1. Material Management
By
Amruta S. Sambarekar
Dept. Of Pharmaceutics
M.Pharm Ist Year
M.M.C.P,Belgaum
1
2. INTRODUCTION
It is an organizational concept, which has the
authority & responsibility of all activities,
principally concerned with the flow of materials in
the organization.
Operations involved in the flow of materials are –
Purchasing, Inventory control, Receiving, Storing,
Production scheduling & Shipping of finished
products.
Hence, material management works in liaison with
production, marketing, sales & quality control.
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3. Objectives
Maximizing the use of working capital.
Lowering inventory investment & increasing the
inventory turnover by cutting the costs related to
purchases.
Ensuring cooperation of all departments.
Providing best services to the level of customer’s
delight.
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4. Functions of
material management
Material planning & programming.
Simplification, standardization & value analysis.
Inventory control & management.
Purchasing of materials in desired quantities without
delays.
Receiving of incoming materials.
Storage, preservation & administration of materials.
4
5. Cont…
Transportation (internal & external) & material
handling.
Disposing of rejects & obsolete materials.
Improving operation efficiency through training.
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6. Materials – Quality & Quantity
For the purchase of raw materials, 4 factors are
considered to be essential –
- Quality
- Quantity
- Price RS.
- Delivery time. DATE
DATE
Optimizing these factors is the essence of the
material management. 6
7. Quality
It is defined as the suitability of an item to accomplish
the intended purpose.
A quality standard is the description of an acceptable
quality of a particular item. Ex: quality of drugs &
excipients is expressed as per the standards of IP, BP,
USP, NF, BPC etc.
Raw materials & components should satisfy the
following requirements –
-Efficiency with which the material can perform its
functions. 7
8. - Cost & estimated life of the material
- Power consumption in case of equipment.
The quality of material used has direct relationship
with the end use of the product.
In the purchasing context, quality is expressed as
the capability of doing a certain thing
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9. Quantity
The function of purchasing department is to buy the
right quantity.
From inventory point of view, quantity standards are
decided on the following parameters –
- Maximum inventory
- Minimum inventory
- Standard order
- Reorder point
The quantity is mainly based on the calculation of 9
economic order quantity (EOQ).
10. Value analysis
Value is defined as the lowest cost paid for reliably
providing the required function or service, at the
desired time & place with essential quality.
Value analysis is a systematic study of every
element for its cost in a part, material or service to
make certain that it performs its function at lowest
possible cost.
Primary objective of value analysis is to obtain the
same quantity of a product & to achieve the
required function at a lower possible cost. 10
11. Benefits
Cost of existing product decrease.
Unnecessary expenditure can be identified &
eliminated in products, processes or services.
Import substitution efforts get boosted.
Greater profits accrue.
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12. Types
User value: Properties that accomplish use, work or
service. Ex: self-sealing tape.
Esteem value: Properties that make the ownership
of that object very desirable value. Ex: gold tie-pin.
Cost value: Properties that are the sum of labour,
material, overheads & other costs, required for
producing that object.
Exchange value: Properties that make the objective
possible of being traded for other items. Ex: gold
ornaments. 12
13. Value ratio
Function may be expressed in terms of performance,
reliability, appearance etc.
It is expressed as Value = Function
Total cost
Once a function is kept constant a value can be
improved by the following ways,
- Reducing the costs.
- Improving the function.
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14. Cont…
- When function is increased with disproportionately
low increase in cost.
Unnecessary costs may be due to,
- Lack of information
- Lack of ideas
- Wrong beliefs ,habits and attitudes
- Changed circumstances
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15. Purchasing – Centralized &
Decentralized
Purchasing is an activity of securing the materials,
supplies, equipment & services required in the
operations of an enterprise.
Purchasing manager is responsible for the effective,
efficient & economic operations of the department.
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16. Functions Of Purchasing Department
Ordering section places orders with the vendors.
Service section follows the progress of the purchase
orders, its shipment by the vendor & its final receipt
by the company.
Records-section maintains all records of quotations,
costs, purchases etc.
- Thus, purchasing involves control, coordination &
communication 16
17. Centralized Purchasing
If a company has production operations at different places &
if the nature of operations is similar, then centralized
purchasing is preferred,
Advantages:
- Invariably an efficient system.
- Permits a greater degree of specialization for buying.
- Bargaining capabilities are better.
- Procuring becomes uniform & consistent materials are
procured without price anomalies.
- Duplication of efforts is eliminated.
- Purchasing procedures & payment of invoices become
simple. 17
18. Decentralized Purchasing
When different branches of a large organization
require different types of materials, decentralized
purchasing is preferred.
Advantages:
Purchasing system, purchasing becomes more
flexible & efficient
Procurement is faster.
Purchases made in local place, promotes better
public relations.
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19. Cont…
Control over purchases is no longer remote.
Disadvantages:
Quantity of discounts offered is less & also involves
duplication of efforts.
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20. Vendor development
Vendor is a person who sells & supplies his products.
An intelligent purchasing process involves the
rational selection of sources from which materials can
be obtained. Considerable efforts are needed in
identifying, developing & evaluating the prospective
suppliers.
Factors to be considered in developing a vendor –
- Quantity required to be purchased.
- Time available for making such purchases.
- If the material be required repeatedly or
occasionally.
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21. Cont…
Volume of the purchase of required materials.
Industry producing the required materials.
Commercial viability of the materials.
For the purchase of items that are of repetitive
nature, a detailed evaluation procedure of suppliers
is adopted.
For a one-time purchase, elaborate inquiries &
evaluation procedures may not be necessary, unless
the item is costly & has a high technological
content, such as biological products.
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22. Stage Name Development
Survey stage Identifying the potential
1st sources of suppliers.
Seeking information.
Provisional vendors list.
Enquiry stage Analysis of information in
nd standard enquiry format.
2
Accreditation, FDA approval,
ISO certification.
Personal visits.
Negotiations and Quality control specifications,
rd clarification, credit, quantity
3 selection stage
discounts.
Experience and Performance appraisal,
Quality, delivery time.
4th evaluation stage
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23. Survey stage
The following sources are considered for information,
Trade directories
Trade journals
Telephone directories
Supplier’s catalogue
Salesmen
Other ways are like exchanging information between
purchage departments of other companies, tracing of
public tenders and advertisements in the press.
A list of possible supplier is drawn and assessed then
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further.
24. Enquiry Stage – Selection Of
Potential Suppliers
• After getting the information of the suppliers, detailed
analysis of the supplier is being carried out. A
comparison is being made between the different
suppliers on basis of the following points,
• Technological competition,
• service competition,
• price competition,
• delivery time.
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25. Cont…
The following aspects can be verified by the first hand
visit:-
• Internal facilities of the vendor
• Financial adequacy, stability and reputation of the
vendor
• Location of vendor’s factory
• After sales service
• Industrial relations
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26. Negotiation and selection stage
The vendors who clear the enquiry stage are
selected and negotiations are being carried out with
them.
The various aspects such as credit, quantity
discount, quality specifications are being discussed.
Finally, a list of approved vendors is drawn and
accordingly purchase orders are placed with the
approved vendors.
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27. Experience and evaluation stage
The buyer evaluates and appraises the performance
of the vendor.
The objective is to improve the performance of the
vendors.
Few ways of evaluating a vendor are
o Categorical method
o Weighted point method
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28. Categorical Method
The buyer sets up some category on which the evaluation
of the vendor is done are following,
Supplies are as per quantity specified
Delivery as per schedule
Rigorous follow up is not necessary
Solve his raw material problem his own
Willing to accommodate when production schedules
are changed suddenly
Helps in emergency
Reasonable pricing 28
29. Cont…
Each supplier is evaluated and number-score is
calculated. The conversion score is as follows,
80-100 points Excellent
70-80 points Very good
60-70 points Good
50-60 points Average
40-50 points Very poor
Method provides an opportunity to discuss the
performance with the vendors in clear terms.
Less expensive method. 29
30. Weighted Point Method
Involves a point rating based on the quality of
goods received, the promptness of deliveries made
& the quality of the service rendered by the vendor.
The performance of each factor is separately
quantified.
Quality - 50 points
Delivery - 30 points
Price - 20 points
Total - 100 points
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31. Cont…
Numbers of lots accepted * Rating points
Quality rating =
Numbers of lots rejected
No. of lots delivered in time Rating
Delivery rating = * points
Total no. of lots delivered
Least offers received
Price rating = * Rating points
Supplier’s offer
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32. Buying Techniques
Purchasing of material , machinery and services is
done by purchasing department.
For buying the material company has to pay up a
price, the value that a seller sets on his goods in the
market is called as the price of that good.
Price is one of the greatest variables in the
purchasing of material.
Price is often quantified by terms, best price, lowest
price, economic price.
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33. Quotations :
It is a kind of an enquiry done to know whether the
vendor can supply the desired material and if so, at what
price.
They are not the purchase order. They just contain all the
details including taxes and many other costs.
The highly used quotation techniques are
Spot quotations
Floating a limited enquire
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34. Spot Quotations
This is basically used for the small items not related
to the technical purpose.
The prospective buyer goes to the market and gets
the quotations from the different suppliers and takes
a spot decision
Floating A Limited Enquire
This method is used when the value of the purchase is
small. In this technique the reliable vendors are called
upon and asked to provide the quotations.
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35. Cont…
A comparative statement helps in studying and
comparing a different quotations at a glance.
Tenders
It is a written letter or a published document that is
aimed at finding the price for procuring certain materials.
Tenders are invited from recognized firms. A few types
of tenders are:
# single tender
# Open tender 35
# Closed tender or limited tender
36. Single Tender
It is invited from one reliable supplier, under certain
conditions. Applicable to proprietary items, high
quality items & also C-items such as clips, pins,
pencils, etc., when items are required urgently
Open Tender
Used when the value of purchase is high. & when
supply sources are not known. Open tenders are very
expensive.
It gives wide publicity & is open to any vendor. The
vendor has to deposit an earnest money with the 36
tender information & tender number.
37. Negotiations
It is done to arrive at the mutual understanding
through bargaining on the essentials of a contract
such as delivery, specifications, prices & terms.
The purpose is for fixing & finalizing prices of
materials, terms & conditions.
Negotiations are essential in the following conditions,
- Prices are related to large volumes or large value.
- Terms & conditions are required for large volumes.
- Contract is desired for a longer period.
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38. cont….
Variations in quantity to be purchased are possible.
Changes in drawings & specifications are necessary.
When supplies can be obtained from only one
source.
Changes in transportation, packaging & delivery
points are to be decided.
- It is a kind of win-win situation. Both the parties try to
benefit to the maxima through the negotiation.
- It is not a kind of bargaining but a mutual understanding
between the two parties 38
39. Discounts
Discounts are defined as the cash concessions offered
by the vendor in the payment price, on the goods
purchased, in order to enhance the volume of business
opportunities.
Reasons for offering discounts?????
! When there is a bulk purchase.
! When the bills are cleared immediately.
! And also to maintain the good relation with the buyer
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40. Cont…
Cash discount: It is a method of offering discounts
discount
depending on the time of payment made on the
delivery.
Payment in days Cash discount %
90 nil
60 1
30 2
Immediate 3
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42. Purchasing cycle and procedure
The purchasing department of the company is responsible
for the purchase of all the raw materials as well as the
requirements.
The following steps are followed in the purchasing cycle.
1) Recognition of need and receipt of requisition: The
requisition includes the following information:-
- Name
- Quality and quantity specifications
- Date by which material is required
- Place at which material is to be delivered
Feb 11, 2013 42
Dept of Pharmaceutics
43. 2)Selection of potential sources of supply
3) Making request for quotation
4) Receipt and analysis of quotations
- Material specifications and quality
- Price of the material
- Taxes
- Terms of payement
- Place of delivery
- Delivery period
- Gurantee period
-Validity of tender
Feb 11, 2013 43
Dept of Pharmaceutics
44. 5) Selection of right source of supply
6) Issuing the purchase order
7) Follow-up of the order
8) Receipt of materials,reports and analysis
9) Checking and approving of vendor’s invoice for payment
10) Closing of completed order
11) Maintenance of record and file
Purchasing cycle flow chart has been given in the
following slide.
Feb 11, 2013 44
Dept of Pharmaceutics
46. Cont…
Delivery of materials
Checking of invoice Materials & reports, analysis
with purchase order
Payment made
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47. Stores management
Location of stores
Stores layout should be planned to achieve
following objectives:
Minimum wastage of spaces
Maximum ease of operation
Minimum other operational costs
Minimum handling costs
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48. General functions of
the stores department
Maintenance of stocks (materials and tools)
in stores
Maintenance of hygiene, sanitation and pest
control
Maintenance of material handling equipment
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49. Specific functions of Stores
Department
Receiving, inspecting and recording of raw
materials
Arranging for QC of raw materials
Positioning and storage
Issuing and recording
Receiving and dispatching of finished goods
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50. Optional functions of
Stores Department:
Dispensing, maintenance of weights and
measures: A centralized weighing section is
recommended which avoids the duplication of
weighing facilities
Screening of materials: A material screening
section should be constructed in close
proximity to the central warehousing area.
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51. SALVAGING AND DISPOSAL OF SCRAP AND
SURPLUS
The words ‘scrap’ and ‘surplus’ denotes waste
and to that extent these account for the loss of
profits
Mistakes in procurement
Wrong planning decisions
Wasteful processes in production
Inevitable waste during the adjustments of
the equipment
Overall absence of efficiency.
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52. Scrap
Scrap refers to ferrous scrap, which is not related
to pharmaceutical industry. Commonly it refers
to waste material of all kinds.
The responsibility of disposing scrap and surplus
is usually assigned to the purchase department
because it has fair idea about the market, price
trends.
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53. Salvaging
The processing of materials for advantageous use or
disposal of company’s property which is no longer
economically useful in its present position.
Waste materials are properly collected and stored at
one place
Recoverable materials are stored in a scientific way as
other items are stored.
Materials are stored in terms of quality or
specifications
Waste is investigated for suitability to recover or avoid
them. 53
54. PLANT MATERIAL HANDLING
Material handling involves the movement of
materials manually or mechanically either
individually at a time or in batches within the
plant
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55. Risks associated with improper
handling
Increase in cost of raw materials and finished
products
Delay in production schedule and long production
cycle
Waste of machine time and personnel time
Increase in in-process inventories
Damage or loss of material and employee safety
liabilities
Customers dissatisfaction
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56. APPLICATION OF MATERIAL HANDLING
EQUIPMENT
Production department: As the cost of labour and
cost of the basics have been increasing, there is
a chance of squeezing profit margins.
Store department: For the movement and lifting of
materials in stores, shuttle car or hand operated
mobile trucks are used.
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57. FUNCTIONS OF MATERIAL HANDLING
Handling of unit load
Placement of equipment
Appropriate material handling techniques
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58. SELECTION OF MATERIAL HANDLING
SYSTEMS
Nature of materials to be moved
Plant building and layout
Type of material flow pattern
Type of production
Cost of material handling equipment
Handling costs
Life of equipment
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59. MAINTENANCE OF MATERIAL HANDLING
EQUIPMENT
Preventive maintenance is one of the best
techniques suggested for the material handling
equipment.
Inspection
Repairs
Overhaul
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60. UNIT LOAD, PALLETISATION AND
CONTAINERIZATION
It is easier and faster to move a hundred small
parts by grouping them into one unit than moving
them individually one by one. These are
collectively known as Unit-load.
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61. Pallet is one unit load Unit load & palletizaton
these are moved to the
production department
by suitable handling
system.
Depending on the types
of item to be transferred,
a suitable pallet can be
designed. for example,
items of irregular in
shape are liable to be
damaged by crushing,
for such items, a post
pallet is useful. small
items can be placed in a
wire mesh-box.
02/11/13 61
62. Containerization uses Containerization
the principle of unit
load. in this system, a
big metal container is
filled with a number of
small products. many
such containers are
placed on a truck or
trailer that is pulled by
tractor or truck. such
containers can be
loaded on railway
trailers & transported.
02/11/13 62
63. TYPES OF MATERIAL HANDLING
SYSTEMS
Conveyors Slides
Fork- lift Trucks Chute
Cranes Lifts
Hoists Tractors and Trailers
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64. Conveyors
Belt conveyors are used in transporting
containers (bottles) for filling, capping, sealing,
labeling, pasting, visual inspection in
production of injectables, liquid orals, ointments
and jellies.
Other conveyors- Pneumatic conveyor, roller
conveyor, slat conveyor, wheel conveyor, apron
conveyor, pusher conveyor, bar conveyor and
bucket conveyor.
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66. Fork- lift Trucks
It consist of forks attached to a column of the truck.
fork can be lifted upto the desired height with
material(boxes) on them. the material can be stacked
at the proper place very close to the roof in
warehousing & shinning area. Fork-lift trucks are
used for short distance(40 to 70 meters) travel. These
are used for indoor applications.
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68. Cranes
Cranes are employed for lifting & lowering of
bulky items, packages & boxes. these find
applications in heavy engineering industry &
generally in intermittent type of production.
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70. Slides Chute and Lifts
• Slides can be straight, spiral & vibrating, & made up of
wood or steel. These transfer small jobs that can slide
down under gravity. Vibrating slides transport
material up & inclined.(Example,cigar-ette factories )
• Chutes generally deliver the feed material directly onto
the conveyor to reach the destination further. Spiral
chutes are used for transporting sealed vials from
aseptic area to packing section using gravity principle.
• Lifts are used to transport material up in multi-storeyed
Plants. It is a fast & flexible equipment for floor to floor
Travel.
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72. Tractors and Trailers
Three wheeled or four wheeled tractors are
employed & fitted with an IC engine drive. These
are used for outdoor applications.
Trailers are loaded with the material & attached to
the tractor. It can be either uncoupled from the
tractor or the material can be dumped in respective
stations.
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74. IMPORTANT QUESTIONS
1. What is HRD ? Explain about personnel training of job
spec ification. (Oct ’06, May 11)
2. Explain centralised & decentralised purchase
procedure (Oct’06, May 11)
3. Describe the material management in pharmaceutical
industries(Oct’09)
4. Explain the various material handling systems &
maintainance of material equipments in p’ceutical
industries.(May’ 10)
5. Explain personnel training, job specifications , job
enlargment & labour welfare. (Oct’09)
6. Explain stores management in p’ceutical industry.
(May 10)
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75. REFERENCES
•CVS Subramanyam, Pharmaceutical Product and
Management, Published by- Vallabh Prakashan, Page no :-
260 – 282
•Prof. S.A. Sherlekar, V.S. Sherlekar Modern business
organization & Management systems approach, by Himalaya
publishing house, 5th edition,pg.no.5.38–5.58.
www.google.com
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