1 Material Management :
¹ Materials Management refers to the process of planning, acquiring, storing, and distributing
materials efficiently and effectively to support production and operations within an organization.
² It aims to ensure the right materials are available in the right quantities, at the right time, and
at
the right cost, facilitating smooth operations and meeting organizational goals.
³ It is concerned with planning, organizing and controlling the flow of materials from their
initial
purchase through internal operations to the service point through distribution.
2 Inventory Management
¹ Inventory Management refers to the systematic process of ordering, storing, and using a
company's inventory, which includes raw materials, components, and finished products.
² It ensures that the right inventory is available at the right place and time, minimizing costs
and
avoiding disruptions.
3 ABC Analysis
¹ ABC Analysis is a technique used to manage inventory by dividing items into three categories
(A, B, and C) based on their importance and value.
² 'A' items are the most valuable and require
close attention, 'B' items are less critical but still important, and 'C' items are the least valuable.
³ This method helps businesses prioritize their efforts and resources effectively.
4 VED Analysis
VED analysis in inventory management deals with the classification of materials based
on their
importance to other materials.
● Vital (V) : These are essential materials whose non-availability while putting a halt to
business operation. These materials need to be in stock at all times else, production will
be affected.
● Essential (E) : This refers to materials that you require a certain amount of. You just
require a minimum amount of them to keep production active.
● Desirable (D) : This refers to materials that do not really affect production. Production
can run with or without these materials.
5 FSN Analysis :
It stands for Fast-moving, slow moving and Non-moving items. The classification is based on
past consumption pattern.
¹ Items which are usually drawn from stores frequently are classified as fast moving items
² items which are drawn only once or twice a year are classified as slow-moving and items
³ items not at all drawn for the past two years are classified as non-moving items. FSN analysis
in inventory management deals with the classification of items based on usage, consumption
rate, and quantity.
6 H-M-L Analysis:
This stands for High value, medium value and Low value items based on unit price of the item.
For instance, a firm may decide to categorize items having unit price more than ₹ 5000 as ‘H’
items. From ₹ 1000 to 5000 as ‘M’ items and below ₹ 1000 as ‘L’ items. On this basis, materials
management may delegate authority to various levels of purchase officers/managers to
authorize
and sign purchase orders. Also, for high value items, alternative sources of suppliers are
developed.
7 S-O-S Analysis
“S” stands for Seasonal items and ‘OS’ for Off-Seasonal items. It may be advantageous to buy
seasonal items at low prices and keep inventory or buy at high prices during off seasons. Based
on
the fluctuation in prices and availability, suitable decision has to be taken regarding how much to
purchase and at what prices.
8 G-O-L-F Analysis
This stands for Government, Open market, Local or Foreign source of supply. For many items,
imports are canalized through government agencies For such items, the buying firms can not
apply any inventory techniques and have to accept the quota allotted by the Government. ‘Open
market’ categories are those who form bulk of suppliers and procurement is rather easy. ‘L’
category includes those local suppliers from whom items can be purchased off-the-shelf on cash
purchase basis. ‘F’ category indicates foreign suppliers. Since an elaborate import procedure is
involved, it is better to buy imported items in bigger lots usually covering the annual
requirements
9 Re-Order Level.
➔ A point at which stock of a particular item has diminished to a point where it needs to be
replenished
➔ Re-order level is a stage or time of placing a new order when the total stock in hand is
insufficient to meet not only the normal consumption over normal lead time but also
safety stock (buffer)
➔ Reorder level (or reorder point) is the inventory level at which a company would place a
new order or start a new manufacturing run.
