This document discusses material management concepts including: 1. Defining economic order quantity and how it minimizes total inventory costs by balancing ordering and holding costs. 2. Key responsibilities of a purchasing manager including implementing procurement strategies, forecasting needs, managing vendor relationships, and ensuring purchases are appropriately approved. 3. How ethics plays an important role in purchasing by establishing rules for fair supplier selection, honest conduct, and timely fulfillment of commitments. Transparency, compliance, and social/environmental responsibility are also emphasized.

1. MATERIAL MANAGEMENT
PRESENTED BY:
MAHESH SHENOY
SARVESH ACHARYA
NISHCHITHA
SHRUTHI DEVADIGA
JAYATHA KUMARI
VANI

2. 1.Define economic order quantity?
EOQ is defined as that level of inventory order that
minimizes the total cost associated with inventory
management.
It is the optimum level of inventory , and it is also known
as
economic lot size.
EOQ is the backorder quantity for replenishment that
minimizes total inventory costs. The backorder is triggered
when the inventory level hits the reorder point.
The EOQ is calculated in order to minimize a
combination
of costs such as the purchase cost , the inventory holding
cost, the ordering cost, etc.

4. LIMITATIONS OF EOQ:
 The assumption of constant usage and the
instantaneous or immediate replenishment of
inventories are not always practical.
 Safety stock is always required because deliveries
from suppliers may be delayed for reasons beyond
control. Also because there may be an unexpected
demand for stocks.
 EOQ assumes that the demand is constant and
known with certainty which always is not the case.
Demand may rise and fall depending upon various
factors leaving a certain degree of uncertainty behind it.

5. • Computational problems may arise and hence the
number of orders to be placed may not be always
100% accurate if fractions or decimals are involved.
• Only Applicable to Non-Perishable products with
staple demand.
• Ignores Delivery Quantities & Discounts.
• Assumes Storage space is unlimited.
• Assumes retailer controls delivery Scheduling.

6. Key responsibilities of Purchasing Manager

7. •
Implement procurement strategy and policies.
Forecast procurement needs.
Continually develop expertise to support growth for new
projects.
Prepare purchase requisitions, approve and
issues purchase orders.

8. Build and develop relationships with key suppliers and
customers.
Lead the procurement group in all phases.
Dealing with suppliers
Dealing with Brokers.

9. Manage vendor relationships and assist in building
effective partnerships.
Assist department in developing and implementing
purchasing strategies for products.
Order materials and services as per negotiated and
appropriately approved. Review quotations.
Maintain procurement files.

10. Reorder level
Definition
A minimum amount of an item
which a company holds in
stock, such that, when stock falls
to this amount, the item must be
reordered.

11. Lead time
Lead time is the period between a customer's
order and delivery of the final product. A small
order of a pre-existing item may only have a few
hours lead time, but a larger order of custom-
made parts may have a lead time of
weeks, months or even longer. Manufacturers are
always looking for ways to improve
the lead time on their products.

12. 'Average Inventory'
A calculation comparing the value or
number of a particular good or set of
goods during two or more specified time
periods. Average inventory is the median
value of an inventory throughout a certain
time period.
A basic calculation for average inventory
would be
(Current Inventory + Previous Inventory) / 2

13. 2)How does ethics play an important role in today's
purchasing profession?
In the today‘s purchasing profession most
organizations develop a set of rules and guidelines to
ensure that their purchasing personnel conduct business
in an ethical manner.
Some of this rules are given below:
a)The organization interest should be kept in mind while
purchasing

14. b)No undue favor should be taken from or given to
suppliers. Selection of suppliers should be based
solely on merit.
c)All purchasing activities should be conducted
honestly and truthfully.
d)All purchasing commitment(payment of
bills, etc.)should be completed on time.

15. how will it be in an Ethical purchasing
organization?
1) They will be transparent
2) The entire transactions will be recorded
and tracked
3) The decisions will be data driven
4) The good performance get rewarded
5) High on compliance to rules, regulations
and government laws
6) They have social and environment
responsibilities as one of the top
priority.
7) They have genuine long term

16. Inventory Control Using ABC Analysis
ABC analysis is a type of analysis of
material dividing in three groups
called A-group items, B-Group items
and C-group items For the purpose of
exercising control over materials.
Manufacturing concerns find it useful
to divide materials into three
categories.

17. Under ABC analysis, the material are divided into
three categories, A,B and C. Past experience has show
that almost10%of items contribute 70%of value of
consumption and this category is called “A” Category.
About 20%of the items contribute about 20%of value of
consumption and this in known as “B” category.
Category “C” covers about 70% of items of material,
which contribute only 10%of value of consumption.

18. Factors that can be considered in selecting a vendor
1. QUALITY
The overall efficiency and Quality
of their end product or service to
nourish and improve. Maintaining
quality standards and providing
quality service to facilitate
customers and end users is the key
to win their confidence in the firm’s

19. 2. PRICE/COST
 Price or cost of the project quoted by the
vendors has always been considered as one of the
most important aspect of vendor selection criteria. .
 Price alone can and should never act as the
governing principle

20. 3. FINANCIAL HEALTH/STABILITY
 The financial stability of the
vendor is another important criterion
to consider before making your
choice.
 If the vendor itself isn’t
financially sound, it can never
become a reliable source for your
organization because in order to
provide quality product using

21. 4. PAST PERFORMANCE RECORDS
 Firms must also carefully examine the
performance history of the vendor.
 If the vendor seems to have shown good
results, maintains a happy customer base and
seems to have sustained its quality of performance
over the years it is probably a good investment to do
business with such a vendor.
 Performance are risky business partners.

22. Other factors are:
Delivery time
 Credit
 Reputation
 Education
 Experience
 Good communication skill