Download - Material Management and ABC analysis
SonalArshpreetAman Hosp.2nd yrUIAMS
DefinitionIt 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 provide reasonable level of client
services
Objective of material management
PRIMARY OBJECTIVES
SECONDARY OBJECTIVES
Buying the best item at the lowest cost Reduction in inventory cost and High inventory
turnover Maintaining the flow of production Maintaining the consistency of quality Optimisation of acquisition and possession,
resulting in lower cost Cordial relationship with suppliers Maintaining good records Contribution towards competitiveness
PRIMARY OBJECTIVES
Promotion of standardisation with suppliers Committees to decide on economic make –
or- buy decisions Development of inter departmental
relationships Can undertake acquisitions
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
Cost can be lowered Controlling of indirect cost (such as materials
movement) Risk of inventory loss minimised (theft, pilferage ) Control of manufacturing cycle Material congestion in storage places avoided Improvement in delivery of the product
PLANNING (Plans for capacity or production levels and required inventory levels
MATERIAL UTILISATION (efficiency of the flow of materials through the plant)
PHYSICAL (storing, receiving and issuing of materials and physical checking of inventory of raw materials, work in process, finished goods, record keeping)
CONTROL OR FOLLOW UP (feedback and corrective action involved)
Selection of appropriate vendors Land and storage cost increase Difficulty in forecasting demand accurately
Scarce capital for investment in materials inventory
Diversification of product lines Optimising time and quantity for products
Management of information
Functional areas of material management
1. Purchasing
2. Central service supply
3. Central stores
4. The print shops
5. The pharmacy
6. Dietary
& Linen services
(ABC = Always Better Control)This is based on cost criteria.
It helps to exercise selective control when confronted with large number of items it rationalizes the number of orders, number of items & reduce the inventory.
Small in number, but consume large amount of resources About 10 % of materials consume 70 % of resources Must have:
Tight control
Rigid estimate of requirements
Strict & closer watch
Low safety stocks
Managed by top management
Intermediate.About 20 % of materials consume 20 % of resources
Must have:
Moderate control
Purchase based on rigid requirements
Reasonably strict watch & control
Moderate safety stocks
Managed by middle level management
Larger in number, but consume lesser amount of resourcesAbout 70 % of materials consume 10 % of resources
Must have:
Ordinary control measures
Purchase based on usage estimates
High safety stocks
ABC analysis does not stress on items those are less costly but may be vital
This approach helps the materials manager to exercise selective control and focus his attention only on a few items when he is confronted with lakhs of stores items.
By concerning on ‘A’ category the materials manager is able to control inventories and show visible results in a short span of time
By controlling the ‘A’ its and doing a proper inventory analysis, obsolete stocks are automatically pinpointed.
Many organizations have claimed that the ABC analysis has helped in reducing the clerical costs and resulted in better planning and improved inventory turnover.
• ABC analysis has to be resorted to because equal attention to ‘A’ ‘B’ and ‘C’ items will not be worth while and would be very expensive.
• Concentrating on all the items is likely to have a diffused effect on all the items irrespective of the priorities.
It gets harder to do correctly the longer you do them.
Needs to be completed in the moment for the most accuracy.
Still might reflect the biases of the data collector.