Seminar on…              MATERIAL              MANAGEMENT                                       Presented By              ...
Content    Purchasing-Centralized and Decentralized    Vendor development1.   Survey stage2.   Enquiry stage3.   Negotia...
Purchasing – Centralized & Decentralized    Purchasing is an activity directed towards securing the materials,     suppli...
    Types of purchasing :-A.   Centralized purchasing :    Advantages :a)   It is an efficient systemb)   It permits a g...
B.   Decentralized purchasing:    Advantages :a)   Purchasing system becomes more flexible & efficientb)   Procurement is...
Vendor deVelopment   Vendor means a person who sells and supplies his or its    products   Considerable efforts needed t...
1) Survey stage – sources of information on potential   vendors  Involves collecting information on difft. Supliers of th...
c) Telephone directories :   Contains classified advertisements arranged    alphabetically , item wise or group wise   E...
   Directly convey the information and clarify the doubts    and expanding the knowledge to a great extent2) Inquiry stag...
    A first hand assesment of the capability of the     suppliers made by visiting supplier’s factory and satisfy     wit...
b) Financial adequacy and stability:  Financial status of the vendor company should be   explored  So that the items can...
   Only the selected suppliers considered for the third    stage3) Negotiation and selection stage – Finalization of   su...
4) Experience and Evaluation stage – consolidation of   suppliers   At this stage buyer evaluates the performance of the ...
   Each supllier evaluated and a number of score is    calculated    80 -100 points   Excellent    70 - 80 points   Very ...
   For this purpose points are assigned as :    quality    50 points    delivery   30 points    price      20 points   T...
Delivery rating = number of lots delivered in time x 30                      total number of lots delivered    Price ratin...
   for example , costs raring to quality works out to be    Rs.2000 and the total worth of material purchase Rs.2.0    la...
Buying Techniques   Purchasing involves procurement of materials    ,machinery and services needed for production and    ...
   Price is defined as the amt of money at which a thing is    valued or the value ,which a seller sets on his goods in  ...
b) Floating a limited enquire :   When the value of purchase is small   Company sends letters to a few reliable vendors ...
   After getting quotations, comparative statement is made    and analyzed in the light of following points-   Price of m...
   Types of tenders1) Single tender :   Invited from one reliable suppliers only and is called for    under certain cond...
   The buyer not aware of the capability of the supplier    there fore tenders invited from recognized or registered    f...
   Can be often done before a purchase contract is    finalized for fixing and finalizing prices of materials    ,terms a...
   Negotiation does not mean horse trading or bargaining ,it    is mutually satisfactory settlementd) Discounts : There ...
   Advantage of this type of purchase is that the contract    price is usually protected from increase or decrease of    ...
   Discount is given on the basis of actual purchases and    appropriate to the quantity range   For example ,buying is ...
Purchasing cycle andProcedures   A purchase department takes the purchasing decisions   There is no standard method of o...
SPELL OUT OF SPECIFICATIONSNEED RECOGNITION         & REQUIREMENTS                      OFFICIAL REQUISIONSPECIFICATION   ...
PURCHASE ORDER                      SUPPLIERS                     ACCEPTANCE                      DELIVERY                ...
1) Recognition of need ,receipt of purchase requisition : An official indent being sent in duplicate to purchase   depart...
   The information requested is regarding the company’s    annual sales ,accounts, type of operations ,facilities    ,des...
4) Receipt and analysis of quotations : After receiving quotations a comparative statement of   prices prepared along wit...
   Though quoted price is an important consideration for    finalizing the purchases   Based on the personal experience ...
   After placing order the purchase service section contacts    the vendor in order to ascertain the progress of the orde...
   The quality assurance personnel collect the samples    randomly and analyzed for its specifications8) Checking and app...
   9)Closing of completed orders :   Before closing the completed the file copy of the    purchase order must be checked...
Store ManageMent   The success of a business to large extent depends on    the efficient storage of the materials   Stor...
   Ideally raw materials stored nearer to use and finished    goods nearer to shipping area   So that handling costs wil...
2) Analytical reports for raw materials : Receipts of the materials informed to the quality control   department so as to...
3) Positioning and storage : Separate storage space should be allocated for   quarantine ,approved raw materials and bulk...
   Depending upon properties , materials should be stored4) Issuing and recording : Issue of the material should be foll...
   Stores receives the finished goods from the production    department   After approval of quality control these are di...
Salvaging and disposal of scrap andsurplus   Word scrap and surplus symbolized waste and to the    extent they account fo...
    These are attacked before they arise and the primary     concern is to reduce these to minimum    The following meas...
   The responsibility of disposing scrap and surplus usually    assigned to the purchase departmentSalvage   Salvaging d...
referenceS   Pharmaceutical Production & Management by C.V.S. Subrahmanyam,    Vallabh Prakashan, first edition, pg. no. ...
sneha.saloni@gmail.com   48
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Material management

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Material management

  1. 1. Seminar on… MATERIAL MANAGEMENT Presented By Sonam M. Gandhi Dept. of Industrial pharmacy . sneha.saloni@gmail.com 11
  2. 2. Content Purchasing-Centralized and Decentralized Vendor development1. Survey stage2. Enquiry stage3. Negotiation & selection stage4. Experience & Evaluation stage Buying Techniques1. Quotations2. Tenders3. Negotiation4. Discounts Purchasing cycle and Procedures Stores Management Salvaging and Disposal of Scrap and Surplus sneha.saloni@gmail.com 2
  3. 3. Purchasing – Centralized & Decentralized Purchasing is an activity directed towards securing the materials, supplies, equipment & services required in the operations of an enterprise. Functions of Purchasing department :-1. Ordering section places orders with the vendors2. Service section follows the progress of the purchase orders, its shipment by the vendor and its final receipt by the company3. Records-section maintains all records of quotation, costs, purchases. sneha.saloni@gmail.com 3
  4. 4.  Types of purchasing :-A. Centralized purchasing : Advantages :a) It is an efficient systemb) It permits a greater degree of specialization for buyingc) Bargaining capabilities are betterd) Procuring becomes uniform & consistent materials are procured without price differentiatione) Duplication of efforts is eliminatedf) Purchasing procedure & payment of invoices become simple. sneha.saloni@gmail.com 4
  5. 5. B. Decentralized purchasing: Advantages :a) Purchasing system becomes more flexible & efficientb) Procurement is fasterc) When purchases are made in a local place, it promotes better public relationsd) Control over purchases is no longer remote. Disadvantages :a) Quantity of discounts offered is lessb) It involves duplication of efforts. sneha.saloni@gmail.com 5
  6. 6. Vendor deVelopment Vendor means a person who sells and supplies his or its products Considerable efforts needed to indetifying ,developing and evaluating the prospective suppliers Supplier expected to continously improve his product and trying to reduce its cost Vendor development involves four stages as follows. sneha.saloni@gmail.com 6
  7. 7. 1) Survey stage – sources of information on potential vendors Involves collecting information on difft. Supliers of the desired materials Sourcesa) Trade Directories : Information regarding dealers addresses ,regional offices ,names ,types and range of products including spares E.g. computer based trade directoriesb) Trade journals : Contains advertisements of the materials related to specific industries ,chemicals ,plastics , steels etc. sneha.saloni@gmail.com 7
  8. 8. c) Telephone directories : Contains classified advertisements arranged alphabetically , item wise or group wise Easy means of collecting the sourcesd) Supplier’s catalogues: many manufacturer periodically publish catalogues and pamphlets giving details of the products they manufacture. Contains tech. information ,specification ,prices etc.e) salesmen: Trained and competent personnel visit customers for the possible business and orders sneha.saloni@gmail.com 8
  9. 9.  Directly convey the information and clarify the doubts and expanding the knowledge to a great extent2) Inquiry stage – selection of potential suppliers After list prepared next step to inquire possible suppliers Involves a detailed analysis of information finished by vendors or collected Accreditation ,FDA approval and certifications facilitates their selection While choosing suppliers ,comparision may be made in regards to four aspects of competition Technological competition , service competition ,price competition ,time based competition sneha.saloni@gmail.com 9
  10. 10.  A first hand assesment of the capability of the suppliers made by visiting supplier’s factory and satisfy with respect to followinga) Internal facilities of the suppliers: Adequate facilities and quality control are essential for the right quality Done under the charge of qualified and experienced staff. Facilities such as modern equipments ,quality of inputs maintainance,size and capacity,layout, housekeeping and cleanliness be inspected sneha.saloni@gmail.com 10
  11. 11. b) Financial adequacy and stability: Financial status of the vendor company should be explored So that the items can be produced and supplied without any difficulties at any stagec) Reputation of the supplier’s : Reputation in the market in regards to prices and promises of the delivery dates should be consideredd) Location of the supplier’s factory: Should be nearer to the buyer’s factory sneha.saloni@gmail.com 11
  12. 12.  Only the selected suppliers considered for the third stage3) Negotiation and selection stage – Finalization of suppliers These suppliers called for negotiations in order to discuss business possibilities During this stage various terms namely credit, quantity discount, quality control specification etc. can be considered Several aspects of buying tech. used at this stage. sneha.saloni@gmail.com 12
  13. 13. 4) Experience and Evaluation stage – consolidation of suppliers At this stage buyer evaluates the performance of the vendor to improve the performance of the vendors in which they are deficient This can be done on two aspects quality and delivery Various ways of evaluation:1) Categorical method: The buyer prepares a list of factors which are considered necessary for evaluation Once in a three months buyer prepares a performance report sneha.saloni@gmail.com 13
  14. 14.  Each supllier evaluated and a number of score is calculated 80 -100 points Excellent 70 - 80 points Very good 60 – 70 points Good 50 – 60 points Average 40 – 50 points Very poor On the basis of evaluation a meeting should be held with the suppliers and clear appraisal is given2) Weighted point method : Evaluation involves a point rating based on the quality of the goods received sneha.saloni@gmail.com 14
  15. 15.  For this purpose points are assigned as : quality 50 points delivery 30 points price 20 points The performance of each factor quantified for example assumes that 160 lots received during a year and 16 lots were rejected on account of poor quality so quality rating obtained by Quality rating = number of lots accepted x 50 number of lots received sneha.saloni@gmail.com 15
  16. 16. Delivery rating = number of lots delivered in time x 30 total number of lots delivered Price rating = least offer received x 20 suppliers offer3) Cost ratio method : An intricate system of determining the actual costs incurred in purchasing , follow up ,transportation , packing ,duties ,receiving etc. Based on this costs ,the unit cost incurred by the buyer is calculated sneha.saloni@gmail.com 16
  17. 17.  for example , costs raring to quality works out to be Rs.2000 and the total worth of material purchase Rs.2.0 lakhs per year then , Quality cost ratio = 2000 : 2,00,000 i.e. 1% Similarly when the cost of delivery is 1000 then Delivery cost ratio = 1000 : 2,00,000 i.e.0.5 % sneha.saloni@gmail.com 17
  18. 18. Buying Techniques Purchasing involves procurement of materials ,machinery and services needed for production and maintainance Purchasing department procures right kind of material in right quantities at right time and makes them available for the production It also concentrate on the right source of material and economic procurement sneha.saloni@gmail.com 18
  19. 19.  Price is defined as the amt of money at which a thing is valued or the value ,which a seller sets on his goods in the market. Price is greatest variable in purchasing Buying tech. involvesa) Quotations1) Spot quotations : Buyer can go in the market and collect minimum three quotations and takes a spot decision Not possible In pharmaceutical materials but for office stationary and computer peripherals sneha.saloni@gmail.com 19
  20. 20. b) Floating a limited enquire : When the value of purchase is small Company sends letters to a few reliable vendors requesting for prices ,analytical report and other details for a perticular material At the top of this form ,the words’ THIS IS NOT AN ORDER’ The quotations collected in duplicate at least from three suppliers and valid for one month from opening sneha.saloni@gmail.com 20
  21. 21.  After getting quotations, comparative statement is made and analyzed in the light of following points- Price of material - material specifications- Place of delivery - delivery period- Taxes - terms of payment- Validity of tenders - guarantee periodb) Tenders : A tender is a written letter or a published document . Aim to find out the price for procuring certain materials or to get job done within the desired period and under specified conditions sneha.saloni@gmail.com 21
  22. 22.  Types of tenders1) Single tender : Invited from one reliable suppliers only and is called for under certain conditions Applicable to proprietary items ,high quality products and for items such as pins ,clips ,pencils etc. When items are required urgently2) Open tenders : Used when the value of purchases is high and when supply sources not known or intended to locate more supply sources Very expensive sneha.saloni@gmail.com 22
  23. 23.  The buyer not aware of the capability of the supplier there fore tenders invited from recognized or registered firms Also called press tender because published in news papers and trade journals The Vendor has to deposit an earnest money or security deposit with the tender information and tender numberc) Negotiations : Negotiations may be defined as an art of arriving at a common understanding through bargaining on the essentials of a contract such as delivery ,specifications, price and terms. sneha.saloni@gmail.com 23
  24. 24.  Can be often done before a purchase contract is finalized for fixing and finalizing prices of materials ,terms and conditions Negotiation literally means a mutual discussion and an agreement on the terms of transactions Takes place between two individuals or two sets of individuals Communication is an important ingredient in the art of negotiation Negotiation attempts at a win win situation to both parties sneha.saloni@gmail.com 24
  25. 25.  Negotiation does not mean horse trading or bargaining ,it is mutually satisfactory settlementd) Discounts : There are three ways through which materials may be purchased1) Volume contract : Employed to cover total purchase of ampoules ,bottles , and other accessories called quantity discount Because of large orders the seller able to obtain economy in production ,packaging ,billing ,selling etc. Suppliers prepared to give a part of savings to the buyer sneha.saloni@gmail.com 25
  26. 26.  Advantage of this type of purchase is that the contract price is usually protected from increase or decrease of prices In case of government purchases payment is made through director general of supplies and disposals2) Cash discount : Given If payments are made immediately on delivery Discount of 1% availed if the bill is paid in 60 days, 2% if paid in 30 days , 3% if paid immediately3) Cumulative discount : In this case Quantity might not fixed in the contract sneha.saloni@gmail.com 26
  27. 27.  Discount is given on the basis of actual purchases and appropriate to the quantity range For example ,buying is continued during the course of year the price will be reduced beyond the certain volume4) Consignment terms : Frequently used in retailing The buyer pays the price of the goods after selling the goods A pharmaceutical company may agree on consignment terms of the payments to a chemist’s shop. sneha.saloni@gmail.com 27
  28. 28. Purchasing cycle andProcedures A purchase department takes the purchasing decisions There is no standard method of organizing a purchase department or no standard system and procedures Different organization having a different setups and different types of procedures Purchasing cycle sneha.saloni@gmail.com 28
  29. 29. SPELL OUT OF SPECIFICATIONSNEED RECOGNITION & REQUIREMENTS OFFICIAL REQUISIONSPECIFICATION CHECK SPECIFICATIONS PURCHASE FILE PRICE /SUPPLIES ORDERS INQUIRY SELECT SUPPLIERS SUPPLIER’S TENDER RECORDS IMPORT QUOTATIONS PRICES& TERMS NEGOTIATIONS FINALISATION sneha.saloni@gmail.com 29
  30. 30. PURCHASE ORDER SUPPLIERS ACCEPTANCE DELIVERY MATERIALS &REPORTSINVOICE CHECKED ANALYSIS WITHPURCHASE ORDER PAYMENT MADE sneha.saloni@gmail.com 30
  31. 31. 1) Recognition of need ,receipt of purchase requisition : An official indent being sent in duplicate to purchase department These includes: name quality specification quantity specification date by which material required place at which material to be delivered2) Selection of potential sources of supply: It is more economical to purchase materials directly from manufacturing firms For purchasing a new items sources should be developed sneha.saloni@gmail.com 31
  32. 32.  The information requested is regarding the company’s annual sales ,accounts, type of operations ,facilities ,description of quality control procedures should be ascertained3) Making request for quotation : Quotation is an inquiry to know whether the vendor can supply the desired material and by what price Also include terms and condition such as taxes and frieght Minimum three quotations required from difft. suppliers sneha.saloni@gmail.com 32
  33. 33. 4) Receipt and analysis of quotations : After receiving quotations a comparative statement of prices prepared along with the terms Comparative statement analyzed in light of following points and right quotation selected for ordering the material price of the material material specification place of delivery delivery period taxes terms of payment validity of tender guarantee period5) Selection of right source of supply : sneha.saloni@gmail.com 33
  34. 34.  Though quoted price is an important consideration for finalizing the purchases Based on the personal experience and reputation of the company the right suppliers selected6) Issuing the purchase order : Purchase order constitutes a legal documents and serves as an authority to dispatch items by vendor When vendor accepts the purchase order it acts as contract for delivery of items7) Follow up and expediting the order : sneha.saloni@gmail.com 34
  35. 35.  After placing order the purchase service section contacts the vendor in order to ascertain the progress of the order Specially designed postcards containing the following information for follow up purchase order number pre-decided delivery date promised shipment date8) Receipt of materials ,reports and analysis: Company receives the materials along with the analytical reports After verification of the reports and purchase order the material is warehoused sneha.saloni@gmail.com 35
  36. 36.  The quality assurance personnel collect the samples randomly and analyzed for its specifications8) Checking and approving vendor’s invoice for payments : Bills are received along with goods or sometimes later along with the receipted copy of invoice Invoice should be checked to ensure that the correct material has been supplied Price are checked as per the purchase order and verified whether agreed discounts are given or not. sneha.saloni@gmail.com 36
  37. 37.  9)Closing of completed orders : Before closing the completed the file copy of the purchase order must be checked against both the delivery reports and vendor’s invoice Then the purchase file is closed sneha.saloni@gmail.com 37
  38. 38. Store ManageMent The success of a business to large extent depends on the efficient storage of the materials Store manager responsible for executing the function of the stores Ideally stores should be located adjacent to the manufacturing area Stores layout should be planned with the objectives such as to achieve minimum wastage of space and to achieve maximum ease of operations sneha.saloni@gmail.com 38
  39. 39.  Ideally raw materials stored nearer to use and finished goods nearer to shipping area So that handling costs will be minimum and other costs related to its operations are reduced Some specific functions of the stores department as follows:1) Receiving and recording of raw materials : Goods should be inspected visually for labeling and for damage The containers are then stored in quarantine area with label “not released“ The receipt of materials entered in the records sneha.saloni@gmail.com 39
  40. 40. 2) Analytical reports for raw materials : Receipts of the materials informed to the quality control department so as to collect samples for analysis The material reach the final storage station and then chemical assay ,microbiological assay or physical assay should takes place Rejected materials should be clearly marked as such and stored separately Should be destroyed or returned under supervision of quality control department sneha.saloni@gmail.com 40
  41. 41. 3) Positioning and storage : Separate storage space should be allocated for quarantine ,approved raw materials and bulk products So mixing of the materials can be avoided It should be placed as such so can be easily located and easily found Special care should be given to the printed packaging to avoid mislabeling Stores maintained as such materials do not suffer any damage or pilferage sneha.saloni@gmail.com 41
  42. 42.  Depending upon properties , materials should be stored4) Issuing and recording : Issue of the material should be followed as per the policy of FIFO (first in ,first out) Materials issued against the receipt of authorized material requisition by stores This functions serviced promptly so that production continue without interruption.5) Receiving and dispatch of finished goods: sneha.saloni@gmail.com 42
  43. 43.  Stores receives the finished goods from the production department After approval of quality control these are dispatched against the orders placed by customers6) Maintainance of sufficient stocks : Stores maintains safety stocks Accordingly the purchasing cycle initiated at appropriate times so that items never run out of stocks sneha.saloni@gmail.com 43
  44. 44. Salvaging and disposal of scrap andsurplus Word scrap and surplus symbolized waste and to the extent they account for the loss of profits results from following Mistakes in procurement Wrong planning decisions Wasteful processes in production In modern management surplus and scrap cannot be treated as inevitable sneha.saloni@gmail.com 44
  45. 45.  These are attacked before they arise and the primary concern is to reduce these to minimum The following measures are adopted and monitored :1) Controlling of surplus and scrap2) Salvaging or converting the waste for advantageous use3) Disposing of the surplus and scrap to the best advantage The production department primarily controls the first function by proper design while purchase department handles the second and third function sneha.saloni@gmail.com 45
  46. 46.  The responsibility of disposing scrap and surplus usually assigned to the purchase departmentSalvage Salvaging defined as the processing of materials for advantageous use or disposal of company’s property, which no longer economically used in its position. sneha.saloni@gmail.com 46
  47. 47. referenceS Pharmaceutical Production & Management by C.V.S. Subrahmanyam, Vallabh Prakashan, first edition, pg. no. 260-267. Modern business organization & Management systems approach by Prof.S.A.Sherlekar,V.S.Sherlekar, Himalaya publishing house, 5 th edition,pg.no.5.38–5.58. Applied production & operation management by Evans, Anderson, Sweemey & Williams, 3rd edition, West publishing company ltd. sneha.saloni@gmail.com 47
  48. 48. sneha.saloni@gmail.com 48

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