MMEIM 106.

3 INTEGRATED MATERIALS MANAGEMNT Module 1:- Introduction, scope of materials management, primary and secondary objectives, integrated materials management, r elation with other functional areas of organization. Organizing for materials management, basis for forming organizations, conventional and modern approaches to organizing materials management Materials management is the process by which an organisation is supplied with the goods and services that it needs to achieve its objectives of buying, storing and movement of materials. Its related to planning procuring storing and providing the appropriate materials of right quality, quantity, and price and at the right time. The main areas in materials management are materials requirement planning, purchasing, storing, inventory control, materials supply, transportation and materials handling. Materials management became so important because of cut throat competition, variety of materials and scarcity of materials. Brief history:Scarcity of materials during WW1 Development of principles of scientific management Development in the field of materials purchase and supply by Charles baggage from 1830s Growth of railroad industry in 1860s Developments in the field of procuring, receiving, inventory control and supply during WW2 Value analysis tech by GE during post WW2 Agreement between countries with an objective to solve material problems in planning, inventory control, quality control, stores control, and surplus disposal. After 2000 , emphasis on improvement of quality, supplier relationship, more cooperative approach, long term strategies of cost mgmt, database materials management system Objectives:- the objectives of materials management can be classified in two ways Primary objectives:Efficient materials planning Purchasing Procuring and receiving Storing and inventory control Supply and distribution of materials Quality assurance Good supplier and customer relation Improved departmental efficiency Secondary objectives:Efficient scheduling Make or buy decision Specification and standardization of materials Assist product design and development Forecast demand and materials quantity Value analysis and engg Dr. Pramod Kumar Mangayil , Associate Professor, VJCET Page 1

Developing worker skills in materials management Ensuring smooth flow of materials in and out of organisation For these objectives to be fulfilled, its necessary to have a good harmony and coordination between all employees within and between departments. The basic objectives of mgmt in any organisation are Increase sales, profit maximization, improved customer services, product globalization, good employee employer relationship, reduction in cost and social objectives Functions:-the functions are also classified into primary and secondary Primary functions1. Materials Requirements Planning (MRP) 2. Purchasing3. Ascertaining and maintaining the flow and supply of materials 4. Inventory Planning and Control 5. Quality Control of Materials 6. Departmental Efficiency Materials Requirements Planning (MRP)- Planning of materials requirements is an important function as inventory of materials involve about 60% of the total investment. Profit depends on the effective utilization of these materials and reducing the inventory of the materials. it is not absolutely possible to keep no inventories. Latest technique used is called Just in Time (JIT). The MRP is a technique used to plan, procure or produce the materials (raw materials, finished parts, components, sub-assemblies and assemblies) as per Bill of Materials (BOM) to support a Master Production Schedule (MPS). Purchasing-profitability depends on the efficiency by which purchasing and procurement of the right materials is done at the right time. The function of procurement is as follows The requisition of material is necessary by proper authority to initiate its purchase. To select proper supplier for the materials requisitioned, before placing an order. To negotiate about the price of the material from the supplier and it will be purchased at the cheapest price. The quality of material must be assured and should not be compromised with the cost of the material. The material should be purchased of right quantity and right quality at proper time at the cheapest cost. To set the proper purchase policy and procedure. Inventory Planning and Control- There are 4 types of inventories- Raw materials, Purchased goods, WIP, finished parts and components. Concept of inventory planning- materials should be purchased and brought to store just before it enters production or shipped so that inventory cost is negligible. Zero inventories are ideal planning Inventory Inventory

Raw materials

Process

Parts

Process

Components

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Some of the RM and manuf parts are sent to the stores as inventories, rest is sent for production. Similarly some of the finished goods are also sent to the stores as FG inventory to meet the fluctuating demand and regularize the supplies (buffer stock) Ascertaining and maintaining the flow and supply of materials-Distribution of materials to various production centers must be determined and its flow and continuity of supply must be maintained. Insufficient or zero inventories, Failure of materials handling Devices, Uncertainty in demand and production quantity are the main factors responsible for the disruption of materials supplies. Quality Control of Materials-quality of the product manufactured by the organization depends upon the quality of the materials used. Performance, reliability, interchangeability, consumer satisfaction, cost, vendors selection, buyers and suppliers relationships depends on the quality of materials Departmental Efficiency- the objectives can be fulfilled only if the system and procedures adopted for materials management are sufficient and effective. Departmental control is necessary to maintain things in a proper order as planned. MIS and feedback control at every stage is necessary to achieve best results. Secondary functions:1. Standardization and Simplification 2. Design and Development of the Product 3. Make and Buy Decisions 4. Coding and Classification of Materials 5. Forecasting and Planning Scope of Materials ManagementWith respect to the various functions, the materials management coordinates various dept of manuf concerns. As stated about 60% of total investment is associated by inventories and as soon as the materials is purchased and brought, its value goes on increasing (ordering cost, inventory carrying cost, maintenance, storing, handling etc). Cost reduction through some effective and efficient materials management technique is necessary. Definite procedure and system to ensure proper quality, quantity and time. Ensure continuous flow with changing demand and production Integrated Materials Management IMM can be considered as a coordinated approach responsible for procurement, purchasing materials management, logistics and warehousing of all types of materials using most efficient and effective technological process, methods and ideas. Integrated setup ensures mangers to have a good control and proper coordination of various objectives and also proper balance of any conflicting objectives Materials management involves handling a vast amt of data and integration helps rapid transfer and processing of these data through effective communication channels. Integration ensures timely determination of materials requirement and its purchasing procedures, centralization of authority, coordination of all materials management functions speedy and accurate decision making, data analysis through EDP and effective use of computers and ICT and opportunities for future growth. Advantages of IMM Better accountability, coordination, performance, adaptability, morale and team spirit Dr. Pramod Kumar Mangayil , Associate Professor, VJCET Page 3

Materials Management Organization Seven main resources required to run any organization are management, materials, money, man power, machines, methods and matrix (infrastructure) The structure of the organization must be such so as to have the efficient management of materials controlling its flow, conservation and utilization.

Relation of materials management with other departments

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Organisation structure with functional activities

Organizing Materials Mgmt Once the relationship of materials management wrt other department is finalized, the next step is to finalize the internal structuring of the department. This can be based on 4 aspects 1. Organization based on commodities 2. Organization based on location. 3. Organization based on function. 1) Organization based on commodities - Here items are classified according to their nature such as raw materials, components, spares, imported items, finished goods etc. and assigned to individuals. No wasteful duplication of efforts as each commodity will be separately handled. Bulk buying and standardization are facilitated; the group becomes specialized in a particular commodity market. Materials Manager

Stores Mgr

Traffic and receiving Mgr

Purchase Mgr

Inventory Control and Info Mgr

Buyer Raw Materials. Buyer Forging Buyer Civil Engg Materials

Buyer Castings Buyer prodn parts Buyer Spares

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2) Organization based on location - If the organization has several plants located in different plants of the country, There are two alternatives 1. Centralized materials management (CMM) & 2. Decentralized materials management (DCMM). In Centralized materials management, the most important benefit is combining requirements of all plants and go for bulk buying which will result in substantial reduction in costs, interplant transfer of material is possible in case of emergency, surplus materials can be effectively used by other plants, since only one materials management department, Since only one mm departmentHighly skilled workforce is present. In Decentralized materials management, Better co-ordination with plants production, Financing & marketing department are possible. Plants product lines play an important role i.e. each plant may require some unique materials which can be better managed by DCMM. When the distances between the plants are significant, controlling from a single location is unwise both in terms of cost & time. Now a days combination of both Centralized and Decentralized materials management is possible. Policies, procedures and systems for all plants are laid out by the CMM system. Continues feedback is maintained in the operations of the DCMM departments. Specific financial limits will be set by the CMM Department beyond which the DCMM department will have no authority. Bulk buying of common usage items is done by the CMM department. 3) Organization based on function - The materials management department is structured on the basis of function such as stores, transport, purchase etc. All purchasing activities of a particular function will be under one individual who reports to the material manager. Materials management at Macro Level Materials management at macro level consists of three entities 1) Material system material move from resources in the ground to items in supply pool. The supply phase consumes energy to extract materials & process them for use. After purchase, materials remain in use for a varying length of time. There is a recycling and recovery phase also. 2) Total system The controls of materials does not depend upon either materials or the environment. But lies with human institution like producer consumer, technologists & Govt. 3) Supply System the supply of material is derived from basic resources. The industry uses specific properties of material to perform certain functions. The adequacy of supply depends on economic resources and the socio economic industrial system built on there resources. The provision of adequate supply to feed these systems requires complicated and sophisticated scientific, financial & management procedures.

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Total concept: Today materials management is required to manage resources in a wider context. Technological changes and advancement of raw materials have created the need of a new information system. Now materials management is required to predict the future needs with reasonable accuracy using these new information systems. Increasing prices, increasing difficulties in the availability of materials, timely supply, quality, skill and attitude of workers are every managers nightmare. Increasing productivity is also tied up with basic fundamentals of materials management function. To discharge these responsibilities with a more economical and social consciousness materials management will have to switch over to a new concept This is Total materials management or total concept. The Principle of total concept is to provide effectiveness to all functions starting from planning till the finished product stage. Planning Scheduling Purchasing and procurement Inspection and Quality control

INTEGRATED APPROACH Material Handling & Logistics Stores and Inventory control

System approach to materials management System is any group of inter related parts which functions together to achieve some goals System subsystem The 4 distinct and essential ingredients of a system are Input- Process output -Controls (Feedback) Materials management is an integrated system which emphasizes specific function and its relation with others. Hence its system oriented and dynamic. In order to understand a system approach of materials management, we must first understand management. Management is a social skill and the responsibly guiding and supervising 3 entities 1) People their skills 2) System, Procedure & methods 3) Physical materials & equipment Being a Social entity, small number of essential functional elements account for a variety of activities which they integrate effectively and efficiently and moves in unison towards a common goal. Movement controls & information requirement are spread across many functional activities. Integration is necessary for the following controls functions 1) Material quantity controls at each stage 2) Material movement controls for effective allocation, location to flow Dr. Pramod Kumar Mangayil , Associate Professor, VJCET Page 7

3) Materials quality control for quality standards and maximum product service 4) Overall cost control for profit enhancement and productivity

For effective integration, it has 2 kinds of interfaces -Internal & external Internal- materials forecasting, Production, finance, inventory control, Inspection & QC, material handling, logistics & material flow. External- with customers, with suppliers The main advantages of system approach are 1) Reliable and accurate performance for required results good info Good decision good action- good control and good performance 2) Strict adherence to schedules & plans effective use of 7m, corrective action in case of deviation 3) Timely & optimum material procurement Right quality Right quantity, Right delivery, Right price 4) Optimum inventory turnover Speed at which material come in & go out of states ( annual sales / avg monthly stock ) 5) Good vendor vendee relations Ensures improved materials acquisition and delivery performance 6) Optimum material logistics & distribution 7) Control of overall material cost 8) Minimization of duplication function9) Good conflict resolution.

Dr. Pramod Kumar Mangayil , Associate Professor, VJCET

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