1. Material Management
By Mukeesh Mewada

2. What is In entor
Inventory
• Stock of materials
• Stored capacity
• Types of Inventory
– Raw material
– Work-in-progress
pg
– Maintenance/repair/operati
ng supply
– Finished goods

3. Why to do Inventory
y y
Management
• To ”decouple” or separate
decouple
various parts of the
production process
• To provide a stock of goods
that will provide a “selection”
for customers
• To take advantage of
quantity discounts
• To hedge against inflation
and upward price changes

4. Inventory Management
y g
Involves
• What and how much stock
you have
• When to order fresh supplies
• What and how much has
been ordered, when it was
ordered
d d
• Where all supplies are stored
• When and how much fresh
stock was received, and by
whom

5. ABC Anal sis
Analysis
• Divides on-hand inventory
into 3 classes
– A class, B class, C class
• Basis is usually annual $
volume
– $ volume = Annual demand x
Unit cost
• Policies based on ABC
analysis
– Develop class A suppliers more
– Give tighter physical control of
A items
– Forecast A items more carefullyy

6. INVENTORY COST
• Holding costs - associated
with holding or “carrying”
inventory over time
• Ordering costs - associated
with costs of placing order
and receiving goods
• Setup costs - cost to
prepare a machine or
hi
process for manufacturing
an order

7. QUANTITY DISCOUNT
• Answers how much to
order &
when to order
• Allows quantity discounts
– Reduced price when item is
purchased in larger
quantities
– Other EOQ assumptions
apply
• Trade-off is between lower
price & increased holding
cost

8. REORDER
Inventory
Level
q
q Cycle Stock
q
Safety Stock
Order
cycle

9. LEAD TIME
250
200
and Inventory
150
Average
Inventory
100
On Ha
50
Backorder
0
Lead Time
-50
1/25
1/2 2/14
2/1 3/5
3/ 3/25
3/2 4/14
/1
Date

10. In entor Carrying Cost
Inventory Carr ing
• Storage Space
• Material Handling
• Racks, Shelves
Racks Shelves, Containers
• Reporting
• Obsolesces
• Scrap
• Tracking & Counting

11. • FIFO (First In First Out)
• LIFO (Last in First Out)

12. PURCHASING
• Regular Flow of Material
• Competitive Price
• Right quality
• Higher Productivity
• Maintain Standardization

13. 7 PURCHASING PRINCIPLE
• Right Price
• Right Quantity
• Right Quality
• Right Time
• Right Place
• Right Source
• Right Method

14. Purchase Procedure
P rchase Proced re
• Purchase Requisition
• Enquiry to supplier
• Q
Quotation and comparison
p
• Placing Order
• PO to A/C, Stores, Indenting
g
Department
• Follow-up Order
• After Receiving – Inspection
• Requesting A/C For payment