Classes of materials, procurement, inventory management

2. Material management
 Cost of materials in the different industries may range
from 50 to 85% of production cost.
 Planning and controlling the flow of materials

3. Definition
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.
OR
Material management is a scientific technique,
concerned with Planning, Organizing &Control of
flow of materials, from their initial purchase to
destination.

4. AIM OF MATERIAL MANAGEMENT
To get
1. The Right quality
2. Right quantity of supplies
3. At the Right time
4. At the Right place
5. For the Right cost

5. OBJECTIVES OF MATERIAL MANAGEMENT
1. To minimize material cost.
2. To maintain desired quality of material at minimum
cost.
3. To reduce investments tied in the industry.
4. To purchase, receive, transport and store material
efficiently.
5. To trace new sources of supply & to develop cordial
relation with them.

6. Four basic needs of Material
management
1. To have adequate materials on hand when
needed
2. To pay the lowest possible prices, consistent with
quality and value requirement for purchases
materials
3. To minimize the inventory investment
4. To operate efficiently

7. Classes of Materials
1. Raw Materials: The raw materials are the unprocessed
material which are used for converting into finished
products.
e.g. iron ore, cotton jute, sugar cane, artificial fibers,
chemicals etc.

8. Classes of Materials
2. Purchased Parts: The purchased parts are used
in the assembling the product.
e.g. nuts & bolts, screws, gears, wheels, etc.

9. Classes of Materials
3. In-process Material: These are partly manufactured
products which need further change of from processing.

10. Classes of Materials
4. Finished Goods: The product complete in all respect,
inspected and prepared for sale in the market.

11. Classes of Materials
5. Supplies: All consumable items used in the
manufacturing operation are supplies.
e.g. oils, diesel, stationary, etc.

12. Scope of Material Management
 Material Requirement Planning & Control
 Procurement
 Inventory Control
 Receiving & Inspection
 Transportation
 Material Handling
 Disposal of Materials
 Value Analysis

13. Material Control
Material control is a systematic control
over the purchasing, storing and using of
materials to minimizing the possible cost.

14. Objectives of Material Control
1. To insure availability of materials.
2. To avoid excessive investments in materials.
3. To ensure the quality of material.
4. To insure minimum wastage.
5. To ensure timely action for procurement of
materials.
6. To maintain records of materials.

15. Purchasing
Purchasing is the procuring of
materials, supplies, machines, tools and services
required for the equipment, maintenance and
operation of a manufacturing plant.
Importance
 Contributes to the competitive advantage of
the firm,
 Significant portion of the logistics costs

16. Managing the Procurement
Process
1. Determine the type of purchase
 New
 Straight re-buy
 Modified re-buy
2. Identify the type of purchase method
- Determine the necessary levels of investments of
time & information.
- The more complex the purchase, the more time
needs to be gathered to get it right the first time.

17. Managing the Procurement
Process
3. Perform the procurement process
Do these activities that are necessary to
effectively make a purchase and satisfy the user’s
requirements.
4. Evaluate the effectiveness of the
procurement process
Were the user’s needs satisfied?
Was the investment necessary?

18. Concerns
 Cost of materials and
 Cost ON materials
 Timely delivery so as to have smooth flow and
avoid DELAYS
 Service centric approach

19. Inventory Management
What is Inventory?
 Stock of items required to meet future demand
 Purpose of Inventory Management
- How many units to order?
- When to order