UNIT – I Production System & Advanced Forecasting Method Generalized Model of production system, design, optimization & control of production system. PPC – Production Planning, integrated part of corporate planning process, Integrative nature of production plans, centralized and decentralized production planning. Advanced Forecasting – Principles, SWOT analysis, and 7S approach, Advanced Techniques – multi item forecasting, slow item forecasting. UNIT - II Capacity Planning Measurement measures, estimating future capacity needs, factors influencing, factors favouring over capacity and under capacity, MPS. Production Control Functions Loading, sequencing, assignment models High Volume Production System Detroit type automation, automated flow lines, transfer mechanism, buffer storage, control function, automation for machining operation, Design and fabrication considerations. UNIT – III Inventory Management Inventory models and safety stocks – Relevant costs, behaviour of costs in relation to level of inventory, optimal order quantity, EOQ, EBQ, Joint cycle for multiple products, model with purchase discounts, approaches to determine buffer stock, fixed order period models. ABC and other classification of Materials selective management control, VED analysis, combination of ABC and VED analysis, purpose classification. Material requirement planning (MRP – I) – Concepts, structure, working output reports, classes of users. UNIT – IV Material Management Spare parts Management – Characteristics, codification concept, stocking, policy analysis, Maintenance or breakdown capital, insurance, rotable spares. Other aspects of Material Management Codification, characteristics, standardization, material handling, stores management. UNIT – V Physical Distribution Management Transportation problem, Route scheduling problem, logistics management. Material Management An integrated view, Adaptability considerations, inventory – a part of production strategy, organization, effectiveness, a multi level interactive process.

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PRODUCTION & MATERIAL MANAGEMENT
Unit – 1
Production System & Advanced Forecasting Method
Production system may be defined as, "The methods, procedure or arrangement which
includes all functions required to accumulate (gather) the inputs, process or reprocess
the inputs, and deliver the marketable output (goods)." Production system utilizes
materials, funds, infrastructure, and labor to produce the required output in form of
goods. Production system consists of three main components viz., Inputs, Conversion
Process and Output.
1. Inputs include raw-materials, machines, man-hours, components or parts,
drawing, instructions and other paper works.
2. Conversion process includes operations (actual production process).
Operations may be either manual or mechanical or chemical. Operations
convert inputs into output. Conversion process also includes supporting
activities, which help the process of conversion. The supporting activities
include; production planning and control purchase of raw-materials,
receipt, storage and issue of materials, inspection of parts and work-in-
progress, testing of products, quality control, warehousing of finished
products, etc.
3. Output includes finished products, finished goods (parts), and services.
Hence, we can say that, production system is a union or combination of its three main
components viz., Inputs, Conversion Process, and Output. In short, everything which is
done to produce goods and services or to achieve the production objective is called
production system.
A production system can be defined as a transformation system in which a saleable
product or service is created by working upon a set of inputs. Inputs are usually in
the form of men, machine, money, materials etc. Production systems are usually
classified on the basis of the following:

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 Type of product,
 Type of production line,
 Rate of production,
 Equipments used etc.
They are broadly classified into three categories:
 Job shop production: - In this system products are made to satisfy a specific
order. However that order may be produced
 Only once.
 Or at irregular time intervals as and when new order arrives.
 Or at regular time intervals to satisfy a continuous demand.
The following are the important characteristics of job shop type production
system:
 Machines and methods employed should be general purpose as product
changes are quite frequent.
 Planning and control system should be flexible enough to deal with the
frequent changes in product requirements.
 Man power should be skilled enough to deal with changing work
conditions.
 Schedules are actually nonexistent in this system as no definite data is
available on the product.
 In process inventory will usually be high as accurate plans and
schedules do not exist.
 Product cost is normally high because of high material and labor costs.
 Grouping of machines is done on functional basis (i.e. as lathe section,
milling section etc.)
 This system is very flexible as management has to manufacture varying
product types.
 Material handling systems are also flexible to meet changing product
requirements.
 Batch production: - Batch production is the manufacture of a number of
identical articles either to meet a specific order or to meet a continuous
demand. Batch can be manufactured either
 only once
 or repeatedly at irregular time intervals as and when demand
arise

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 or repeatedly at regular time intervals to satisfy a continuous
demand.
The following are the important characteristics of batch type production
system:
 As final product is somewhat standard and manufactured in
batches, economy of scale can be availed to some extent.
 Machines are grouped on functional basis similar to the job shop
manufacturing.
 Semi automatic, special purpose automatic machines are
generally used to take advantage of the similarity among the
products.
 Labor should be skilled enough to work upon different product
batches.
 In process inventory is usually high owing to the type of layout
and material handling policies adopted.
 Semi automatic material handling systems are most appropriate
in conjunction with the semi automatic machines.
 Normally production planning and control is difficult due to the
odd size and non repetitive nature of order.
 Mass production: - In mass production, same type of product is
manufactured to meet the continuous demand of the product. Usually
demand of the product is very high and market is going to sustain same
demand for sufficiently long time. The following are the important
characteristics of mass production system:
 As same product is manufactured for sufficiently long time,
machines can be laid down in order of processing sequence.
Product type layout is most appropriate for mass production
system.
 Standard methods and machines are used during part
manufacture.
 Most of the equipments are semi automatic or automatic in
nature.
 Material handling is also automatic (such as conveyors).
 Semi skilled workers are normally employed as most of the
facilities are automatic.
 As product flows along a pre defined line, planning and control of
the system is much easier.

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 Cost of production is low owing to the high rate of production.
 In process inventories are low as production scheduling is simple
and can be implemented with ease.
Control of production system: - Production control is the activity of monitoring
and controlling any particular production or operation. Production control is often
run from a specific control room or operations room. With inventory control and
quality control, production control is one of the key functions of operations
management.
Objectives of Production Control: -
The success of an enterprise greatly depends on the performance of its production
control department. The production control department generally has to perform
the following functions:
 Provision of raw material, equipment, machines and labor.
 To organize production schedule in conformity with the demand
forecasts.
 The resources are used in the best possible manner in such a way that
the cost of production is minimized and delivery date is maintained.
 Determination of economic production runs with a view to reduce setup
costs.
 Proper co-ordination of the operations of various sections/departments
responsible for production.
 To ensure regular and timely supply of raw material at the desired place
and of prescribed quality and quantity to avoid delays in production.
 To perform inspection of semi-finished and finished goods and use
quality control techniques to ascertain that the produced items are of
required specifications.
 It is also responsible for product design and development.

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Thus the fundamental objective of production control is to regulate and
control the various operations of production process such a way that orderly flow of
material is ensured at different stages of the production and the items are produced
of right quality, in right quantity, at the right time with minimum efforts and cost.
Levels of Production Control: -
Production control starts with some particular goal and formulation of some general
strategy for the accomplishment of desired objectives. There are three levels of
production control namely programming, ordering and dispatching.
1. Programming plans the output of products for the factory as a whole.
2. Ordering plans the output of components from the suppliers and
processing departments.
3. Dispatching considers each processing department in turn and plans the
output from the machine, tools and other work centers so as to complete
the orders by due date.
Factors Determining Production Control Operations: -
The nature of production control operations varies from organization to
organization. The following factors affect the nature and magnitude of production
control methods in an organization.
 Nature of production: In job-oriented manufacturing, products and
operations are designed for some particular order which may or may not
be repeated in future. Hence production usually requires more time,
whereas in a continuous manufacturing system inventory problems are
more complex but control operations are rather simple due to fixed
process. In mixed stock and custom manufacturing systems the problem of
control is further complicated due to simultaneous scheduling of combined
process.
 Nature of operations/activities: In intermittent manufacturing system the
operations are markedly varied in terms of their nature, sequence and
duration. Due to this the control procedure requires continuous
modifications and adjustments to suit the requirements of each order.
 Magnitude of operations: Centralized control secures the most effective
co-ordination but as an organization grows in size, decentralization of
some production control functions becomes necessary. The degree to
which the performance of an activity should be decentralized depends
upon the scope of operations and convenience of their locations.

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Production Planning Control (PPC) is a managerial function which is mainly concerned
with the following important issues:
 What production facilities are required?
 How these production facilities should be laid down in the space available for
production? and
 How they should be used to produce the desired products at the desired rate of
production?
Broadly speaking, production planning is concerned with two main aspects:
 Routing or planning work tasks
 Layout or spatial relationship between the resources.
Objectives of Production Planning and Control: -
The main objective of production planning and control is to ensure the coordinated
flow of work so that the required numbers of products are manufactured in the
required quantity and of required quality at the required time at optimum
efficiency. In other words, production planning and control aims at the following
purposes:
 Continuous Flow of Production: It tries to achieve as smooth and
continuous production by eliminating successfully all sorts of bottlenecks
in the process of production through well-planned routing and scheduling
requirements relating to production work.
 Planned Requirements of Resources: It seeks to ensure the availability of
all the inputs i.e. materials, machines, tools, equipment and manpower in
the required quantity, of the required quality and at the required time so
that desired targets of production may be achieved.
 Co-ordinated work Schedules: The production activities planned and
carried out in a manufacturing organization as per the master schedule.
The production planning and control tries to ensure that the schedules to
be issued to the various departments/units/supervisors are in co-
ordination with the master schedule.
 Optimum Inventory: It aims at minimum investment in inventories
consistent with continuous flow of production.
 Increased Productivity: It aims at increased productivity by increasing
efficiency and by being economical. This is achieved by optimizing the use
of productive resources and eliminating wastage and spoilage.
 Customer Satisfaction: It also aims at satisfying customers requirements
by producing the items as per the specifications or desires of the
customers. It seeks to ensure delivery of products on time by co-ordinating
the production operations with customers’ orders.

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 Production and Employment Stabilization: Production planning and
control aims at ensuring production and employment levels that are
relatively stable and consistent with the quantity of sales.
 Evaluation of Performance: The process of production planning and
control is expected to keep a constant check on operations by judging the
performance of various individuals and workshops and taking suitable
corrective measures if there is any deviation between planned and actual
operations.
Production planning control (PPC) is a mechanism to monitor the execution of the
plans. The functions of PPC are as follows:
Functions Issues to be covered
Product
Design&
Development
Customer needs, market needs, availability of similar product, demand-
supply gap, functional aspects, operational aspects, environmental
aspects etc.
Demand
Forecasting
Quantity, Quality, Demand pattern.
Capacity
Planning
No. of machines, No. of tooling, workers, No. of flow lines, Quantity,
Quality and rate of production, demand pattern.
Equipments
Selection &
Maintenance
No. of machines, type of M/c, Quality aspects, Quantity aspects, rate of
production, Cost of equipments, support from the supplier, maintenance
policy, storage of spare parts.
Tooling
Selection
Compact ability between w/c steels, No. of tools, their cost, their
material etc, storage policy.
Material
Selection &
Management
Types, specification, quality aspect, quantity aspect, cost, supplies
reputation , lot size, inventory levels, setup cost, mode of transportation
etc.
Process
Planning
Generation of manufacture instruction, selection of M/c, tools,
parameters, sequence etc.
Loading
Division of work load, assignment of tasks, uniform loading, matching
between capability & capacity with job requirements.
Routing
Path selection for material movement as per the process plan and
loading, minimum material handling and waiting time.
Scheduling
Time based loading, start and finish times, due dates, dispatching rules,
re-scheduling.
Expediting Operation Scheduling and order and progress reporting.
Inspection
It is carried on at various levels of production process so that pre-
determined standards of quality are achieved. If inspection is not
regularly undertaken then there may be a possibility of more rejections.

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Corporate planning: -
“Corporate planning” is an important and vital business process.
Under this, the organization's top management sits down to formulate policies and
strategies and communicate them downward for implementation. This process of
corporate planning entails preparing the company's mission, goals and objectives.
The following chart depicts the corporate planning process:
Major steps involved in corporate planning are as follows:
 Environmental Analysis and Diagnosis:
The first step (which is, in fact, the background step), involved in corporate
planning is environmental analysis and diagnosis.
 Determination of Objective:
All planning starts with a determination of the objectives for the plan; and
corporate planning is no exception to this generality. In corporate planning,
after environmental analysis and diagnosis, the planners determine
objectives for the company as a whole and for each department of it; which
become the beginning point of corporate planning.
All objectives of corporate planning must represent an integrated or
coordinated system of objectives. In order to make corporate planning a
realistic approach to attaining objectives; objective setting for corporate
planning is done in the light of environmental analysis and diagnosis.

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 Strategy Formulation:
Strategy formulation is the core aspect of corporate planning. Strategy is, in
fact, the weapon of the planner devised for attaining objectives of corporate
planning. It is easier to set objectives; it is difficult to realize them. Strategies
facilitate the attainment of objectives.
There is no doubt about it that success of strategies is the success of
corporate planning; and vice-versa. Strategy formulation is also done in the
light of environmental analysis and diagnosis.
 Development of Tactical Plans:
Strategies are translated into action plans called tactical plans or operational
plans. Tactical plans are necessary for implementation of strategies leading to
the attainment of corporate planning objectives. For example, if the strategy of
a company is to develop the skills and talents of manpower for realizing
objectives; then designing of suitable training programs would amount to
making tactical plans.
Corporate planning and strategy formulation have a long-term perspective;
while tactical plans have a short-term perspective, as the latter are to be
implemented immediately, in the usual course of organizational life.
 Implementation of Tactical Plans:
Mere paper planning is no planning; unless and until it is put into practice. As
such, tactical plans are put into a process of implementation, just at the right
time, as decided by management. For implementation purposes, necessary
communications are made to the operating staffing; who are also provided
with necessary facilities to implement the tactical plans.
 Follow-Up-Action:
After the tactical plans have been put into practice; a review of progress is
done i.e. an examination of what results are following from the
implementation of the plan and what feedback action is necessary, for the
betterment of the corporate planning process.
Production planning as an integrated part of corporate planning: -
Planning and control are the two important components of
the management process. Planning involves the consideration of all input variables
to achieve defined output goals. Control involves the corrective actions taken when

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the actual output varies from the desired one by bringing the actual output in line
with the planned output.
Production planning, in particular would therefore consist mainly of the
evaluation and determination of production-inputs such as labor (manpower),
machinery and equipment materials and utilities to achieve the desired goals. The
definition of the goals is also, of course, a part of the production planning process;
We may break down the planning process into various stages as follows:
 Defining objectives and setting priorities to attain these.
 Studying the environment external the system being planned. Studying the
internal environment of the system being planned.
 Determining reliable targets (quantified as far as possible).
 Gearing the inputs to achieve these targets.
Importance of Time Horizon:
Plans have a time dimension and to the extent the time span is
limited, the scope of functioning plans for also remains limited with less interaction
from other functional plans. The longer the time span of the plan, the more
integrative organizations wide the plan has to be. The wider time horizon plants
cover a wider organizational perspective.
That is why very often the corporate planning process is
synonymous with Long Range planning. As the time horizon of the production plan
widens, from a short range plan (annual or five yearly), the flexibility available to
change the variables and allow modifications when found necessary also increase.
The five year range plan allows a company the flexibility of increasing the
production capacity by purchasing new equipment locating new plants, acquiring
new technology, or recruiting adequate technical manpower.
This is not applicable for a one year plan. Here, much of the
flexibility in procuring new plants and machinery or acquiring the technology and
knowhow is lost. Coming to the weekly or daily plans, hardly any flexibility is left
except to assign different jobs to the available machines and manpower. As the
flexibility decreases the strategic or tactical options also decrease and the nature of
planning itself assumes a different character. The planning problems for different
time horizons are therefore different and the solutions are also different.
Dovetailing of Plans:
One important fact is that the short, medium and long range
plans to dovetail into one another. Shorter range plans are always made within the
framework of the longer range plans. Production planning as it is generally
understood is really the intermediate range and short range plan. The long range

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production plan has lost its identity with the overall corporate planning process.
That is why production planning is said to follow from marketing plan. Or, as is
usually said, the production plan is the translation of the market demands into
production orders. The market demands have to be matched with the production
capacities.
Market demand — Match the two optimally – Production capacities
The keyword is ‘optimally’. Market demands are either known or are forecasted but
we do know them, and the production capacities are also known. But how these two
are matched will generate different cost structures and utility (e.g. time) structures.
Optimization o the cost or other utilities is the concern of production planning.
The Market demands (actual and forecasted) will not usually
be level and steady over time. At different points of time the market will demand
differently. It is, not always possible for the production department to follow the
market fluctuations as and when they arise (or even if they are known in advance)
and very often it is not ‘optimal’ (economical cost wise) to do so. Therefore, the
production plan will many a time, look very different from the marketing or sales
plan, although the total production figures will be more or less in agreement with
the market requirements.
Advanced Forecasting method:
Forecasting is the process of making predictions of the future based on past and
present data and most commonly by analysis of trends.
Need of forecasting:
 When there is a time lag between awareness of an impending event or
need and occurrence of that event. This lead time is the main reason of
planning and forecasting.
 Planning is the fundamental activity of management. Forecasting forms the
basis of planning.
 It is essential for the organization to know for what level of activities one is
planning before investments in input.
SWOT Analysis: -
SWOT analysis (or SWOT matrix) is a strategic planning technique used
to help a person or organization identify strengths, weaknesses, opportunities, and
threats related to business competition or project planning. It is intended to specify
the objectives of the business venture or project and identify the internal and
external factors that are favorable and unfavorable to achieving those objectives.
Users of a SWOT analysis often ask and answer questions to generate meaningful

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information for each category to make the tool useful and identify their competitive
advantage. SWOT has been described as the tried-and-true tool of strategic analysis.
Strengths and weakness are frequently internally-related, while opportunities and
threats commonly focus on the external environment. The full form of SWOT is:
 Strengths: Strengths are the qualities that enable us to accomplish the
organization’s mission. These are the basis on which continued success can
be made and continued/sustained.
Strengths are the beneficial aspects of the organization or
the capabilities of an organization, which includes human competencies,
process capabilities, financial resources, products and services, customer
goodwill, Unique Selling Proposition (USP) and brand loyalty. Examples of
organizational strengths are huge financial resources, broad product line,
no debt, committed employees, etc.

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 Weaknesses: Weaknesses are the qualities that prevent us from
accomplishing our mission and achieving our full potential. These
weaknesses deteriorate influences on the organizational success and
growth.
Weaknesses are the factors which do not meet the standards we
feel they should meet. Weaknesses in an organization may be depreciating
machinery, insufficient research and development facilities, narrow
product range, poor decision-making, etc. Weaknesses are controllable.
They must be minimized and eliminated. For instance - to overcome
obsolete machinery, new machinery can be purchased. Other examples of
organizational weaknesses are huge debts, high employee turnover,
complex decision making process, narrow product range, large wastage of
raw materials, etc.
 Opportunities: Opportunities are presented by the environment within
which our organization operates. These arise when an organization can
take benefit of conditions in its environment to plan and execute strategies
that enable it to become more profitable. Organizations can gain
competitive advantage by making use of opportunities.

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Organization should be careful and recognize the
opportunities and grasp them whenever they arise. Selecting the targets
that will best serve the clients while getting desired results is a difficult
task. Opportunities may arise from market, competition, industry or
government and technology. Increasing demand for telecommunications
accompanied by deregulation is a great opportunity for new firms to enter
telecom sector and compete with existing firms for revenue.
 Threats: Threats arise when conditions in external environment jeopardize
the reliability and profitability of the organization’s business. They
compound the vulnerability when they relate to the weaknesses. Threats
are uncontrollable. When a threat comes, the stability and survival can be
at stake. Examples of threats are - unrest among employees; ever changing
technology; increasing competition leading to excess capacity, price wars
and reducing industry profits; etc.
Advantages of SWOT Analysis: -
SWOT Analysis is instrumental in strategy formulation and selection. It is a
strong tool, but it involves a great subjective element. It is best when used as a
guide, and not as a prescription. Successful businesses build on their strengths,
correct their weakness and protect against internal weaknesses and external
threats. They also keep a watch on their overall business environment and
recognize and exploit new opportunities faster than its competitors. SWOT Analysis
helps in strategic planning in following manner-

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 It is a source of information for strategic planning.
 Builds organization’s strengths.
 Reverse its weaknesses.
 Maximize its response to opportunities.
 Overcome organization’s threats.
 It helps in identifying core competencies of the firm.
 It helps in setting of objectives for strategic planning.
 It helps in knowing past, present and future so that by using past and
current data, future plans can be chalked out.
SWOT Analysis provide information that helps in synchronizing the firm’s resources
and capabilities with the competitive environment in which the firm operates.
Limitations of SWOT Analysis: -
SWOT Analysis is not free from its limitations. It may cause
organizations to view circumstances as very simple because of which the
organizations might overlook certain key strategic contact which may occur.
Moreover, categorizing aspects as strengths, weaknesses, opportunities and threats
might be very subjective as there is great degree of uncertainty in market. SWOT
Analysis does stress upon the significance of these four aspects, but it does not tell
how an organization can identify these aspects for itself.
There are certain limitations of SWOT Analysis which are not in control of
management. These include-
 Price increase;
 Inputs/raw materials;
 Government legislation;
 Economic environment;
 Searching a new market for the product which is not having overseas
market due to import restrictions; etc.

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Internal limitations may include-
 Insufficient research and development facilities;
 Faulty products due to poor quality control;
 Poor industrial relations;
 Lack of skilled and efficient labor; etc
7S Approach: -
The McKinsey 7S Framework is a management model developed by well-known
business consultants Robert H. Waterman, Jr. and Tom Peters (who also developed
the MBWA-- "Management By Walking Around" motif, and authored In Search of
Excellence) in the 1980s. This was a strategic vision for groups, to include
businesses, business units, and teams. The goal of the model was to show how 7
elements of the company: Structure, Strategy, Skills, Staff, Style, Systems, and Shared
values, can be aligned together to achieve effectiveness in a company. The key point
of the model is that all the seven areas are interconnected and a change in one area
requires change in the rest of a firm for it to function effectively.

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The model can be applied to many situations and is a valuable tool when
organizational design is at question. The most common uses of the framework are:
 To facilitate organizational change.
 To help implement new strategy.
 To identify how each area may change in a future.
 To facilitate the merger of organizations.
In McKinsey model, the seven areas of organization are divided into the ‘soft’ and
‘hard’ areas. Strategy, structure and systems are hard elements that are much easier
to identify and manage when compared to soft elements. On the other hand, soft
areas, although harder to manage, are the foundation of the organization and are
more likely to create the sustained competitive advantage.
The Hard S’s
 Strategy: Actions a company plans in response to or anticipation of
changes in its external environment.
 Structure: Basis for specialization and co-ordination influenced primarily
by strategy and by organization size and diversity.
 Systems: Formal and informal procedures that support the strategy and
structure. (Systems are more powerful than they are given credit)
The Soft S’s
 Style / Culture: The culture of the organization, consisting of two
components:
 Organizational Culture: the dominant values and beliefs, and norms,
which develop over time and become relatively enduring features of
organizational life
 Management Style: more a matter of what managers do than what
they say; how do a company’s managers spend their time? What are
they focusing attention on? Symbolism – the creation and
maintenance (or sometimes deconstruction) of meaning is a
fundamental responsibility of managers

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 Staff: The people/human resource management – processes used to
develop managers, socialization processes, ways of shaping basic values of
management cadre, ways of introducing young recruits to the company,
ways of helping to manage the careers of employees
 Skills: The distinctive competences – what the company does best, ways of
expanding or shifting competences
 Shared Values / Super ordinate Goals: Guiding concepts, fundamental
ideas around which a business is built – must be simple, usually stated at
abstract level, have great meaning inside the organization even though
outsiders may not see or understand them.

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Unit – 2
Capacity Planning, Production Control Functions,
High Volume Production System
Master Production Schedule (MPS): -
A Master Production Schedule is a plan for individual commodities to be produced
in each time period such as production, staffing, inventory etc. It is usually linked to
manufacturing where a plan indicates when and how much of each product will be
demanded. This plan quantifies significant process, parts and other resources in
order to optimize production to identify bottle necks and to anticipate needs and
completed goods. Since an MPS drives much factory activity, its accuracy and via
dramatically affect profitability. Typical MPS's are created by software with user
tweaking.
The MPS is a statement of what the company expects to produce and
purchase. It translates the customer demand into a build plan using planned orders
in a true component scheduling environment. Using MPS helps avoid shortages,
costly expediting, last minute scheduling and inefficient allocation of resources.
Working with MPS allows businesses to consolidate planned parts, produce master
schedules and forecasts for any level of the bill of material (BOM) for any type of
part.
The data needed to develop an MPS include: -
 Customer Orders.
 Dealer Orders.
 Inventory replenishment orders.
 Forecast for individual end products.
 Interplant requirements.
 Distribution center requirements.
 Inventory level for end products.
 Safety Stock.
 Released production orders for end products.
 Capacity Constraints.
Importance of MPS: -
 It provides management with the means to authorize and control all resources
needed to support integrated plans.
 It develops the data to drive the detailed planning, MRP. MPS is a priority plan
for manufacturing.
 In the short horizon, MPS serves as the basis for planning material
requirement, production of components and short term capacity
requirements.

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 In the long horizon, MPS serves as the basis for estimating long term demands
on the company resources such as people, equipment, ware housing, capital
etc.
Working: -
By using many variables as inputs the MPS will generate a set of outputs used for
decision making.
Inputs may include: - Output generation: -
 Forecast demand.
 Production Costs.
 Inventory Money.
 Customer Needs.
 Inventory progress.
 Supply.
 Lot Size.
 Production Lead time
 Capacity.
 Quantity to be produced.
 Staffing Levels.
 Quantity available to promise
(ATP)
 Project available balance (PAB)
Inputs may be automatically generated by the enterprise resource planning (ERP)
system that links the sales department with production department. For instance,
when the sales department record the sale, the forecast demand may be shifted to
meet the new demand. Inputs may also be inputted manually from forecasts that

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have also been calculated manually. Outputs may include amounts to be produced,
staffing levels, quantity available to promise and projected available balance.
An effective MPS ultimately will: -
(a) Rough Cut capacity planning.
(b) Tie overall business planning and forecasting to detail operations.
(c) Increasing efficiency and accuracy of company's manufacturing.
MPS Techniques: -
MPS is a time phased order point (TPOP) procedure. The related MPS techniques
are as follows:
 2nd level master production schedule: -
It is a master schedule approach where a planning bill of material is used to
master schedule end items or product families. Key features such as options
and accessories are frequently used in the 2nd level MPS procedure. For
forecast demand, product families are master scheduled and the usage ratio in
the "quantity per" of planning. Bill of materials (BOM) is used to calculate the
gross requirement of the modules. For customer orders, options and
accessories are defined before the MPS. In this case, end items instead of
families are master scheduled.
 Master level master production schedule: -
A master scheduling approach that allows any level in the end items bill of
material to be master scheduled. To accomplish this, MPS items must receive
requirements from independent and dependent demand sources. Higher level
MPS items are scheduled before lower level MPS items. Its benefits are as
follows:
 Ability to make adjustments to fluctuations in demand and still
minimize waste.
 Help prevent shortages and scheduling mishaps.
 Improve efficiency in the location of production resources.
 Reduces lead time throughout the year.
 Provides an effective communication conduit with the sales team for
planning sources.
Transfer Mechanism: -
In production system, the transfer mechanism moves product from a station to a
moving conveyor. High speed packing lines often need to transfer product or pack
from a machine that indexes to a machine that moves continuously. Transfer
mechanisms are often the most suitable method for continuous flow of identical or
similar components in mass production.

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(a) In - line configuration: -
It consist of sequence of workstation in straight line. At starting, unprocessed
parts enters the automated production line and undergo a system of automated
processing at various workstations along the fixed production line; the parts are
passed from workstation to workstation by means of a mechanized work
transport system, until the completely processed parts pass out of the automated
production line after the last process occurs to the part at the final workstation in
the system.
(b) Segmented In - line Configuration: -
It consists of two or more straight line transfer sections where segments are
usually perpendicular to each other. Layout design includes:
, and rotary layout
L - shaped layout
rectangular shaped layout
U - shaped layout

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Reasons for favoring segmented in - line over in - line configuration includes
floor space considerations; Reorientation of work parts to present different
surfaces for machining in different line segments; the swift return of work
holding fixtures in rectangular shaped layout.
The rotary shaped layout consist of circular work table around which work parts
are fixed to work holders. The worktable rotates to move each work part in turn
to each automated workstation which is located around the circumference of the
table. The worktable is also called dial and the equipment is referred as the dial
indexing machine or simple indexing machine. Commonly limited to smaller
work parts and relatively few workstations and they cannot accommodate buffer
storage capacity. However, they require less floor space and are generally
expensive than others
Buffer Storage: -
Buffer Storage supports fast and smooth production process. Buffer storage areas or
systems are used to temporarily store items that will be needed for production or
orders. Normal buffer storage does not have storage positions for specific items.
Buffer storage areas are often located near the shipping and receiving
docks and in spaces between two production zones along manufacturing lines to
ensure smooth running processes. The products kept in buffer storage must be
ready to enter manufacturing process quickly when they are needed.

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Buffer storage keeps production processes in balance during brief outages
and whenever the pace of production fluctuates. The size of buffer storage and the
floor space required are available. Generally, the production volume and storage
costs are decisive factors.
Capacity planning: -
Capacity is defined as the ability to achieve, store or produce. For an organization,
capacity would be the ability of a given system to produce output within the specific
time period. In operations, management capacity is referred as an amount of the
input resources available to produce relative output over period of time.
Capacity planning is essential to be determining optimum utilization of
resource and plays an important role decision-making process, for example,
extension of existing operations, modification to product lines, starting new
products, etc.
Capacity planning is the process of determining the production capacity needed by an
organization to meet changing demand for its products. Capacity is the rate of productive
capability of a facility. Capacity is usually expressed as volume of output per time period.
It is the process of determining the necessary to meet the production objectives. The
objectives of capacity planning are:
To identify and solve capacity problem in a timely manner to meet
consumer needs.
To maintain a balance between required capacity and available
capacity.
The goal of capacity planning is to minimize this discrepancy.
Capacity is calculated: (number of machines or workers) ×(number of shifts) ×
(utilization) × (efficiency).
Capacity planning is the first step when an organization decided to produce more or a
new product. Once capacity is evaluated and a need for a new expanded facility is
determined, facility location and process technology activities occur. Too much capacity
would require exploring ways to reduce capacity, such as temporarily closing, selling, or
consolidating facilities. Consolidation might involve relocation, a combining of
technologies, or a rearrangement of equipment and processes.
Capacity planning is done in order to estimate whether the demand is higher than
capacity or lower than capacity. That is compare demand versus capacity.
It helps an organization to identify and plan the actions necessary to meet
customer‟s present and future demand.

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THREE STEPS OF CAPACITY PLANNING:
 Determine Service Level Requirements:
The first step on the capacity planning process is to categorize the work done by
systems and to quantify users‟ expectation for how the work gets down.
(a) Define workloads
(b) Determine the unit of work
(c) Identify service levels for each workload
 Analyze current capacity:
Next, the current capacity of the system must be analyzed to determine how it is
meeting the needs of the users.
(a) Measure service levels and compare to objectives
(b) Measure overall resources usages.
(c) Measure resource usages by workload
(d) Identify components of response time
 Planning for future:
Finally, using forecasts of future business activity, future system requirements
are determined. Implementing the required changes in system configuring will
ensure that sufficient capacity will be available to maintain service level, even
as circumstanced change in the future.
(a) Determine future processing requirements
(b) Plan future system configuration
ESTIMATING FUTURE CAPACITY NEEDS:
Capacity requirements can be evaluated from two extreme perspectives short term and
long term.
 Short-term Requirements-
Managers often use forecast of product demand to estimate the short-term work
load the facility must handle. By looking ahead up to 12 months, managers
anticipate output requirements for different products or services. Then they
compare requirements with existing capacity and detect when capacity
adjustments are needed.
 Long-term Requirements-
Long term capacity requirements are more difficult to determine because future
demand and technologies are uncertain. Forecasting five or ten years into the
future is a risky and difficult task. What products or services will the firm are
producing then? Today‟s product may not even exist in the future. Obviously,
long-term capacity requirement are dependent on marketing plans, product
development, and the life cycles of the products.
Changing in process technology must also be anticipated. Even if producers
remain unchanged, the methods for generating them may change dramatically.
Capacity planning must involve forecasts of technology as well as product.

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Factors influencing: -
Capacity planning is dependent upon factors like
 Production facility (layout, design, and location),
 Product line or matrix, production technology,
 Human capital (job design, compensation),
 Operational structure (scheduling, quality assurance) and
 External structure ( policy, safety regulations)
Capacity Planning Classification: -
Capacity planning based on the timeline is classified into three main categories long
range, medium range and short range.
 Long Term Capacity: Long range capacity of an organization is dependent on
various other capacities like design capacity, production capacity, sustainable
capacity and effective capacity. Design capacity is the maximum output
possible as indicated by equipment manufacturer under ideal working
condition.
 Production capacity is the maximum output possible from equipment
under normal working condition or day.
 Sustainable capacity is the maximum production level achievable in
realistic work condition and considering normal machine breakdown,
maintenance, etc.
 Effective capacity is the optimum production level under pre-defined
job and work-schedules, normal machine breakdown, maintenance, etc.
 Medium Term Capacity: The strategic capacity planning undertaken by
organization for 2 to 3 years of a time frame is referred to as medium term
capacity planning.
 Short Term Capacity: The strategic planning undertaken by organization for
a daily weekly or quarterly time frame is referred to as short term capacity
planning.
Production control functions: -
1. Loading: -
A load means the quantity of work, and allocating the quantity of work to the
processes necessary to manufacture each item is called loading.
It is performed in the CRP (Capacity Requirements Planning) of the
manufacturing planning. Each item planned in MRP is first explored to the
processes necessary to manufacture it, which is usually called process explosion.
Next loading is performed for the explored process. In loading, each load is

27. P a g e | 27
usually piled up by time (hour), by which a setup time and a real operating time
are determined. The real operating time may be set by manufacturing lot or by
real operating time per item unit. In the former case, the time of hour is piled up
as load, while in the latter case, loading is performed after calculating the real
operating time per manufacturing unit by multiplying the number of
manufacturing items by real operating time.
In addition, the calculated load is piled up for a certain period, which is
determined by selecting either the earliest start date or the last start date as a
base date. This method enables loading for each process or each period.
2. Sequencing: -
It is to plan the order of the operation by process, regarding the fixed orders
through the Operation Order Release Planning. It is to grasp the progress status
of the operation, to consider the priority, setup time, and etc., and to make an
operation sequencing list.
Automated flow lines: -
An automated flow line consists of several machines or workstations which are
linked together by work handling devices that transfer parts between the stations.
The transfer of work parts occurs automatically and the workstations carry out
their specialized functions automatically.
A raw work part enters one end of the line and the processing steps are performed
sequentially as the part moves from one station to the next. It is possible to

28. P a g e | 28
incorporate buffer storage zones into the flow line, either at a single location or
between every workstation.
It is also possible to include inspection stations in the line to automatically perform
intermediate checks on the quality of the work parts.

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Unit - 3
Inventory Management
Material Requirement Planning: -
Material Requirement Planning (MRP) is a special technique to plan the
requirements of materials for production. For the manufacturing company to
produce the end items to meet the demands the availability of sufficient production
capacity must be coordinated with the availability of all Raw materials and
purchased items from which the end items are to be processed.
Objectives: -
 It determines the quantity and timing of finished goods demanded.
 It computes the inventories, work in progress, batch size, manufacturing and
packing lead items.
 It reduces inventory cost by reducing inventory levels.
 It improves plant operating efficiency by better use of productive resources.
 It improves customer services by meeting delivery schedules promised and
shortening delivery lead times.
MRP Inputs: -
 Material production schedule (MPS): This is the schedule of the quantity and
timing of all end products to be produced over a specific planning horizon.

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The planning horizon should be long enough to cover the cumulative lead
times of all components that must be purchased or manufactured to meet the
end product requirement. MPS is developed from customer's orders or from
forecasts of demand or both.
 Bill of material (BOM):
A bill of material is also known as product - structure file . It is a computerized
file listing all finished products, like quantity of raw materials, parts, sub -
assemblies and assemblies in each products.
The MRP program me obtains information about the components needed
to make an end product from BOM file. A bill of material not only lists all the
required parts but also is structured to reflect the sequence of steps required
to produce the end product.
The BOM has series of levels, each of which represents a stage in the
manufacture of the end product or the finished goods. The next lower level
might represent the sub assemblies that are combined to make the final
assembly.
Each component at any level of BOM is identified by the unified part
number. Determining all the lower level components needed to make a
finished product is called" exploding the requirements of bill of materils".
 Inventory record file:
This file contains important information such as what items should be
ordered and orders should be replaced. The file gives the complete and up to
date information on the hand quantities, gross requirements, scheduled
receipts and planned order releases for the item. It also tells about lot sizes,
lead items, safety stock level etc.
The inventory record file keeps the data about the projected use and
receipts of each item and determines the amount of inventory that will be
available in each time period. If the projected available inventory is not
sufficient to meet the requirement in a period, then the MRP program will
recommend that item to be ordered.
After getting inputs from these sources, MRP processes the available information
and gives information about the following:
a) Planned order release:
This is the order quantity of an item that is planned to be ordered in the
planned time period for this order that will ensure that the item is received
when needed. Planned order release is determined by offsetting the planned
order receipt by procurement lead time of that item.
b) Order scheduling:

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The highlight the need of any expediting , de expediting and cancellation of
open orders etc. in the case of unexpected situations.
c) Planned order receipts:
This the order quantity of an item that is planned to be ordered so that it is
received at the beginning of the period under consideration to meet the net
requirements of that period. This order has not yet been placed and will be
placed in future.
Potential benefits of MRP: -
1. The MRP has numerous benefits over the economic over quantity (EOQ) for
the control of production items, because
MRP = Based on future production data
EOQ = Based on past demand data
2. MRP can improve flow of work, thereby reducing intermittent delays and
reducing the manufacturing cycle time for the jobs.
3. MRP improves the company's ability to react to changes in customer orders,
improves customer services by helping production meet assembly dates and
reduces delivery lead times.
4. MRP helps in generating purchase order and in case of any changes
reschedule notices are also generated.
5. To produce end item, MRP plans orders for purchasing and shop scheduling
for the quantity of items that must be available in each time period.
Weaknesses of MRP: -
1. It requires fixed routing for the items. It is not able to access and plan for the
use of alternate routings.
2. It is the time consuming process as it requires lot of processing and analytical
times.
3. The sequencing logic priority order only by period or date. It provides no
priority for sequencing within a period based on similar setups, tooling,
favored customers etc.
4. It assumes that lead times are known constants that are independent of the lot
size.
ABC Analysis: -
It is an inventory categorization technique which divides the inventory into 3
categories:
 "A" items with very tight control and accuracy.
 "B" items with less tightly controlled.
 "C" items with the simplest controls possible and minimal records.

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It provides a mechanism for identifying items that will have a significant impact on
overall inventory cost, while also providing a mechanism for identifying different
categories of stock that will require different management and tools. This analysis
is also called "Pareto analysis".
"A" "B" "C"
 Rigid estimates.
 Centralized
purchasing storage.
 Strict and close
watch.
 Rigorous value
analysis.
 Management of items
should be done at top
level management.
 Maximum efforts
should be made to
expedite the delivery.
 Ordering quantities
reorder point and
minimum stock level
should be revised
more frequently.
 Moderate control.
 Purchase based on
rigid requirements.
 Reasonable strict
watch and control.
 Management should
be done at minimal
level.
 Safety stock should be
medium (3 months or
less).
 Ordinarily control
measures.
 Purchase based on
usage estimate.
 Control exercise by
store keeper.
 Management should
be done at lower
level.
 Decentralized
purchasing.
 Safety stock should be
liberal (3 months or
later).
Steps in ABC Analysis: -
1. Calculate the annual usage in units for each time.
2. Calculate annual usage of each item in terms of rupees.
3. Rank the items highest annual usage in rupees to lowest level annual usage in
rupees.
4. Compute total rupees.
5. Find the percentage of high, medium and low valued items in terms of total
value of items.
6. A graph can be plotted between percentage of items on X - axis and
percentage of total value of items on Y - axis.
VED Analysis: -
"V" = Vital, "E" = Essential, "D" = Desirable items
In VED analysis, each stock items are classified on either vital, essential and
desirable items based on how much critical the item is for providing health services.

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The vital items are stocked in abundance, essential items are stocked in medium
amounts and desirable items we socked in small amounts. Vital and essential items
are always in stock which means a minimum disruption in the services offered to
people.
In VED analysis, the inventory is classified as per functional importance under the
following three categories:
Vital (V): -
Items without which treatment comes to standstill i.e., Non - availability cannot be
tolerated. The vital items are stocked in abundance.
Essential (E): -
Items whose non - availability can be tolerated for 2 to 3 days because similar or
alternative items are available. Essential items are stocked in medium amounts,
purchase is based on rigid requirements and reasonably strict watch.
Desirable (D): -
Items whose non - availability can be tolerated for a long period. Desirable items are
stocked in small amounts and purchase is based on usage estimates.
In manufacturing organization, there are number of items which are very fatal or
critical in production. Their availability must be ensured at all items for smooth
production, so need to be strictly controlled. Essential items follow vital items in
hierarchy of importance. Desirable items are least importance in terms of functional
consideration, which are loosely controlled at lower level.
The VED analysis began its life to manufacturing. In most manufacturing
environments there are a few components without which production will grind to
halt. Failing to order those items on time is clearly an expensive mistake. It can be
helpful to manufacturers or for any businesses to think about their stock in these
terms.
Combination of ABC and VED analysis: -
In hospital inventory management, VED analysis has been commonly used together
with ABC analysis. Because ABC analysis is based on "cost criteria" and VED analysis
is based on the "criticality of an item".
There are two models of this combination which are generally in use: -

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V E D
A AV(90%) AE(80%) AD(70%) Category - I
B BV(95%) BE(85%) BD(75%) Category - II
C CV(99%) CE(90%) CD(80%) Category - III
V E D
A AV(90%) AE(80%) AD(70%) Category - I
B BV(95%) BE(85%) BD(75%) Category - II
C CV(99%) CE(90%) CD(80%) Category - III
 Category - I includes all vital and expensive items. They require close monitoring
and strict control by administrator himself.
 Category - II covers the items of essential category and they are less expensive
and should be under control of the office in charge of the stores.
 Category - III comprises the desirable and cheaper group of items which can be
left under the control of store keeper.
This type of classification helps the management to decide the material policy and
what the service levels are expected to see that no difficulty is faced. An item
belongs to both A and V is costlier, at the same time higher criticality, the
management should see that it is available at any time the need arises and the stock
levels to be controlled properly to see that inventory carrying cost are kept under
control.

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The grouping will essentially depend upon the strategy of management and the
environment of functioning. A high degree of control on inventories of each item
would neither be practical considering the work involved nor worthwhile since all
items are not of equal importance. It is desirable to classify them into groups of
items to control.
This analyses are based on the principle of "Vital few Trivial many" and higher
degree of attention is focused on vital few which affects the results significantly.
Economic order quantity (EOQ): -
In inventory management, economic order quantity (EOQ) is the order quantity that
minimizes the total holding costs and ordering costs. It is one of the oldest classical
production scheduling models. This model is applied when objective is to minimize
the total annual cost of inventory in the organization. Economic order quantity is
that size of the order which helps in attaining the above set objective. EOQ model is
applicable under the following conditions.
 Demand per year is deterministic in nature
 Planning period is one year
 Lead time is zero or constant and deterministic in nature
 Replenishment of items is instantaneous
 Demand/consumption rate is uniform and known in advance
 No stockout condition exist in the organization
The total annual cost of the inventory (TC) is given by the following equation in EOQ
model.
Components of the EOQ Formula:
D: Annual Quantity Demanded
Q: Volume per Order
S: Ordering Cost (Fixed Cost)
C: Unit Cost (Variable Cost)
H: Holding Cost (Variable Cost)
I: Carrying Cost (Interest Rate)

36. P a g e | 36
Economic Order Quantity Model
It is also called optimal order quantity
Economic production quantity (EPQ): -
The economic production quantity model determines the quantity a company or
retailer should order to minimize the total inventory costs by balancing the
inventory holding cost and average fixed ordering cost. In EOQ model supply was
instantaneous, which may not be the case in all industrial applications. If supply of
items is gradual to satisfy a continuous demand, then supply line will be depicted by
a slanted line.

37. P a g e | 37
In this situation, when the order is placed, the supplier begins producing the units
and supplies them continuously. While new units are added to inventory, other
units are being used. Thus, if delivery rate (P) > demand rate (D), the net result will
be a net increase in the inventory level. The slope of replenishment line will thus be
(P-D). Simillarly the slope of demand line will be (-D). The average inventory carried
per year is
Inventory model: -
Inventory also referred as stocks are basically the goods and raw materials that any
business would hold and are ready or will be ready for sale. Inventory model is a
mathematical model that helps business in determining the optimum level of
inventories that should be maintained in a production process, managing frequency
of ordering, deciding on quantity of goods or raw materials to be stored, tracking
flow of supply of raw materials and goods to provide uninterrupted service to
customers without any delay in delivery.
There are two types of Inventory model widely used in business.
1. Fixed Reorder Quantity System: -
Fixed Reorder Quantity System is an Inventory Model, where an alarm is raised
immediately when the inventory level drops below a fixed quantity and new
orders are raised to replenish the inventory to an optimum level based on the
demand. The point at which the inventory is ordered for replenishment is termed
as Reorder Point. The inventory quantity at Reorder Point is termed as Reorder
Level and the quantity of new inventory ordered is referred as Order Quantity.
Average Demand (DAv): It is the average number of order requests made per day.

38. P a g e | 38
Average Lead Time (TL): The time required to manufacture goods or product.
Average Lead Time Demand (DL): Average number of orders requested during
the Lead Time
Average Lead Time Demand (DL) = Average Demand (DAv) X Average Lead
Time (TL)
Safety Stock (S): It is the extra stock that is always maintained to mitigate any
future risks arising due to stock-outs because of shortfall of raw materials or
supply, breakdown in machine or plant, accidents, natural calamity or disaster,
labour strike or any other crisis that may the stall the production process.
The quantity of safety stock is often derived by analysing historical data and is
set to an optimized level by evaluating carefully the current cost of inventory and
losses that may be incurred due to future risk.
Reorder Level (RL): Reorder level is the inventory level, at which an alarm is
triggered immediately to replenish that particular inventory stock. Reorder level
is defined, keeping into consideration the Safety Stock to avoid any stock-out and
Average Lead Time Demand because even after raising the alarm, it would take
one complete process cycle (Lead Time) till the new inventories arrive to
replenish the existing inventory.
Reorder Level (RL) = Safety Stock (S) + Average Lead Time Demand (DL)
Order Quantity (O): Order quantity is the Demand (Order requests) that needs to
be delivered to the customer.
Minimum Level: At least Safety Stock has to be always maintained to avoid any
future stock- outs as per the standard practices of inventory management.
Minimum Level (LMin) = Safety Stock (S)
Maximum Level: The maximum level that can be kept in stock is safety stock and
the demand (the quantity ordered).
Maximum Level (LMax) = Safety Stock (S) + Order Quantity (O)

39. P a g e | 39
2. Fixed Reorder Period System: -
Fixed Reorder Period System is an Inventory Model of managing inventories,
where an alarm is raised after every fixed period of time and orders are raised
to replenish the inventory to an optimum level based on the demand. In this case
replenishment of inventory is a continuous process done after every fixed
interval of time.
Regular Intervals (R): Regular Interval is the fixed time interval at the end of
which the inventories would be reviewed and orders would be raised to
replenish the inventory
Inventory on Hand (It): Inventory on hand is the Inventory level measured at any
given point of time.
Maximum Level (M): It is the maximum level of inventory allowed as per the
production guidelines. The maximum level is derived by analysing historical data.
Order Quantity: In this system, inventory is reviewed at regular intervals (R),
inventory on hand (It) is noted at the time of review and order quantity is placed
for a quantity of (M) – (It).

40. P a g e | 40
Inventory cost: -
In order to control inventories appropriately, one has to consider all cost elements
that are associated with the inventories. There are four such cost elements, which
do affect cost of inventory.
 Unit cost: it is usually the purchase price of the item under consideration. If
unit cost is related with the purchase quantity, it is called as discount price.

41. P a g e | 41
 Procurement costs: This includes the cost of order preparation, tender
placement, cost of postages, telephone costs, receiving costs, set up cost
etc.
 Carrying costs: This represents the cost of maintaining inventories in the
plant. It includes the cost of insurance, security, warehouse rent, taxes,
interest on capital engaged, spoilage, breakage etc.
 Stockout costs: This represents the cost of loss of demand due to shortage in
supplies. This includes cost of loss of profit, loss of customer, loss of
goodwill, penalty etc.
If one year planning horizon is used, the total annual cost of inventory can be
expressed as:
Total annual inventory cost = Cost of items + Annual procurement cost +
Annual carrying cost + Stockout cost
Variables in Inventory Models
D = Total annual demand (in units)
Q = Quantity ordered (in units)
Q* = Optimal order quantity (in units)
R = Reorder point (in units)
R* = Optimal reorder point (in units)
L = Lead time
S = Procurement cost (per order)
C = Cost of the individual item (cost per unit)
I = Carrying cost per unit carried (as a percentage of unit cost C)
K = Stockout cost per unit out of stock
P = Production rate or delivery rate
dl = Demand per unit time during lead time
Dl = Total demand during lead time
TC = Total annual inventory costs
TC* = Minimum total annual inventory costs
Number of orders per year =
Total procurement cost per year = S.D / Q
Total carrying cost per year = Carrying cost per unit * unit cost * average
inventory per cycle

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Cost of items per year = Annual demand * unit cost
= D.C
Total annual inventory cost (TC) =
The objective of inventory management team is to minimize the total annual
inventory cost. A simplified graphical presentation in which cost of items,
procurement cost and carrying cost are depicted is shown in figure.
It can be seen that large values of order quantity Q result in large carrying cost.
Similarly, when order quantity Q is large, fewer orders will be placed and
procurement cost will decrease accordingly. The total cost curve indicates that the
minimum cost point lies at the intersection of carrying cost and procurement cost
curves.
Inventory Operating Doctrine
When managing inventories, operations manager has to make two important
decisions:
 When to reorder the stock (i.e. time to reorder or reorder point)
 How much stock to reorder (i.e. order quantity)
Reorder point is usually a predetermined inventory level, which signals the
operations manager to start the procurement process for the next order. Order
quantity is the order size.

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Chapter - 4
Material Management
Stress Management: -
It is a wide spectrum of technique and psychotherapy aimed at controlling a person's
level of stress especially for the purpose of improving everyday functioning. In this topic,
the term "stress" refers only to a stress with significant negative consequences.
Stress produces numerous physical and mental symptoms which vary according to
each individual's factors. These can include physical health decline as well as depression.
The process of stress management is named as one of the keys to a happy and successful
life in modern society. Although life produces numerous demands that can prove difficult
to handle , stress management provides number of ways to manage anxiety and overall
well being.
Many practical stress management techniques are available for health professionals to
provide positive feelings of control over one's life and promote general well - being. They
are as follows: -
1. Deep breathing.
2. Meditation, spending time in nature.
3. Mindfulness, listening music.
4. Physical exercise, yoga.
5. Prayer
6. Relaxation techniques.
Many techniques cope (invest own conscious effort) with the stresses life brings. Some of
the following ways given above to reduce the stress level temporarily. That's why the
stress management will vary according to the philosophical thought patterns.
In stress management, stresses are of two types: -
1. Acute stress: -
It is the most common form of stress among humans worldwide. Acute stress deals
with the pressure of near future or dealing with the very recent past. This type of
stress is often misinterpreted for being a negative meaning. In some circumstances,
it is also a good thing to have a acute stress in life, like running, exciting experiences
like riding a roller coaster. Acute stress is a short term stress and it does not have
enough time to do the damage that long term causes.
2. Chronic stress: -
It is a unlike acute stress. It has a wearing effect on people that can become a very
serious health risk if it continuous over a long period of time. Chronic stress can
lead to memory loss, illness etc. It causes financial struggles, working at high
pressure job, having personal issues at job.

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At workplace, stress is a common throughout the world in every business. Managing that
stress become very vital in order to keep up job performance as well as relationship with
co - workers and employers. To manage this stress, employers can provide stress
managing programs like therapies that include:
 Track your thoughts because thoughts are automatically occurring in our mind
either positive or negative. This will give you a good picture of how your thoughts
impact your daily living.
 Use support because support from others gives some positive support which is
very helpful.
 Deal with emotional difficulties with the help of psychologist.
 Add some relaxation techniques to your everyday routine, it refreshes your
physically and mentally and helps you to break a pattern of "stressing about your
stress".
 Listen to your body by identifying which part of your body feels various emotions.
For example: you can feel emotions such as anger of year in your stomach with
tightness or in our head by experiencing a headache.
Spare parts management: -
Spare part management is the foundation for reliable plant operation and is crucial
to a plant managers success. As plant manager, you need to know how to determine
which spare parts are needed to make up an effective and comprehensive inventory
system. Rather than using perception to determine what’s needed, it’s best to
establish a strategic method that will adequately manage the movement and storage
of your inventory.
Coping strategy at organizational level: -
1. Organizational role clarity.
2. Job redesign.
3. Stress reduction programs to identify organizational stressors
and reduce their effects by redesigning.
4. Personal wellness.
5. Supportive organizational climate.
6. Counselling.
Coping strategy by individuals: -
1. Relaxation.
2. Time management.
3. Role management.
4. Meditation.
5. Support group.
6. Exercise and many more activities that overcome stressors.

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Operating strategy, inventory control and lead times are a few of the factors you
should consider when developing or reviewing your part management system.
Taking these factors into account can help minimize performance disruption,
promote efficiency, and reduce carrying cost. Ultimately, producing successful spare
part management.
Spare parts Management plays an important role in achieving the desired plant
availability at an optimum cost. Presently, the industries are going for capital
intensive, mass production oriented and sophisticated technology. The downtime
for such plant and machinery is prohibitively expensive. It has been observed in
many industries that the non-availability of spare parts, as and when required for
repairs, contributes to as much as 50% of the total down time. Also, the cost of spare
parts is more than 50% of the total maintenance cost in the industry. It is a paradox
to note that the maintenance department is complaining of the non-availability of
the spare parts to meet their requirement and finance department is facing the
problem of increasing locked up capital in spare parts inventory. This amply
signifies the vital importance of spare parts management in any organization.
The unique problems faced by the organization in controlling/managing the spare
parts are as follows:
Firstly, there is an element of uncertainty as to when a part is
required and also the quantity of its requirement. This is due to the fact that the
failure of a component, either due to wearing out or due to other reasons, cannot be
predicted accurately.
Secondly, spare parts are not that easily available in the market as
they are not fast moving items. The original equipment manufacturer has to supply
the spares in most of the cases. New models are introduced to incorporate the
design improvements and old models are phased out. Hence the spares for old
models are not readily available. Particularly, this is more so in case of imported
equipment as the design changes are taking place faster in the developed countries.
Thirdly, the number and variety of spare parts are too large making the
close control more and more tedious. For instance, the number of items of spares in
a medium scale engineering industry may be around 15,000 and that in a large scale
chemical industry may be around 100,000.
Fourthly, there is a tendency from the stage of purchase of the
equipment to the stage of the use of the spare parts, to requisition spare parts more
number than that are actually required and accumulation of spares takes place.
Finally, the rate of consumption of spare parts for some are very high
and for some are very low. These problems are to be faced by systematic spare parts
management.

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There is a need for systematic actions while managing spare parts as given below:
 Identification of spare parts.
 Forecasting of spare part requirement.
 Inventory analysis.
 Formulation of selective control policies for various categories.
 Development of inventory control systems.
 Stocking policies of capital and insurance spares.
 Stocking policies of rot able spares or sub assemblies.
 Replacement policies of spare parts.
 Spare parts inspection.
 Reconditioning of spare parts.
 Establishment of spare parts bank.
 Computer applications for spare parts management.
Every organization should proceed systematically and establish an effective spare
parts management system. Codification helps the organization minimizing
duplication of spare parts stocking thereby reducing inventory, aids the accounting
process and facilitates the computerization of spare parts control systems. The
inventory analyses carried out on the basis of different characteristics of the spare
parts, such as annual consumption value, criticality, lead time, unit cost and the
frequency of use, help the company in establishing suitable policies for selective
control. This also helps in focusing our efforts on real problem areas.
A good inventory control system will help systemizing the
ordering procedure and also achieving an optimum level of inventory. In addition,
selectively efforts should be made to evolve optimum replacement policies for
selected spare parts, for which cost of down time and cost of replacement are very
high. So, we have to identify such spare parts and carry out the exercise for evolving
optimum replacement policies.
For the spare parts which are very expensive and those which are
to be imported, it is essential that the useful life for such spares is extended by
appropriate applications of reconditioning and repair techniques. Also, efforts
should be made to indigenize the spare parts in view of the hard-to-get foreign
exchange involvement. Also, for similar industries establishing of spare parts bank
goes a long way in reducing the total inventory holding of the expensive spare parts
and also reduces the stock holding cost. For different industries, it will be helpful to
establish spare parts banks and a suitable information system for the exchange of
spares. Lately, the application of computers for the processing of spare parts
information and operating an effective spare parts control system will be very
helpful for the organization and will ensure timely actions for an efficient and
effective spare parts management

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There are some types of spares involved in spare part management and they are as
follows: -
 Capital Spares: -
They are vital spares for critical equipment. The stock - out cost for such spare
is very high and t he unit cost is also high. The number of items consumed
during the lifetime of the equipment may be very limited in number. Hence
the decision has to be made as the number of items to be stored.
 Insurance Spares: -
Capital spares is used to replace a failed identical part in an operating
equipment whose penalty cost for down time is very high. Hence, it is an
insurance against such failures for which the downtime costs are very high.
They do not become obsolete until the parent equipment is retired from
service no matter if they do not move for many years.
 Ro table Spares: -
It is also called repairable spares that are deemed worthy of repair, usually by
the virtue of economic consideration of their cost. Rather than bear the cost of
completely replacing a finished product, repairable typically are designed to
enable more affordable maintenance by being more modular. This allow
components to be more easily removed, repaired and replaced enabling
cheaper requirement.
A rot able pool is a pool of repairable spare parts inventory set aside to allow
for multiple repairs to be accomplished simultaneously. This can be used to
minimize the stock out conditions for repairable items.
 Regular Spares: -
It is also called consumable spares. Parts that are not repairable are
considered as regular/consumable parts. These parts are usually scrapped or
condemned, when they are found to be failed. Since no attempt at repair is
made for fixed mean time to failures (MTTF), replacements rates for
consumptions for consumable are higher than an equivalent item treated as
repairable part. Because of this, consumables tend to be lower cost items.
Because consumables are lower cost and higher volume, economics of
scales can be found by ordering in large lot sizes a so - called economic order
quantity (EOQ).
Material Handling: -
"Material Handling" is the movement and storage of material at the lowest possible
cost of proper method and equipment. It is necessary and significant component of
any procedure activity. Material handling means providing the right amount of right

48. P a g e | 48
material, in the right condition, at the right place, at the right time, in the right
position and for the right cost, by using the right method. It applies the movement of
raw material, parts in process, finished goods, packing materials and disposal of
scrapes. Generally, hundreds and thousands ton of materials are handled daily
requiring the use of large amount of man power while the movement of materials
takes place from one processing area to another or from one department to another
department of the plant. The cost of material handling contributes significantly to
the total cost of manufacturing.
Objectives:
 Reducing manufacturing cycle time.
 Reduce delays and damage.
 Promote safety and improve working conditions.
 Maintain or improve product quality.
 Promote productivity.
 Material should flow in straight line.
 Material should move as short distance as possible.
 Use gravity.
 Move more material at one time.
 Automate material handling.
 Promote increased use of facilities.
 Promote the use of building cube.
 Promote versatile equipment.
 Develop a preventive maintenance program.
 Maximize the equipment utilization.
 Reduce tare weight (Un laden weight).
 Control inventory.
Major types of material handling methods are as follows:
 Movement involves the actual transportation or transfer of material from one
point to the next.
 Quantity dictates the type and nature of material handling equipment and
also cost per unit for the conveyance of goods.
 Time: how quickly the material can move through the facility.
 Space concerned with the required space for the storage of the material
handling equipment and their movement as well as queuing or staging space
for material itself.

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 Control: tracking of the material, positive identification and inventory
management.
Material handling equipments:
Anything that deals with the transportation, storage and control at any stage of the
processing of materials is called material handling equipments. There are 4 main
categories of material handling equipments.
1) Bulk Material Handling Equipment: -
The term refers to the storage, control and transportation of materials by bulk
and in loose form. Example - Handling of food, beverages, liquids, metal items
and minerals etc. In general, these pieces of equipments primarily handle these
items when they are loose.
Types of bulk material handling equipments are as follows -
 Conveyor belts (Horizontal transportation)
 Elevators (Vertical transportation)
 Stackers
 Reclaimers
2) Engineered systems: -
An engineered system is one that is typically automated. Such systems are also
usually created from the variety of units. When combined, they work to enable
both storage and transportation.
Types of engineered systems are -
 Automated storage (AS) and Retrieval system (RS)
 Automated guided vehicles (AGV)
 Robotic delivery system
 Conveyor system
3) Industrial trucks: -
This term is another broad definition that can be applied to many different types
of equipment. Such pieces of equipment do have one thing in common, though -
they all provide transportation.
The scope of this item can includes both small, hand - operated vehicles and large
scale motorized vehicles. Some items can be driven while others simply add
mobility to the materials that are being handled. Types of industrial trucks are -
 Hand, platform and pallet trucks.
 Order pickers
 Pallet jacks
 Side - loaders
 Walking stackers

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4) Storage and handling equipments: -
Equipment that is used for storage usually only bound items that are not
automated. This equipment is automated fall under the term "Engineered
systems"
Storage equipment is a equipment that is used to hold products and materials
when they are not being used or when they are waiting to enter or leave the
production process. These periods could be long - term or short - term in order to
allow a suitable build - upof stock or finished items.
Types of storage and handling equipment are -
 Drive through or Drive in racks
 Pallet racks
 Push - back racks
 Shelving
 Sliding racks
 Stacking frames
Codification Concept: -
Codification identifies an item. Also it acts as a communicating medium for an item
among the different users of that item in whatever way such as Stores, User
department, Planning department, Finance, Purchasing etc.
Thus , as soon as the item enters into Stores (if item is a new one), it is
codified. Once codified, the same code is used in the cycle of procurement,
throughout and for ever. Normally, it is the custodian who does the codification for
the items he keeps in his inventory.
However, in firms of substantial sizes where good number of items are
received on regular basis , codification is usually done by a team consisting of
representatives drawn from Stores, user department and Industrial engineering
department. Still, for Automatic procurement items the responsibility lies with the
Stores department. Process of codification are as follows:
 Decide if the firm wants to go for arbitrary system, symbolic system or
engineering drawing system
 List the inventory items
 Define the class of items such as (for example...) :
Abrasives
Bearings
Belt and beltings
Bolts, nuts & washers
Brooms & brushes
Cans & containers
Chemicals & reagents etc.

51. P a g e | 51
 Define the sub class under each class
 Depending upon the number of classes , their subclasses and probable
number of items under each sub class decide the length of codes which shall
remain fixed for all the inventory items (10 digit, alphanumeric etc.)
 Start assigning codes as per the detailed list of inventory
The codification pattern for the warehouse infrastructure must take into
consideration the following aspects:
 The codification should be easy to understand, right sized, label prints must
be legible, barcodes
readable from workable distances using barcode scanners
 Warehouse Id : which will hold the company, country, province, city and
location details (need not be part of the bin identification, but maintained in
the database table structure of WMS). Taken as input from user when signing
into the application.
Example:
 J01 - KhomrahWarehouse, Al Khomrah, Jeddah, WP, Kingdom of Saudi
Arabia (KSA)
 J02 - HamraWarehouse, Al Hamra, Jeddah, WP, Kingdom of Saudi
Arabia(KSA)
 R01- Murabba Warehouse, Al Murabba, Riyadh, CP, Kingdom of Saudi
Arabia(KSA)

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 Shed or Building Id to represent more than one block (need not be part of bin
identification). Taken as
input from user when signing into the application.
 Bin Identification : Aisle+Bay+Level+Bin Position
 Area and Zone codes will be considered as attributes of Bin.
The label design is an important aspect for a successful WMS (Warehouse
Management System) Implementation when using handheld barcode scanners.
Codification is basically an identification system for each item of the inventory.
There are often three broad approaches to developing a suitable identification
system :
1. Arbitrary approach: -
As the name suggests ,this approach doesnot use any design for codification.
Rather , as and when an item is received by Stores in its receiving bay, a
running and unique serial number is assigned to it. This number becomes the
code of the item for subsequent use at different stages. While this system is

53. P a g e | 53
the easiest one to use, it does not help in scientific management of inventory.
For example, say a particular spare part of a machine is received in the stores
and is assigned a running unique number 999XXX as its code. Then if the same
item is received at any other point of time the code number shall not be the
same i.e. 999XXX as by that time a lot many other items might have entered
into the firm and might also have been assigned different running and unique
code making it impossible to assign a previous code to any item.
Arbitrary approach is useable only where perhaps items are non-repetitive
and the inventory management need not be scientific.
2. Symbolic approach: -
Also known as intelligent code system it assigns code in a manner that the
same item is not allotted two different codes and also a code ,because of its
design, can be used to tell many things about an item.
The system uses either a numeric codification system or an alphanumeric or
mnemonic system. Under the numeric system, a set of numeric code (length
pre-decided) is assigned to each item where different parts of the code
describe, of an item :
Class
Subclass
unique running number of that item
Location of storage
Suppliers' code etc.
For example :
2 145 098 344
Class Subclass Running number Location code
Thus the code of this item shall be a 10 digit code, 2145098344 and it shall
remain always so for this item. It shall then be easy to communicate about this
item among the concerned agencies.
Similarly ,there can be code using alpha numeric value like AA223B234 with
different alpha and numerical value describing some pre-decided meaning. It
is also called mnemonic system. Both numeric and mnemonic systems are
symbolic systems as the codes under it describe a symbol for identifying an
item. Since this code has certain logic it is also called intelligent code and this
system is in wide use every where.

54. P a g e | 54
3. Use of drawing numbers: -
In many firms using complex drawings through which part numbers etc are
drawn, use their drawing numbers as codes to identify an item. Since the
drawing number for a firm remains unique , assigning a code on this basis
assumes a unique code for that item and hence confirms the requirement of
unique identification for the item.
Store management: -
A store management system executes store operations, utilizing a correspondence
mechanical assembly In the store, associated with no less than one store terminal by
method for a first line Inside the store and associated with a server by a second line
outside the store. The correspondence mechanical assembly judges the operation
kind of every operation demand sent from the store terminal and, when the
operation sort is a first operation, forms the operation demand and, when the
operation sort is a second operation, transmits the operation solicitation to the
server so that the server forms the operation demand. The Functions of Store
Management system is to receive, Store & Issue Materials to production plant. Store
Management divided in to various sections such as
 Receiving Section
 Tool Stores
 General Stores
 RAW Materials Stores
Store Management is an Element of Materials department, has as interface with User
Departments in its day by day operations. The essential reason served by stores is
the procurement of continuous support of manufacturing divisions. Stores go about
as pad b/w buy and assembling on one hand and assembling on the other. The
assignment of vendor identifies with safe custody and stocking of materials, their
receipts, issues and accounting with goal of proficiently and economically providing
the right material at the ideal time at whatever point required in the right condition
to all client divisions.
Documentation plays the important role in store management to
ensure accountability, facilitate coordination of care between providers and for
service improvement. However, the importance of documentation and record
keeping may be overlooked/overshadowed by the focus on direct services to clients.
The following documents or records are used "on recording the store items:
 Bin Card: -
After inspection of materials, the approved materials are received by the keeper.
These materials are stored in bins, racks, almirahs and other equipments

55. P a g e | 55
provided for the purpose. For systematic storing, each type of mate kept in
different bins, racks, almirahs, etc. A bin card is a quantitative record of receipts,
issues, and balances in stores. It enables to know the quantity of materials in
hand at a glance . Bin card maintained by the store-keeper. This card is used not
only for recording receipts issues of stores but also assists the store-keeper to
c6ntrol the stock. A bin card the store-keeper to prepare purchase requisition to
replenish the exhausted material. It also helps in locating the discrepancy when
physical stock verification; undertaken and the balance compared with bin card.
It contains particulars such as number, description of material, code number of
material, maximum, minimum, order and danger levels.
 Stores Ledger: -
A stores ledger is a record of materials showings receipts, issues, and balances I
of materials in quantities and value. It is maintained by the Costing Department
and is outside the control of store-keeper. This ledger is maintained in order to
ensure correct 1 stores accounting. This ledger is usually of loose leaf or card
type and each account represents an item of materials. The sheets are numbered
serially and initiated by a responsible official so as to avoid the risk of removal or
loss. In some concern, the stores ledger is maintained in bound volumes so as to
rule out the possibility of loss of folios.
 Stores Issue Requisition: -
The store-keeper is required not to issue any material unless he is d; authorized
by the competent authority. "Stores or Material Requisition is authorization to a
store-keeper to issue materials or other stores." This is use. prepared by the
foreman of the production department.
The contents of Stores Requisition are:
(i) Number and date of requisition.
(ii) Name of the section requiring the materials.
(iii) Particulars and code number of materials.
(iv) The quantity of material demanded and its unit of measurement.
(v) The rate at which issue is to be made.
(vi) The total value of materials.
(vii) Authority for requisition.
 Bill of Material: -
A Bill of Material may be defined as, "a document containing a complete list of
materials and components required for manufacturing a particular product or for
a particular job, process or work-order". It is also known as 'Specification of
materials'. Bill of material often serves the purpose of Material Requisition as it

56. P a g e | 56
contains the complete list of materials required for a particular job. But a Stores
Requisition cannot replaces a Bill of Material.
It gives the details, of materials necessary like material specification,
weigh and the quantity of each item. The bill of material is prepared by
production or planning department as soon as the order is received. It is a
requisition to the stores department for supplying the desired materials in
proper time.
 Material Transfer Note: -
Material Transfer Note is prepared when materials or equipments are
transferred from one sub-store to another sub-store or from one production
section to another or from one job to another in the factory. Normally inter
department transfer is not allowed.
Material Management: -
Materials management is concerned with planning, directing and controlling the
kind, amount, location, movement and timing of various flows of materials used in
and produced by the process.
Materials management objectives are categorized into:
1. Primary objective
2. Secondary objectives
1. Primary Objectives:
“Making available (supply) of materials in specified quantity and quality at
economic cost and maintaining the continuity of supply. Minimization of
investments in materials and inventory costs, and assuring high inventory
turnover.”
2. Secondary Objectives:
Secondary objectives help to achieve the primary objectives. The secondary
objectives can be stated as:
 Purchasing the items from a reliable source at economic price.
 Reduction of costs by using various cost reduction techniques such as variety
reduction, standardization and simplification, value analysis, inventory
control, purchase research etc.
 Co-ordination of the functions such as planning, scheduling, storage and
maintenance of ma

57. P a g e | 57
Unit - 5
Physical Distribution and Material Management
Integral view of material management: -
Material management as a function is responsible for the co - ordination of planning,
purchasing, moving, storing, and controlling materials in an optimum manner so as
to provide a pre - decided service to the customer at the minimum cost.
If the above functions of material management are separately handled a conflict of
intrests occurs and there is a need to balance the conflicting objective from a total
organization point of view so as to achieve optimum results for the organization.
The organization which are following integrated material management concept
requires the services of professional managers so that they can fulfill the
requirements of an integrated material management functions which demand an
ability to bring together conflicting and yet inter related functions.
Objectives: -
 Procuring better value.
 Obtaining better yield.
 Reducing investments in stock through inventory control and material flow.
Materials required for production purpose are normally procured and stored in the
plant and issued to manufacturing when there is a requisition. Materials are to be
purchased in advance and stored to ensure uninterrupted supply. There should be a
proper co-ordination and co-operation among different functional heads of
materials department to optimise the operations of materials management. The
materials function to be effective, the objective must be to maximise materials
productivity. An integrated approach to materials management i.e. materials
planning and control must look in to the problem areas in a co- coordinated manner
in order to maximise the effectiveness of materials management.
Advantages: -
1. Better accountability: -
By effective centralization of authority and responsibility for all aspects of
materila function, a clear cut accountability is established. This helps in
evaluating the performance of material management in an objective manner.
2. Better co ordination: -
When the material manager is responsible for all functions it results in better
support and co - operation in the accomplishment of the materials function.
Better coordination create an atmosphere of trust and better relation between
the user departments and the material management departments.

58. P a g e | 58
3. Improved performance: -
As all the inter related functions are integrated organizationally, better
performance and effectiveness is achieved.
The need for materials is promptly brought to the notice by material planning
and purchasing department is supplied with stock levels and order status by
stores department.
4. Adaptibility to computerization: -
The centralization of material function has made it possible to design data
processing systems. The integrated material management facilitates the
collection, process and analysis of data leading to better decisions.
Computerization can be economically introduced under an integrated set up.
The important areas to improve materials planning and control are:
 Value analysis and purchase price analysis.
 Materials planning and control (Inventory Control).
 Stores control.
 Waste management.
 Materials handling.
Elements of Integrated Materials Management

59. P a g e | 59
Logistics management: -
Logistics management is a supply chain management component that is used to
meet customer demands through the planning, control and implementation of the
effective movement and storage of related information, goods and services from
origin to destination. Logistics management helps companies reduce expenses and
enhance customer service.
Logistics (or Logistical Activities) may be Broadly Classified into Two Categories:
 Inbound logistics; which is concerned with the smooth and cost effective inflow
of materials and other inputs (that are needed in the manufacturing process)
from suppliers to the plant. For proper management of inbound logistics, the
management has to maintain a continuous interface with suppliers (vendors).
 Outbound logistics (also called physical distribution management or supply
chain management); is concerned with the flow of finished goods and other
related information from the firm to the customer. For proper management of
outbound logistics, the management has to maintain a continuous interface with
transport operators and channels of distribution.
Significance (or Objectives) of Logistics Management:
Logistics management is significant for the following reasons:
 Cost Reduction and Profit Maximization: - Logistics management results in cost
reduction and profit maximization, primarily due to:
1. Improved material handling
2. Safe, speedy and economical transportation
3. Optimum number and convenient location of warehouses etc.
 Efficient Flow of Manufacturing Operations: -
Inbound logistics helps in the efficient flow of manufacturing operations, due to
on-time delivery of materials, proper utilisation of materials and semi-finished
goods in the production process and so on.