Institute of Integrated Management Studies

Material Management
Marks: 100
Q1 ) MNO ltd is a multinational company having its head office overseas and engaged in the field
of health care products having three manufacturing units in India. Although company is having
number of vendors on their vendor list, yet supply of quality materials rarely on time. This is
stopping production line frequently. Back log of orders are increasing with every passing day.
Customers are not happy with erratic supplies. Due to inadequate systems, poor visibility and
other reasons, inventories are very high for the materials which are not required for the time
being. Mr X is appointed Head Purchase & assigned the task for streamlining the purchase
operations & ensure uninterrupted supplies of the required materials. Company is looking for re
engineering the total process to take care of above problems. Please help Mr X & suggest ways to
improve the following:-

a) How to ensure uninterrupted supplies of required quality materials on time? (5)

b) How to build a strong base of responsive vendors? (5)
c) How to improve the quality of components? (5)
d) How to generate an effective communication & coordination system among all the three units
& vendors for effective working? (5)

Q2) Sonata Electronics is a medium scale unit engaged in manufacturing of electronics systems
which are used in automobiles industry. Mahindra & Mahindra is their major client. Due to
increase in the raw material prices and slow down in the automobile industry both the
organizations are under pressure. M & M put pressure on the Sonata Electronics for cost
reduction and reduced inventory their end and ask for short notice supplies. Mr Devendrakumar
CEO of Sonata Electronics is in dilemma. He has received a suggestion from Ms Akshata,
Purchase Manager of Sonata to implement ERP System and restructure Materials Department.
She has expressed confidence to save substantially if materials department is run and organized
professionally.
1. Why ERP should be implemented? (5)
2. What Types of data/information will you collect to reduce inventory? (5)
3. What steps you will take to reduce inventory costs and cost of material? (5)
4. Prepare strategy for long term supply of items required by Mahindra & Mahindra. (5)

Q3) you are appointed inventory control manager for a company producing chemicals with
annual turnover of Rs. 500 crores. There are 10000 items of inventory with stock value of Rs.
200 crore.
1) How will you classify the items? (5)
2) What will be your plan to reduce inventory? (5)
3) What will be your main interaction points with production, maintenance and marketing
functions? (5)
4) Do you see any major hurdle in reducing inventory? Explain (5)

Q4) M/s Penelop Chemical Inc is chemical manufacturing company having four plants in
different part of India. Mr Ram Kumar is responsible for managing procurement of spares of
equipment for all plants. Procurement of spares is done based on PRs from different user plants.
There is no centralized planning cell for verifying requirement raised by different users. Also
there is sub-store at all plants besides centralized General Stores. Currently there is increased
inventory level of spares. Users are also complaining about quality related issues like
fitment/interchangeability. There is overall increase of emergency procurement of spares. Ram
Kumar is facing following issues also while dealing with OEMs: * Poor response from OEMs *
some of the OEMs have stopped their operations * Equipment is obsolete Please answer the
following questions for the above case:
1. What organizational changes would you suggest for the spares procurement? (5)
2. What strategies do you suggest for improving procurement service level? (5)
3. Which criteria will you include in Vendor Performance Evaluation? (5)
4. How will you shorten the lead time of procurement? (5)

Q5) An Indian furniture company handles several lines of furniture, one of which is the popular
Layback Model TT chair. The manager, of the company has decided to determine by use of the
EOQ model the best quantity to obtain in each order. He has determined from past invoices that
he has sold about 200 chairs during each of the past five years at a fairly uniform rate and he
expects to continue at that rate. He has estimated that preparation of an order and other variable
costs associated with each order are about 10 MU, and it costs him about 1.5 % per month (or
18% per year) to hold items in stock. His cost for the chair is 87 MU

Based on the above data, calculate the following:

a. How many layback chairs should be ordered each time? (5)
b. How many orders would there be? (5)
c. Determine the approximate length of a supply order in days? (5)
d. Calculate the minimum total inventory cost. (5)