Material management The 5 M’s of production are men, machines, money, materials and methods. Materials management is the branch of logistics that deals with the tangible components of a supply chain. This covers the acquisition of spare parts and replacements, quality control of purchasing and ordering such parts, and the standards involved in ordering, shipping, and warehousing.
Importance The money spent on materials is highest (55-80% of total costs) Maximum scope of cost reduction Add value to the product Quality of finished goods depends upon the quality of materials
Functions involved in Materials Management Enterprise Finished-goodsStorage Customers Suppliers Orders Purchasing Raw-materialStorage Receiving Distribution Transformation Processes In-process Storage
Functions in Material Management
Functions in Material Management 1. Production Control : The function of production control aims at directing and regulating the movement of goods through the entire manufacturing cycle. Departments involved in this function are :-
Raw materials inventory department.
Production Control: Purchasing department
To acquire the required materials in the right quantity, of the right quality, from the right source, at the right time and at least possible cost.
Receiving department Processes incoming shipments of materials. The tasks include unpacking incoming materials checking their quantity and inspecting their quality and generating receiving reports.
Production Control Raw materials inventory department Involves repackaging and labeling raw materials, storing raw materials safely and protecting them from damage, updating records of quantities of various raw materials, arranging for the replenishment of stocks. Production department
Objective is to keep the flow of materials continuous during the process of production.
Monitoring the flow of work-in-process materials, identifying bottlenecks and minimizing them, computing the storage capacity.
Inventory Level Supply Rate Inventory Level Demand Rate Water Tank Analogy
2. INVENTORY CONTROL
3. MATERIAL HANDLING Managing physical movement of materials through and out of the firm. The primary objective of materials management is to move materials to required location in a timely and cost effective way. Material handling equipment are of two types: Fixed path: conveyors, monorail devices Variable path: Trucks, forklifts, mobile cranes
Systems : Just-in-Time Systems: Aims at reduction in the size of purchased quantities so that the materials reach the production point completely. Supply chain management: includes purchase of raw material its flow and ends with finished products delivered to ultimate customers. It includes purchasing, warehousing, inspection, production, material handling and distribution. Warehouse management system: It is a key part of the supply chain and primarily aims to control the movement and storage of materials within a warehouse. The systems also direct and optimize stock put away based on real-time information.
ECIL – case study Electronics Corporation of India Ltd.(ECIL) is a Public Enterprise . The CrisisPost liberalization period of the 90s was characterized by intense competition from both the MNCs and private sector. The impact of the globalization process , ECIL suffered a loss of Rs.10 crore in 1997-98 and a substantial loss of Rs.60 crore in 1998-99. The net worth of the company was badly eroded.
The Initiatives in Materials Management
Material costs forms 55-60 % of the total cost, thus it was difficult to initiate in the area of materials with the global nature characterized by high rate of obsolescence, falling prices, high quality inputs and global sourcing .
There was no assured market, customer-driven requirements and threat of denials.
It is against this background that the entire supply chain was addressed
Supplier Communication It was ensured that the requirements of the customers of ECIL are clearly communicated to the suppliers, thus making the latter jointly responsible for ensuring customer satisfaction. This is done through constant touch with the suppliers Inventory Control The scheduling process was streamlined to ensure efficient inventory management covering . Implementation of IT All the processes involved in Integrated Materials Management are fully computerized for speedy disposal of material requisitions, resulting in substantial reductions in lead times across various operations.
The Results Between 1998-99 and 2002-03: Turnover shot up from Rs. 250 crore to Rs. 1000 crore Profitability reversed from a loss of Rs. 60 crore to a profit of 130 crore Net worth increased from Rs. 7 crore to Rs. 309 crore Loans Outstanding became nil Inventory levels and Sundry Debtors demonstrated efficient Working Capital Management. Procurement lead-times reduced substantially from about 60 days to 30 days Customer Satisfaction Index improved phenomenally from 66% to 95%
Hypothetical Case-Study There is increasing competition between building companies in urban and semi urban areas. This is giving rise to a number of small organizations to adopt /adapt material and logistic systems practised by large organizations. Such small organizations are giving more importance to constructive rationalization, quality management systems and material loss studies.
The company being a small one has a number of constraints like limited labor force, investment on raw materials, cost of ware housing, managing information, contingencies etc. To overcome these constraints, the company tried evaluating its processes and the following were the findings Defined role and accountability for each individual Supply plans elaboration Site layout planning considering different site phases; Increasing speed in data processing/Avoiding duplicity of information Reduction in interference among subcontractors and agents Optimum usage of stored capacities even with limited work force
To improve this scenario the company opted to diffuse “Just-in- Time” into its production system Principle of JIT:
To improve its situation, the company chalked out a plan with the help civil engineers
the exact quality, quantity of raw materials with phased delivery schedule
number and type of labor required for each task and avoided confusion and chaos due to over-crowding.
The company also used Supply Chain Management. The main focus in this system was to limit the number of suppliers, minimize change of suppliers and thoroughly evaluate suppliers The company ensured that civil engineers inspect raw materials before unloading The company improved its warehousing conditions by storing raw materials like cement, brick in a protected place. There were be civil engineers checking. Some checks were at regular intervals whereas some at random. They also ensured rewards for successful production teams.
During this exercise the company implemented:
Site preparation phase
Site layout planning
Material Handling Systems
The above measures helped the company achieve its targets with respect to time, cost with the same quality. This helped to company to offer a competitive price to its customers.
Latest Developments ROBOTS: they are reprogrammable and multifunctional manipulators designed to perform a variety of tasks. They are of two types: Processing: the robot works as a tool by performing a job on a product like cutting, screwing etc. but this article should move to the robot. Pick-and-place: these robots are more relevant to material handling. They perform tasks like assembling and testing. Recently developed robots respond to stimuli like touch, light and can be effectively used to mix chemicals and also handle radio active materials.
ROBOTS can be based on their operations: Physically operated robots: have a primary objective of protecting workers from using harmful materials like radioactive substance. Fixed sequence robots: these perform a sequence of operations according to a predetermined set of procedures. Variable-sequence robots: performance is flexible thus can be easily changes while their functioning is similar to that of fixed sequence robots. Numerical control robots: (NC robots) perform a set of operations based on numerical data that is fed into them through devices. These robots are used to perform manufacturing operations where high precision is required. Playback robots: store a sequence of operations in memory.
GEOCODING: High-quality, real-time address-validation tools can help improve operational efficiencies of business. To Optimize Delivery: Geocoding enables you to provide a clearer, smarter picture of just how to deliver for your customers. With it, addresses are linked to specific latitudes and longitudes — not just streets and zip codes. Geo coding can also add any number of geographic characteristics to enrich your data with added relevance and usability. >> Weather and disaster-related information; >> proximity to important distribution centers /stores >> traffic and construction updates; >> tax jurisdictions; >> and area shipping restrictions
Determining ways to optimize all aspects of delivery from point of origin, to loading of goods, to routing deliveries, to tracking of items in transit. Situations such as bad weather /natural disasters, terrorism or political unrest delays caused by parades, protests, rallies or construction projects that temporarily render an address inaccessible.
Point-to-point optimization: automatically maps out the very best routes, right down to putting your trucks on the right side of each street for the most efficient delivery.
WITH THE ADVENT OF I.T. THERE HAVE BEEN VARIOUS OTHER SOFTWARES DESIGNED TO SIMPLIFY MATERIAL MANAGEMENT. e.g. SAP which helps in Material Resource Planning.
GREEN MATERIAL HANDLING:
This new emerging global trend involves the material handling processes and procedures to be carried out in the most eco-friendly manner .
Promotes the concept of “REDUCE- REUSE- RECYCLE”.
This involves reducing the potential environmental impact that arise due to the various internal processes of material procurement and dispatching processes like transportation, material waste disposal etc .
This is now considered to be a part of a firm’s Corporate Social Responsibility.