Materials & Logistics Management

IntroductionMaterials management
 The wealth of a country measured by its national

products the out put of goods and service produced by the nation ..  Goods are physical objects we can tough, feel or see.( Tangible).  Service are the performance of some useful function such as Banking, medical care,( intangible)

 Manufacturing companies are in the

business of converting raw materials to form that is of far more value and use to the consumers than the original raw materials.  Exp- Logs are converted into Table .chair  iron ore into steel in to cars ,refrigerator. This conversion process called Manufacturing or production

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.

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

PURPOSE OF MATERIAL MANAGEMENT To gain economy in purchasing To satisfy the demand during period of replenishment To carry reserve stock to avoid stock out To stabilize fluctuations in consumption To provide reasonable level of client services

Objective of material management

Primary
Right price High turnover Low procurement & storage cost Continuity of supply Consistency in quality Good supplier relations Development of personnel Good information system

Secondary
Forecasting Inter-departmental harmony Product improvement Standardization Make or buy decision New materials & products Favorable reciprocal relationships

Basic principles of material management

1. Effective management depends on managerial functions of - Planning Organizing Staffing Directing Controlling Reporting Budgeting

2. 3. 4. 5. 6. 7.

Sound purchasing methods Skillful & hard poised negotiations Effective purchase system Should be simple Must not increase other costs Simple inventory control programme

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

Operating environment
 Operations management works in a complex

environment affected by many function Among the most important are  Government regulation,  Economy.  Competition  Customers  Quality

 Government- Regulation of Business by the various level of

Govt. is Extensive .regulation applied to such areas as the environment, safety, product liability, and taxation.Govt.or the lack of it ,affects the way business is conducted  EconomyEconomic condition influence the demand for a companys product or service.  Competition competitive product.  Customer.-demanding A fair price, Right ( quality) Higher product & service. Delivery lead time . Better per-sale and after sale service product and volume flexibility QualityProvide better quality

Materials management
 Evaluation

Materials management covers all aspects of materials and their supply necessary for converting raw materials into finished products. Evaluation done throughPlanning and programming of materials

Definition & scope

 Materials managementdefined as the grouping of

Management functions that supports the entire materials flow cycle from ,materials planning, purchasing, inventory control, stores, warehousing and dispatch  Materials management is also defined as the concept which brings together under one manager the responsibility for determining the manufacturing requirements, scheduling the manufacturing process, and procuring ,storing ,and dispersing materials

 Definition Materials management is a

coordinating function responsible for planning and controlling materials flow.  OR  Controlling the kind ,amount, location, movement and timing of various commodities used in and produced by the Industrial Enterprise
.

Scope
 1- Corporate policy.  2-materials planning & budgeting.  3Materials research.  4-Source selection and development,  5-Purchasing research.  6-Inventory control.  7-Value engineering/analysis.  8-Import Purchasing  9- legal aspects in purchasing& stores Management.  10-Materials handling  11- Logistics management

Cost involved
Various cost involved in Materials management. 1- Basic cost of Materials. 2-Govt.levis & taxes. 3- Ordering Cost.4- Inventory carrying Cost. 5-Pacaging and Packing cost. 6-Materials handling cost. 7-Freight cost. 8-Insurance cost. 9-Wastage during receipt, storage, production cost.

  Improve R.O.R. *  A-Increase Profit keeping Capital constant.  B- Reduced capital keeping profit constant
R.O.R. PProfit P/C C-Capital. S-sales S/C

p/s

profit margin

Capital turn over ratio

 Two basic way to improve R.O.R

A-Increase profit keeping capital Constant.  B- Reduce capital keeping profit constant
 A- Increasing profit keeping capital constant.  1Increase units sold (s).  2increase units produced (N).  3 Increase unit price (P).  4Reduced unit cost. (c)  B-Reducing Capital  Fixed capital. Land,building,plant & m/c  Working capital.-materials ,(inventory)

Objectives of Materials management

1- Maintain steady flow materials to ensure uninterrupted. 2- to achieve economy in cost of materials. 3- To provide consistency of right quality . 4- To reduced inventory. 5- To improve corporate image by improving buyers& sellers relations. 6- Safe preservations of materials . 7-To reduce wastage. 8 -To improve the competitive strength.produce best Quality materials

Integrated Approach to M.M.

 To improve the productivity it is essential to

follow well co-ordinated and integrated approach towards various areas which involves decision making with respect to materials  Exp..- Reduce the inventory cost. by
 Reducing lead time  minimize uncertainties.  Cut down varieties.  Reduction programming.

Activities -Materials management Department.

To achieve best result all activities should be controlled by one dept. Activities followed by stored Dept. 1- Materials planning. 2 Make or buy decisions. 3- purchasing. 4- receiving and inspection. 5-storage. 6-Inventory control. 7- Distribution of materials.

8-Transpotaions. 9- Disposal of surplus ,obsolete and scrap materials  10- Developing new sources of supply.  11- Import substitute.  12-Ancillarisation.  13-Insurance management.  14-Materials cost reduction and cost control.  15- Waste management.  16- Materials research.

Benefits of integrated materials management

 1)- Speedy & accurate decision.  2)-easy for corrective action.  3)-Optimal decisions. (right balance of conflicting

interest are taken.)  4)- better co ordination.  5)- Maintain good relations to other department.  6)-easy to collect date for analyses.  7)-Improves the opportunities for Growth.

Logistics Management

Concept of logistics
 Logistics is concerned with getting product and service

where they are needed when desired. ConceptBusiness logistics' is the planning ,organizing and controlling all activities that facilitate product flow from the point of raw materials acquisition to the point of final product. and the necessary information flow ,for the purpose of providing a sufficient level of customer service in a cost effective manner.

Logistics Management-.
 Council of Logistics management defines it as the process of

planning, implementing and controlling, a flow & storage of Goods ,Service,& related information in the most efficient way, from the point of origin to the point consumption.  OR  Logistics Management encompasses all materials flows management from inflow of purchased materials in to works materials flow through manufacturing processes and materials flow to customer. --- as per the customers requirement at the lowest possible cost.

Significance
Raw materials . Initial processing. Production - Finished Retailers. Customers  Parts and Sub assembling. Centre Goods  Components
   

Materials Management. Part-A

Physical Distribution Management Part -B

The total is Logistics Management.

Logistics Management Physical distribution

Supplier

Inbound logistics

Production

outbound logistics

Customer

Materials Management

Physical distribution

Logistics Management

Scope of Logistics Management

 Inbound logistics  Materials Production Suppler-1 Distributor Supplier-2 Distributor Supplier-3 Distributor Flow of IP(INPUT) Distributor

In plant logistics

Out bound Logistics

Distributor

Customers need
    

What he wants. When he wants Where he wants Why he wants How he wants

Product & price. Time. Place . Purpose /frequency. convenience.

Every Customer required

 Best product-(quality).  At lowest price.-(cost)  Fastest delivery.-(Time)

Organizations need
 How much money (returns) organization

wants?--(profitability). How long organisation wanted to remain in business & make money. Long term profitability.

Objectives
 Basic objectives logistics management is to get the right goods

       

or services to the right place, right time in right condition and right cost. 1- high level of service 2- minimize operating cost. 3-reduce delivery time. (stages) 4- add values at every stage. 5-reduced inventory. 6-improve competitive position. 7- Improve communications. 8-Pramote co-operation and co-ordination among sub system.

Activities. of the Logistics management

 1- Delivery Consistancy.And Reliability.  2-Deliverry Frequency (Timings) & Flexibility.  3-Order Cycle time.  4- Order Status Information.  5- Product Availability. (Most).  6- No stock Percentages. (Least)

Activities. of the Logistics management

 Order processing  Transportation.  Inventory Management.  Warehousing.  Materials handling.  Packaging.  Product scheduling.  Information system.

Needs For Logistics

 Logistics Supports Marketing activities---

By bringing all items together for sale

- Provide wide mix products (Colour, Size, Styles.) Make available when required.

- Logistics adds value by creating time & place

utility.
-

Form Utility. (right product.) Possession Utility.( Right communicating & right price) Time utility. (when it is required.)

Factors affecting logistics.

 1-Lack of standardisation.  2-Too.close tolerance and high finishes.  3-in Effectiveness of production ,planning and

control.

Total cost concept.

The goal of organisation to reduce operating cost of logistics activities rather than focusing on each activities in isolation.

Major logistics cost.

 Inventory carrying cost.  Procurement cost. (lot quality cost.)  Transportation cost.  Warehousing cost.  Parking Cost.  Order processing cost.  Information /communication cost.

Logistics and operational dimensions

-1- Materials handling. 2- Packing and packaging. 3-Transportaion. 4- Warehousing. And storage Depot. 5-Inventories, 6- Customer Service requirement. 7- Logistics interfaces. 8- Order processing. .

Operational Elements.
 Materials handling-is concerned with movement of product at the stocking point and it involves such decision

. Packing and packaging.-is concerned with design of packing of the product that ensures damage free movement of the product.

Transportation.--Quick and safe movement of materials.

Warehousing. And storage Depot.-is the management of space to hold inventory

Inventories
inventories required to be maintained to take care of needs between the time of demand and time of supply.

Customer Service requirement.Required to satisfy

customer.

Logistics interfaces.
Required to make connectivity to all concerned.

Order processing.
Through this activity does not contribute much to total cost, but it contribute to reduce lead time

Supply Chain Management

 Introduction to Supply Chain Management
If company makes a product from parts purchased from suppliers, and those products are sold to customers, then you have a supply chain. Some supply chains are simple, while others are rather complicated. The complexity of the supply chain will vary with the size of the business and the intricacy and numbers of items that are manufactured.

Supply chain management (SCM)

 Supply chain management (SCM) is the

process of planning, implementing, and controlling the operations of the supply chain as efficiently as possible. Supply Chain Management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point-oforigin to point-of-consumption

Definition-- Supply Chain Management

 The definition --Supply Chain Management

encompasses the planning and management of all activities involved in sourcing, procurement, conversion, and logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, thirdparty service providers, and customers. In essence, Supply Chain Management integrates supply and demand management within and across companies.

Supply-Chain Management
 Planning, organizing, directing, & controlling

flows of materials
  

Begins with raw materials Continues through internal operations Ends with distribution of finished goods Example: Your suppliers supplier

 Involves everyone in supply-chain



 Objective: Maximize value & lower waste

The Supply-Chain
VISA

Material Flow

Credit Flow

Supplier

Manufacturing

Retailer

Consumer

Supplier Schedules Order Flow

Wholesaler Cash Flow

Retailer

Material Costs in Supply-Chain

Wholesale Manufacturing
31% 11% 58% Material
Dir Wages

8% 9%

COGS Payroll

83%

Other

Other

Retail
13% 16%

COGS Payroll

Source: U.S. Department of Commerce, Bureau of Census, 1987 Census of Manufacturers: General Summary of Retail Trade (Washington, D.C.: Government Printing Office, 1991)

71%

Other

Supply Chain Management Aims

 Reduction of costs  Reduction of lead times  Reduction in transactions  Release of value  Ensuring appropriate quality

Elements of the Supply Chain

 A simple supply chain is made up of several elements

that are linked by the movement of products along it. The supply chain starts and ends with the customer  Customer: The customer starts the chain of events when they
decide to purchase a product that has been offered for sale by a company. The customer contacts the sales department of the company, which enters the sales order for a specific quantity to be delivered on a specific date. If the product has to be manufactured, the sales order will include a requirement that needs to be fulfilled by the production facility.

Supply Chain Management

To ensure that the supply chain is operating as efficient as possible and generating the highest level of customer satisfaction at the lowest cost, companies have adopted Supply Chain Management processes and associated technology. Supply Chain Management has three levels of activities that different parts of the company will focus on: strategic; tactical; operational.

 Strategic: At this level, company management will be looking to

high level strategic decisions concerning the whole organization, such as the size and location of manufacturing sites, partnerships with suppliers, products to be manufactured and sales markets.  Tactical: Tactical decisions focus on adopting measures that will produce cost benefits such as using industry best practices, developing a purchasing strategy with favored suppliers, working with logistics companies to develop cost effect transportation and developing warehouse strategies to reduce the cost of storing inventory.  Operational: Decisions at this level are made each day in businesses that affect how the products move along the supply chain. Operational decisions involve making schedule changes to production, purchasing agreements with suppliers, taking orders from customers and moving products in the warehouse.