material management

1. MATERIAL MANAGEMENT
AR.AKANKSHA PENDHARKAR.
DATE: 17-02-2023

2. Material Management is the process of planning, procuring, Controlling and providing raw material in the
right quantity, in the right place, at the right time, with the right cost for production purposes.
COST OF
CONTROL
CONTROL OF
INDIRECT
MATERIALS
SUPPLY OF
MATERIALS
WASTAGE OF
MATERIALS
LOSS OF DIRECT
LABOUR
INVESTMENT
CONGESTION
IMPORTANCE OF MATERIAL MANAGEMENT:
Cost kept at reasonable level
Scientific purchasing helps to keep cost reasonable.
Why there is no proper control over such materials which controls total cost?
Prompt supply.
The equipment is properly utilized. No breakdown due to late supply.
Kept under control- at the stage of storage
-Movement
Avoided
Kept under control.
Over stocking is avoided.
Avoided- in the stores.
-At different stages of manufacturing.
MATERIAL
MANAGEMENT

3. MATERIAL MANAGEMENT
AIM OF MATERIAL MANAGEMENT:
Right
QUANTITY
Right
QUALITY
Right
TIME
Right
PLACE
Right
COST
OBJECTIVES OF MATERIAL MANAGEMENT :
PRIMARY
• Right price
• High turnover
• Low procurement
& storage cost
• Continuity of supply
• Consistency in quality
• Good supplier relations
• Development of personnel
• Good information system
SECONDARY
• Forecasting
• Inter-departmental harmony
• Product improvement
• Standardization
• Make or buy decision
• New materials & products
• Favorable reciprocal
relationships
MATERIAL CALCULATION
AT SITE
MATERIAL
PROCUREMENT
VENDOR SELECTION
DELIVERY & TESTING
ISSUE & UTILIZATION
PAYMENT DETAILS
STAGES OF MANAGEMENT:

4. WHAT IS PROCUREMENT?
Procurement is the process of acquiring
goods and services from vendors, typically
for business purposes.
STEPS OF PROCUREMENT PROCESS:
MATERIAL MANAGEMENT
IDENTIFYING
• listing all of the
goods and
services your
organization
needs to
purchase ,
thinking about
which of those
high priority are
and which are
not.
SHORTLISTIN
G
• Once you know
what your needs
are, it’s time to
determine who
will supply
them. You first
need to identify
potential
suppliers, which
usually require
you to do some
market research.
SELECTING
• The next step is
to establish the
terms of the
agreement. This
generally
includes pricing,
delivery,
payment terms
and so on.
AQUIRING
• The final step is
to process
generally involves
reviewing and
accepting the
invoice, then
passing it along to
your accounts
payable
department for
payment.

5. WHAT IS PURCHASING?
• Purchasing is the act of buying goods or services. Unlike procurement, which is a strategic
process, purchasing definitions claim that purchasing is transactional in nature.
• Buyers do not necessarily take the time to consider all of their options before making a
purchase decision; rather, they simply buy what they need when they need it.
• While this approach may work for some buyers, it does not always lead to the best possible
price or terms. Therefore, it’s important for buyers to understand both procurement and
purchasing so that they can make informed decisions about how to best acquire goods and
services.
STEPS OF PURCHASE PROCESS:
MATERIAL MANAGEMENT
ORDERING
• Once the tender and
supplier is selected,
the purchase order
is made which is the
written agreement
in which purchaser
and sellers will bind
its terms and
condition.
EXPEDITING
• After placing the
order, purchase
officer will send the
reminder. He can also
get the written
promise from vendor
for supplying goods at
a specific time.
RECEIVING
• the quality and
quantity of material is
checked at the time
of receiving.
• If everything is okay,
report will be made.

6. PROCUREMENT PURCHASING
Activities related to acquiring goods and
services
Functions associated with buying goods and
services
Steps that happen before, during, and after
purchase
The straightforward process of purchasing
commodities
Used in a production environment (internal
process)
Used in a wholesale environment (external
process)
Puts more importance on an item’s value than
its cost
Tends to focus more on the item’s price than
its value
Refers to a set of tasks that spot and fulfill
needs
Refers to the specific task of committing
expenditure
Includes need recognition, sourcing, and
contract closure
Includes ordering, expediting, and payment
fulfillment
Follows a proactive approach to spot and
fulfill needs
Follows a reactive approach to satisfy internal
needs
Relational–focuses on creating long-term
vendor relationships
Transactional–focuses on transactions than
vendor relationships
DIFFERENCE BETWEEN PROCUREMENT AND PURCHASING:

7. INVENTORY CONTROL
NEED FOR INVENTORY CONTROL
• Inventories constitute the most significant part of the current assets, representing as much
as 50%-70% of the capital investment. Therefore it is absolutely imperative to manage inventories
effectively and efficiently in order to avoid unnecessary investment in them.
• If a company's inventory level is too low, it risks delays in fulfilling it's customers orders.
• If the inventory level is too high, it is using up money that can be better used in other areas. It also risks
obsolescence and spoilage
• INVENTORY CONTROL is defined as the supervision of supply, storage and accessibility of
items in order to ensure an adequate supply without excessive oversupply.
• The objective of inventory management is to have the appropriate amounts of materials in the right
place, at the right time, and at low cost.
INVENTORY CONTROL METHODS
1. ABC ANALYSIS
2. EOQ ANALYSIS

8. ABC ANALYSIS: (ABC = Always Better Control)
Consumption Value =
(Unit price of an item) (No. of units
consumed per annum)

9. SR.NO ITEM DESCRIPTION UNIT UNIT COST
ANNUAL
USAGE
1 4” HOLLOW CLAY BRICK NOS 35.00 228766.00
2 CEMENT BAGS 350.00 23515.00
3 FINE SAND BRASS 6000.00 491.00
4 CRUSH SAND BRASS 3000.00 722.00
5 LIME BAGS 50.00 1428.00
6 AGGREAGATE BRASS 1600.00 282.50
7 MURUM BRASS 400.00 254.00
8 RUBBLE SOLING BRASS 860.00 162.00
9 STEEL TON 75000.00 239.90
10 FLOORING SQ.FT. 90.00 4677.19
11 WINDOWS NOS 3344.00 566.03
12 DOORS NOS 1060.00 408.22
13 ELECTRICAL MATERIAL NOS 870000.00 -
14 PLUMBING MATERIAL NOS 4567503.00 -
15 SANITARY FITTINGS NOS 840.00 336.00
16 CP FITTINGS NOS 315.00 916.00
17 PAINTING LITRE 265.00 944.67
18 M.S.GRILLS TON 42.00 10607.47
19 S.S. RAILINGS TON 2583.00 799.65
Q: For a bungalow construction site, material unit cost and annual demands are given in a
table. Please conduct ABC analysis for the same.

10. SR.NO ITEM DESCRIPTION UNIT UNIT COST
ANNUAL
USAGE
TOTAL COST/
YR
% USAGE
VALUE
1 4” HOLLOW CLAY BRICK NOS 35.00 228766.00 8006810.00 16.85
2 CEMENT BAGS 350.00 23515.00 8230250.00 17.32
3 FINE SAND BRASS 6000.00 491.00 2946000.00 6.20
4 CRUSH SAND BRASS 3000.00 722.00 2166000.00 4.56
5 LIME BAGS 50.00 1428.00 71400.00 0.15
6 AGGREAGATE BRASS 1600.00 282.50 452000.00 0.95
7 MURUM BRASS 400.00 254.00 101600.00 0.21
8 RUBBLE SOLING BRASS 860.00 162.00 139320.00 0.29
9 STEEL TON 75000.00 239.90 17992500.00 37.86
10 FLOORING SQ.FT. 90.00 4677.19 420947.10 0.89
11 WINDOWS NOS 3344.00 566.03 1892804.32 3.98
12 DOORS NOS 1060.00 408.22 432713.20 0.91
13 ELECTRICAL MATERIAL NOS 870000.00 - 870000.00 1.83
14 PLUMBING MATERIAL NOS 4567503.00 - 467503.00 0.98
15 SANITARY FITTINGS NOS 840.00 336.00 282240.00 0.59
16 CP FITTINGS NOS 315.00 916.00 288540.00 0.61
17 PAINTING LITRE 265.00 944.67 250337.55 0.53
18 M.S.GRILLS TON 42.00 10607.47 445513.74 0.94
19 S.S. RAILINGS TON 2583.00 799.65 2065495.95 4.35
TOTAL MATERIAL COST 47521974.86 100.00
Calculating total cost of all material & percentage of cost for each one,

11. SR.NO ITEM DESCRIPTION UNIT UNIT COST
ANNUAL
USAGE
TOTAL COST/
YR
% USAGE
VALUE
CUMULATIVE %
OF
TOTAL COST
1 STEEL TON 75000.00 239.90 17992500.00 37.86 37.86
2 CEMENT BAGS 350.00 23515.00 8230250.00 17.32 55.18
3 4” HOLLOW CLAY BRICK NOS 35.00 228766.00 8006810.00 16.85 72.03
4 FINE SAND BRASS 6000.00 491.00 2946000.00 6.20 78.23
5 CRUSH SAND BRASS 3000.00 722.00 2166000.00 4.56 82.78
6 S.S. RAILINGS TON 2583.00 799.65 2065495.95 4.35 87.13
7 WINDOWS NOS 3344.00 566.03 1892804.32 3.98 91.11
8 ELECTRICAL MATERIAL NOS 870000.00 - 870000.00 1.83 92.94
9 PLUMBING MATERIAL NOS 4567503.00 - 467503.00 0.98 93.93
10 AGGREAGATE BRASS 1600.00 282.50 452000.00 0.95 94.88
11 M.S.GRILLS TON 42.00 10607.47 445513.74 0.94 95.82
12 DOORS NOS 1060.00 408.22 432713.20 0.91 96.73
13 FLOORING SQ.FT. 90.00 4677.19 420947.10 0.89 97.61
14 CP FITTINGS NOS 315.00 916.00 288540.00 0.61 98.22
15 SANITARY FITTINGS NOS 840.00 336.00 282240.00 0.59 98.81
16 PAINTING LITRE 265.00 944.67 250337.55 0.53 99.34
17 RUBBLE SOLING BRASS 860.00 162.00 139320.00 0.29 99.63
18 MURUM BRASS 400.00 254.00 101600.00 0.21 99.85
19 LIME BAGS 50.00 1428.00 71400.00 0.15 100.00
TOTAL MATERIAL
COST
47521974.86
100.00
A
B
C
Arranging materials in descending order according to percentage cost,
As stated above ABC classification is,
Item 1 – Item3 = Category A
Item 4 – Item 8 = Category B
Item 9 – Item19 = Category C.
Here, Steel , Cement and brick have highest % cost,
Which means it requires very tight control and
accurate records.
No major wastage can be afforded for these
materials.

12. (EOQ) ECONOMIC ORDER QUANTITY
Economic order quantity (EOQ) is a calculation companies perform that represents their
ideal order size, allowing them to meet demand without overspending. Inventory managers
calculate EOQ to minimize holding costs and excess inventory.
ASSUMPTIONS OF BASIC EOQ MODEL
• Demand is known, constant, and independent
• Lead time is known and constant
• Order quantity received is instantaneous and complete
• No shortage is allowed
Calculation of EOQ
The formula for calculation of the EOQ is:
EOQ=√(2 x D x S/ H.)
Here, D= Annual demand in units of a product.
S= Ordering cost per order
H= Holding cost per unit of the product.

13. 2. CEMENT
A= 23515 Units per year
O= 200 Rs. Per order
C= 50% of the unit cost
i.e. 50% X 350
= 175.
Hence
EOQ = 2 X 23515X200
175
= 231 Bags
2. HOLLOW BRICKS
A= 228766 Units per year
O= 500 Rs. Per order
C= 5% of the unit cost
i.e. 80% X 35
= 28.
Hence
EOQ = 2 X 228766 X500
28
= 2858 Bricks
SR.NO ITEM DESCRIPTION UNIT UNIT COST
ANNUAL
USAGE
TOTAL COST/
YR
% USAGE
VALUE
CUMULATIVE %
OF
TOTAL COST
1 STEEL TON 75000.00 239.90 17992500.00 37.86 37.86
2 CEMENT BAGS 350.00 23515.00 8230250.00 17.32 55.18
3 4” HOLLOW CLAY BRICK NOS 35.00 228766.00 8006810.00 16.85 72.03
As per performed ABC analysis ,for bungalow construction site, following are the A CATEGORY
ITEMS.
Here determining eoq in units for the same.
Assuming ordering cost is respectively 1000, 200, 500 Rs per order & carrying cost is 5%, 50% &
80%of unit price.
1. STEEL
A= 239 Units per year
O= 1000 Rs. Per order
C= 5% of the unit cost
i.e. 5% X 75000
= 3750.
Hence
EOQ = 2 X 239 X1000
3750
= 11 TON

14. THANK YOU !