inventory + Manufacturing Costs – COGM = Ending WIP Inventory
Make-or-Buy Decision:
A make-or-buy decision is an act of choosing between manufacturing a product in-house or purchasing it
from an external supplier.
Make-or-buy decisions, like outsourcing decisions, speak to a comparison of the costs and advantages of
producing in-house versus buying it elsewhere.
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UNIT II MANAGEMENT OF PURCHASE
Syllabus :
Purchasing policies and procedures – Selection of sources of supply – Vendor development – Vendor
evaluation and rating – Methods of purchasing – Imports – Buyer – Seller relationship – Negotiations.
The purchase policies:
A purchasing policy is a collection of rules that control the requisition process. Purchasing policies help
procurement administrators implement their procurement strategy by creating a policy structure that is
aligned with the organization's strategic purchasing requirements
Purchasing policy – Step by step process:
The objective of the purchasing policy.
Role of purchasing.
Vendor setup and onboarding process.
Contract signing authority.
Purchasing authority levels.
The delegation of authority.
Purchasing process and accepted norms.
Invoices and accepted norms.
Stages of Supplier Selection:
Supplier Selection Criteria.
First Stage: Evaluating Offers.
Second Stage: Operational Capacity Analysis.
Third Stage: Technical Capability Determination.
Fourth Stage: Financial Analysis.
Conclusion.
Standard procedures in purchasing:
Needs Analysis.
Purchase Requisition to Purchase Order.
Purchase Order Review and Approval.
Requests for Proposal.
Contract Negotiation and Approval.
Shipping and Receiving.
Three-Way Matching.
Invoice Approval and Payment.
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The Purchasing Process:
Type of vendors:
Vendors Rating System:
The Vendor Rating is proposed to be done Based on three criteria:
1. Quality performance of vendor: Based on Quality of Products produced during period under consideration
2. Delivery Performance of Vendor: Based on supply performance of vendor against orders within delivery Period
3. Service & System performance of vendor: Based on General Performance Such as reassessment, Updating
infrastructure etc. and maintenance of Quality control systems
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There are five essential methods of purchasing:
Bulk Purchasing.
Hand to Mouth Purchasing.
Speculative Purchasing.
Blanket Purchasing.
Reciprocate Purchasing.
Imports and it’s steps:
Imports are any good or service brought in from one country to another,they are 8 steps clearence need
Invoice.
Packing list.
Bill of lading.
GATT declaration form.
Importer/CHA declaration.
6.LC or Bank draft.
Insurance memo/policy.
Certificate of country of Origin.
Negotiations
Negotiation is a strategic discussion that resolves an issue in a way that both parties find acceptable.
Compromise is normally the basis of negotiation. Negotiations can take place between buyers and sellers,
an employer and prospective employee, or governments of two or more countries
4 types of negotiation:
Principled negotiation. Principled negotiation is a type of bargaining that uses the parties'
principles and interests to reach an agreement. ...
Team negotiation. ...
Multiparty negotiation. ...
Adversarial negotiation.
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UNIT III MANAGEMENT OF STORES AND LOGISTICS
Syllabus :
Stores function – Location – Layout – Stock taking – Materials handling – Transportation – Insurance –
Codification – Inventory pricing – stores management – safety – warehousing – Distribution linear
programming – Traveling Salesman problems – Network analysis – Logistics Management.
Stores Function:
Stores are very important in carrying out day-to-day operations. The objective behind stores is
the continuous supply and production of goods and services. Managing the stores ensures that every
project, no matter how large or small is properly managed.
Process:
1. To receive the incoming materials (receiving)
2. To keep the materials as long as they are required for use (keeping in custody)
3. To move them out of store for use (issuing)
The auxiliary process of store is the stock control also known as inventory control.
Materials handling:
Materials handling, the movement of raw goods from their native site to the point of use in
manufacturing, their subsequent manipulation in production processes, and the transfer of finished
products from factories and their distribution to users or sales outlets. materials handling.
Bulk Handling Material Equipment.
Engineered Systems.
Industrial Trucks.
Storage And Handling Equipment.
Logistics management:
Logistics management is the part of the supply chain process that plans, implements, and controls the
efficient, effective flow and storage of goods, services, and related information from the point of origin to
the point of consumption to meet customer requirements.
Logistics Fields
Procurement Logistics
Production Logistics
3 main activities of logistics system:
Logistics systems are made up of three main activities:
Order Processing,
Inventory Management
Freight Transportation.
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What is network analysis in management:
Network analysis is a system which plans the projects by analyzing the project activities. Projects are
broken down into individual tasks or activities, which are arranged in logical sequence. It is also decided
that which tasks will be performed simultaneously and which other sequentially.
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UNIT IV MATERIALS PLANNING
Syllabus :
Forecasting – Materials requirements planning – Quantity – Periodic – Deterministic models – Finite
production.
What Is Forecasting:
Forecasting is a technique that uses historical data as inputs to make informed estimates that are
predictive in determining the direction of future trends. Businesses utilize forecasting to determine how
to allocate their budgets or plan for anticipated expenses for an upcoming period of time.
3 types:
Qualitative techniques
Time series analysis and projection
causal models.
Deterministic system:
In mathematics, computer science and physics, a deterministic system is a system in which no
randomness is involved in the development of future states of the system. A deterministic model will thus
always produce the same output from a given starting condition or initial state
Finite production:
Finite production rate model assumes implicitly that all items produced are of perfect quality. In real life
production settings, however, due to various unpredictable factors it is inevitable to produce defective
items randomly.
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UNIT V INVENTORY MANAGEMENT
Syllabus :
ABC analysis – Aggregate planning – Lot size under constraints – Just in Time (JIT) system
Example of ABC Analysis:
One can take the example of a Furniture Store. Step 1: Multiply the total number of items by the cost of each unit
to find the annual usage value. Step 2: After noting all the products of the inventory, it's time to list them in the
descending order based on annual consumption value.
Calculate ABC:
The formula for activity-based costing is the cost pool total divided by cost driver, which yields the cost driver rate.
The cost driver rate is used in activity-based costing to calculate the amount of overhead and indirect costs related
to a particular activity.
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What is meant by aggregate planning?
Aggregate planning is a method for developing an overall
manufacturing plan that ensures uninterrupted production at
a facility. Aggregate production planning typically is applied
to a 3- to 18-month period.
How is lot size determined?
Description: In the stock market, lot size refers to the
number of shares you buy in one transaction. In
options trading, lot size represents the total number
of contracts contained in one derivative security. The
theory of lot size allows financial markets to regulate
price quotes.
Just-in-time, or JIT: An inventory management
method in which goods are received from suppliers
only as they are needed. The main objective of this
method is to reduce inventory holding costs and
increase inventory turnover
