MATERIALS MANAGEMENT

Prepared by:
Rohit Bansal
Suraj Bansal

Masters of Finance and Control

Materials Management
CONTENTS

 Introduction
 Definition
 Objectives
 Functions
 Techniques and Technologies
 Procurement of equipments
 History sheet
 Importance/Advantages/Benefits
Material Management
 Material includes all the things from raw
material to semi-finished and finished
goods.

 It has great significance as it has direct

relation with the efficiency of a system.

 Expense made on Materials is invested in

inventories, storage, transportation,
insurance etc.
Cont…

 Previously only Marketing and Manufacturing were

considered as important activities of an enterprise.

 Material management has gained its importance

due to costs involved and economizing the total
activity.

 Material Management is basic function of business

that adds directly to value of product.
 Cont…

 MM covers various aspects of input process, like it

deals with Raw-Materials, procurement of machines,
other tools and necessary spares for the
maintenance.

 It involves planning and programming for procuring of

material and quality goods of desired quality and
specification at reasonable price and at right time.

 It involves being up-to-date with market information,

stores and stick control, inspection and transportation
of materials.
 Definition.
 According to American Production and
Inventory Control Society (APICS)
defines Material Management as :

“The grouping of management

functions sporting the complete
cycle of material flow, from the
purchase and internal control of
production materials to the
planning and control of work in
OBJECTIVES OF MM
PRIMARY SECONDARY
 Right price  Forecasting
 Higher turnover  Inter-departmental
 Low procurement & harmony
storage cost  Product improvement
 Continuity of supplier  Standardization
 Consistency in quality  Make or buy decision
 Good supplier  New materials &
relations products
 Development of  Favorable reciprocal
personnel relationships
 Good information
system
Functions of Material
Management.

 Production Control

 Inventory Control

 Materials Handling
Production Control
 Function of production control aims at
directing and regulating the movement of
goods through the entire manufacturing
cycle from the process of purchasing
materials to producing the finishing
production.

Departments involved are:

1. Purchasing department
2. Receiving department
3. Raw materials inventory department
4. Production department
Inventory Control
 Inventory is the stock of any item or resource used
in an organization and can include: raw materials,
finished products, component parts, supplies, and
work-in-process

 An inventory system is the set of policies and

controls that monitor levels of inventory and
determines what levels should be maintained, when
stock should be replenished, and how large orders
should be

 Firms invest 25-35 percent of assets in inventory

but many do not manage inventories well
Cont….
 However, inventory control
emphasizes cost minimization, where
as production control focuses on
materials availability.
Inventory control function represent
three departments:
1. Raw materials inventory department.
2. Production department.
3. Finished goods inventory department.
 Economic order quantity
(economic model for inventory
management)

 Economic order quantity is the level of inventory that minimizes

the total inventory holding costs and ordering costs.

 Underlying assumptions

 The ordering cost is constant.

 The rate of demand is constant
 The lead time is fixed
 The purchase price of the item is constant i.e. no discount is available
 The replenishment is made instantaneously, the whole batch is
delivered at once.
 EOQ is the level of the inventory where ordering cost and carrying cost
remains equal.
Cont…
 Total Cost function

 Variables

 Q = order quantity

 Q * = optimal order quantity

 D = annual demand quantity of the product

 P = purchase cost per unit

 C = fixed cost per order (not per unit, in addition to unit cost)

 H = annual holding cost per unit (also known as carrying cost) (warehouse space,
refrigeration, insurance, etc. usually not related to the unit cost)
MATERIALS HANDLING
 The primary objective of materials management is to move materials
to the required location in a timely and cost-effective way without
affecting the primary objective of the other two materials management
functions.

Departments in the materials handling:

1. Purchasing depart
2. Receiving depart
3. Raw materials inventory depart
4. Production depart
5. Finishing goods inventory depart
6. Shipping
7. Distribution centers
8. Warehouses
MATERIAL FLOW PROCESS
 Organization of MM
department.
Chief
executive
Personnel Financia Material Production Marketing
Manager l Manager Manager Manager
Manage
r

Purchase Stores Material Research Shipping

Dept. Handling section

Receiving Storage Issuing

 The Material Flow Cycle

Cycle time

95% 5%

Input Wait for Wait to Move Wait in queue Setup Run Output
inspection be moved time for operator time time
MM TECHNOLOGY AND
TECHNIQUES
TECHNOLOGIES ARE:

 Robots

 Automated storage and retrieval system AS/AR)

TECHNIQUES ARE:

 Kanban card systems

 ABC classification systems

 Just-in-time purchasing
Material Management
Technologies
 ROBOTS

 They are re-programmable and multifunctional

manipulators designed to move materials, parts, tools and
other specialized devices through variable programmed
motion to perform a variety of tasks.

 Types:

 Processing
 Pick and Place
Cont….
 Automated Storage and Retrieval
System

 They are computer controlled and

mechanically operated materials handling
systems.

 They ca perform more complex problems

than ROBOTS
 Techniques
 JIT Purchasing (Just In Time)

 It advocates reduction in the size of the purchased to the extent so

that the materials reach the production point directly

 KANBAN System

 Under this technique firms used their store and other inventory
items in a single use container like Trays or boxes

 Types

 Production Authorization Card

 Vendor Authorization Card
 Conveyance Authorization Card
 Cont…
 ABC Classification System (Always Better
Control)

 It is exercise control over all materials

 More attention paid to items with high usage value

 Materials classified into 3 materials

 “A” account for 60-70% of total cost

 “B” account for 10-30% of total cost
 “C” account for 5-15% of total cost
PROCURMENT OF
EQUIPMENT
Points to be noted before purchase of an
equipment:
• Latest technology
• Availability of maintenance & repair facility with
minimum downtime.
• Post warranty repair at reasonable cost.
• Upgradeability
• Reputed manufacturer
• Low operating costs
• Installation
HISTORY SHEET OF
EQUIPMENT
 Name of equipment  After sales
 Code number arrangement
 Guarantee period
 Date of purchase
 Warranty period
 Name of supplier  Life of equipment
 Name of manufacturer  Downtime/uptime
 Date of installation  Cost of maintenance
 Place of installation  Unserviceable date
 Date of commissioning  Date of condemnation
 Environmental control  Date of replacement
 Spare parts inventory
Importance/Advantages/Ben
efits
 Regular supply is ensured, aiding for uninterrupted
production process.

 Procurement and transportation costs can be

controlled and checked.

 Efficient stock and stores control minimizes waste.

 Pre-inspection of RM minimizes chance of

rejection of final product.

 Timely supply and other inputs is ensured.

 Importance/Advantages/Ben
efits
 Best utilization of labor, capital and equipment is
ensured.

 Congestion in stores and confusion can be avoided,

resulting in better services.

 Manufacturing Cycle is reduced to min.

 Slight changes in material costs, changes the profit

statement of the co.

 Shortages can be eliminated.

 Conclusion
 MM is an important management tool which will be
very useful in getting the right quality and right quantity
of supplies at right time, having good inventory control
and adopting sound method and of condemnation and
disposal will improve the efficiency of the organization
and also make the work atmosphere healthy in any
type of organization, whether it is private, government
,small organization, big organization or households.

 Even a common man must know the basics of MM so

that he can get the best of the available resources and
make it a habit to adopt the principles of mm in all over
daily activity.
THANKYOU