PRODUCTION MANAGEMENT

BBA SEMESTER 6

Module 3

Contents

Materials management

Scope & Importance , methods of purchasing

Inventory control – ObjectivesFunctions andimportance

MATERIALS MANAGEMENT

MM can be defined as “ that of business / management function that is responsible for the coordination of planning ,sourcing ,purchasing , moving, storing and controlling materials in an optimum manner so as to provide service to the customer at a pre-decided level at a minimum cost.

Scope of Material Management

Materials planning and control

Purchasing

Materials handling

Stores

Receiving, Inspection and Despatching.

Inventory control

Advantage of Material Management

Accurate stock forecasting

To minimize errors

Better coordination

BETTER PERFORMANCE :

Timely provision of material

FORMS OF PURCHASING

i. Centralized Purchasing

ii.Decentralized Purchasing

iii.Just-in-Time Purchasing

1. CENTRALIZED PURCHASING

•Responsibility of purchasing is delegated to only one department.

•Other departments submit their requisitions to the Purchase Department.

Advantages of Centralized Purchasing • Increased efficiency and effectiveness.•Minimizes ordering costs.•Avoids duplicity.• Ensures better control.•Other Depts. Can save time.•Better Supplier- Partnership.

disadvantages of Centralised Purchasing • Local Purchase: The benefits arising out of local

purchase cannot be availed of where there is centralized purchase in operation.

• Emergency Purchase: In case of centralized purchasing, emergency purchase cannot be made.

• Communication difficulty: This system of purchase leads to communication difficulty between centralized purchase office and the plants.

• Less flexible: The purchasing procedure under centralized purchasing is less flexible.

2. Decentralized purchasing

•Purchasing work is assigned to all departments.

•No separate Purchase Department exists.

•Different departments purchase from different suppliers.

3. just-in-time purchasing

• It is the purchase of materials and parts so that delivery immediately precedes the demand or use.

• Primary objective is to achieve product quality through a long-term contract and fair price.

• Relies on a single source of supply in a nearby geographical area.

advantages

• Increase in ability to meet delivery promises.•Reduction in delivery lead time.•Reduction in storage cost.• Improved product quality.• Increased productivity.

Eg. Toyota, General Motors, Ford, Xerox.

INVENTORYInventory consists of materials, parts, and finished goods.Inventory is depleted when its sold or destroyed.

An inventory-manager’s job is to balance the advantages and disadvantages of both low and high inventories.

• Both low and high inventory levels have associated cost characteristics.• The ideal cost situation is to have “some” inventory

TYPES OF INVENTORYINPUT PROCESS OUTPUT

Raw Materials Work In Process Finished Goods

Consumables required for processing.

Eg : Fuel, Stationary, Bolts & Nuts etc. required in manufacturing

Semi Finished Production in various stages, lying with various departments like Production, WIP Stores, QC, Final Assembly, Paint Shop, Packing, Outbound Store etc.

Finished Goods at Distribution Centers through out Supply Chain

Maintenance Items/Consumables Production Waste and Scrap Finished Goods in transit

Packing Materials Rejections and Defectives Finished Goods with Stockiest and Dealers

Local purchased Items required for production

Spare Parts Stocks & Bought Out items

Defectives, Rejects and Sales Returns

Repaired Stock and Parts

Sales Promotion & Sample Stocks

INVENTORY CONTROL

Inventory control is defined as “the planning and scheduling of materials used in the manufacturing process. It is possible to exercise control over the three type of inventories recognized by the accountant as raw-material, work-in- progress and finished goods”.

L.V. Fine

I. To ensure smooth flow of stockII. To provide for Required Quality of MaterialsIII. To Control Investment in stockIV. Protection against fluctuating demandV. Protection against fluctuations in outputVI. Risk of obsolescenceVII. Minimization of material cost

Objectives of inventory control

Functions of Inventory control

To ensure the timely availability of materialBetter use of financial resourcesProtecting inventories from lossesProvides protection against the uncertainties of demand and supplyPreparation of accurate material reportsTo minimize wastages and rate of deterioration

ajosh mathew thomasMBA semester 3