2. What is Materials Management
Materials management is that coordinated function
,objective of which is to provide optimum service of material
at minimum cost . It covers efficient management of
material in all its aspects such as, planning, indenting,
procurement,store keeping , material handling, distribution
inventory control ,disposal of obsolete/scrap material.
Typical break-up of product cost and
annual expenditure
Materials
Overheads
Labour
InterestProfit
Materials
Overheads
Labour
Interest
Profit
3. Concept of Inventory
“Inventory” may be defined as usable but idle resource. If
resource is some physical and tangible object such as
materials , then it is generally termed as stock. Thus stock
or inventory are synonymous terms through inventory has
wider implications.
“Any idle resource of any kind , provided that such resource
has economic value” Tap
Source
or
Input
Cistern
Usage or output
Drain Plug
4. Definition of Spare Part
“Spare part means a part or sub-assembly or assembly for
substitution i.e. ready to replace identical or similar part or
sub assembly or assembly, if it becomes faulty or worn out
and includes as accessory or attachment in the same
One of the important function of materials management is,
inventory control. For effective inventory control , it is
necessary to have good management of spare parts.
A) Production Inventories
D) M RO Inventories
B) Work in Process
C) Finished goods
inventories
1) Raw Materials
2) Bought out Components
1) Consumables
2) Spare Part
1) Packaging Materials
2) Finished Goods
Types of
Inventory
Semi-finished products
5. Classification of Spare Parts.
Spare parts can be classified on the basis of :
(A) Accordingly to Usage :
i) Regularly used spare parts: Ball bearing,gasket,oil seal
etc
ii) Irregularly used spare parts:Gears,compressor unit etc
(B) Accordingly to Functional characteristics.
i) Insurance and capital spares:
These Spares have build in stability hence probability of its
failure is very low during life time of equipment.
ii) Rotable spares:
Spares which are repaired and stored for re-use and can
easily be interchanged like motors,pumps,engines etc.
iii) Overhauling spares:
Spares which are used on a planned and scheduled basis
after pre-determined number of hours of working.
iv) Maintenance Spares:
The spare parts which are regularly consumed during use or
operation of machines or vehicles .
6. Need for scientific management of spare
Parts
Keeping machines in good repair requires, timely
replacement of defective or worn out parts, older the
machine the importance of spare parts goes up.
Factors which calls for scientific spare parts management
are as follow:
1. Random & unpredictable pattern of failure.
2. Long lead time required for procurement.
3. High rate of obsolescence.
4. Non availability and improper information system.
5. Uneconomical to manufacture as demand is small.
6. High rate of stock out cost.
7. Characteristics of Spare Parts
Demand
(A) Criticality : It is important to provide a good supply of
spares for critical parts.
(B) Failures types
i) Wear & corrosion .
ii) Accidental Failure.
iii) Consequential damage.
(C) Required Usage: Some parts need replacement
frequently but some parts have long life.
(D) Cost of Spare Parts : High value- Critical,Low value-
Non Critical ,High Value-Non Critical,Low value -Critical.
(E) Spare Parts Availability: Indigenous /Imported
8. Operating
PoliciesThe spare parts management policy should take the form of
general rules for spare provisioning and should cover six
main type of decision :
(A) Form: as spare machine ,as spare assemblies and as
spare parts.
(B) Source:There are three main “Sources” which are
(i) Repair: Welding,strapping or brazing of cracked castings.
(ii) Make: Making of Gaskets,o rings,studs etc.
(iii)Buy : from OEM or agent.
(C) Whether to stock: It’s decision matter that which items
to stock and which to order on demand. The prime purpose
of stocking is to reduce lead time & stop cost.
(D) Standardization: The process of standardization
logically leads to simplification or variety reduction.
(E) Ordering Methods: Auto indenting, order on demand etc.
(F) The spares budget: The actual expenditure on spare
parts and the actual investment in stocks ,will depend on
the policy decisions described above.the budget & policy
can't be make independently.
10. Reducing The Gravity of The
problemThe adoption of good operating policies will in itself bring
savings in most companies under present conditions
however ,they can never hope to solve the basic dilemma
that:
(A) Stop costs can only be reduced by incurring increased
spares provisioning costs.
(B) Provisioning Costs can only be reduced at the expense
of increased stop costs.
The only long-term solution to this problem is to change the
present conditions and to establish new conditions under
which it’s possible to reduce provisioning cost without
increasing stop costs.
Following are the ways by which this might be achieved:-
(A) Preventive Maintenance.
(B) Machinery Purchasing Policy.
(C) Standardization of Assemblies and Parts.
(D) Reduction of “Lead Times”.
i) Manufacturers spares stock
ii)Mode of transport iii)Credits
11. Techniques for Spare Parts Controlling
A) Item Reducing Techniques
i) Standardization / Variety Reduction
ii) Codification
B) Quantity Reducing Techniques
Sr N.
Type of
Control Criteria Main Use
1 V.E.D Critically of the item
To determine the
stocking level of
spare parts
2 S.D.E
Purchasing problem
in regard to
availability
Lead time analysis
and purchasing
strategies
3 G.O.L.F
Source of supply of
materials
Procurement
Strategies
4 F.S.N
consumption pattern
of the component
To control
obsolescences
5 X.Y.Z
Inventory value of
items in store
To review the
inventory ,their uses
etc. at scheduled
intervals
12. Departmental Responsibility for Spare Parts Management
Maintenance Department
1.Preventive maintenance (P&M).
2.Standardization.
3.Generate New,alternative sources
of spares supply,such as repair,make.
Production Dept.
1.Regular watch on
equipment & parts .
2.Stabilize operations.
1.Develop sources
of supply .
2. Provide estimated
procurement lead
time data for control
of inventories.
Purchase Dept.
Inventory
Control(Stores)
1.Provide
historical data.
2. Preventive
maintenance of
stock items
13. Spare Parts Management is a Profit Making
Concept
Company X Company Y Company Z
1. Cost of sales 100 100 100
2. Gross Profit @12.5% 12.5 12.5 12.5
3. Materials Consumed 50 50 50
4. Inventory held
-Month's consumption 2 Month 6 Month 12 Month
-Inventory Turn-over ratio 6 2 1
-Value of inventory held 8.33 25.00 50.00
5.Inventory carrying cost
@25% 2.08 6.25 12.50
Net Profit 10.42 6.25 0.00
Amount in Crores
14. Average Inventory at Site
(A) Purchase Inventory
Approx..
i) Raw Materials =10 Crores
ii) Stores & spares =10
Crores
iii) Insurance spares = 4 Crores
(B) WIP & Finished Goods at Factory
= 7 Crores
Total = 31 Crores
Average Inventory Carrying
Cost @20% = 6 Crores
15.
16. 511927908 Filter Super by pass -3873576
519927915 Filter Element & Ring pt no AR-3879948800
511927917 Filter Element by pass pt no 136750
660874701 Seal Kit FA-01002 for 100 mm cylinder
660674700 Seal kit LCI-A1-480/25/120 Q100 MM cylinder
132605050 Flange unit with bearing FY-505 M SKF
132302051 Flange unit with bearing UCF-205 NTN
280900025 Knob plastic for low level cistern
280900031 Push button for low level cistern
280900033 Handle pvc for low level cistern
790683415 Transformer current CT RATIO:3000/5
844283402 Transformer CAT 1N4762-1001 PT
17. A) Production Inventory
(I)Raw Materials Average Inv. Amount In lacs
Coal 35000 MT 87500000 875.00
Lignite 500 MT 525000 5.25
Gysum 10000 MT 4150000 41.50
Silica Sand 2000 MT 670000 6.70
Iron ore 500 MT 220000 2.20
Fly Ash 50 MT 20000 0.20
930.85
B)Work in process inventory
Clinker 35000 MT 28000000 280.00
Raw Mix 15000 MT 4500000 45.00
325.00
C)Finished goods inventory
Packing Material(PP Bags) 7 Lacs 3150000 31.50
Cement in Silo 20000 MT 48000000 480.00
511.50
D)MRO Inventory
Revenue 100000000 1000.00
Capital/Insurance 40000000 400.00
1400.00
Total 3167.35
