Material management aims to manage materials in an optimum manner to provide a pre-decided service to customers at minimum cost. It involves planning, sourcing, purchasing, storing, and controlling the flow of materials. Key functions include purchasing, stores management, and inventory control. Purchasing objectives are to avail materials at minimum cost while ensuring continuous production. Inventory control aims to provide adequate supply without shortages at optimal investment. Techniques like ABC analysis, VED analysis, and EOQ are used to classify items and determine optimal order quantities.

1. EDITED BY PRERNA TOSHNIWAL
MATERIAL MANAGEMENT

2. Definition
It is concerned with planning, sourcing,
purchasing, moving, storing and controlling the flow
of materials in an optimum manner so as to provide
a pre-decided service to the customer at a minimum
cost.
OR
Material management is a scientific technique
which aims for integrated approach towards the
management of materials in an industrial
undertaking.

3. Functions

4. Factors affecting Material Planning

5. PURPOSE OF MATERIAL MANAGEMENT
•To gain economy in purchasing
•To satisfy the demand during period of replenishment
•To carry reserve stock to avoid stock out
•To stabilize fluctuations in consumption
•To provide reasonable level of client services

6. Functional areas of material management
1. Purchasing
2. Central service supply
3. Central stores
4. The print shops
5. The pharmacy
6. Dietary
& Linen services

7. PURCHASING
Objectives:
To avail the materials, suppliers and equipments at the
minimum possible cost
To ensure the continuous flow of production
To increase the asset turnover
To develop an alternative source of supply
To maintain good relations with suppliers
To achieve maximum integration with other department
To train and develop the personnel
Efficient recordkeeping and management reporting

8. Points to remember while purchasing
•Proper specification
•Invite quotations from reputed firms
•Comparison of offers based on basic price, freight &
insurance, taxes and levies
•Quantity & payment discounts
•Payment terms
•Delivery period, guarantee
•Vendor reputation
(reliability, technical capabilities, Convenience, Availability,
after-sales service, sales assistance)
•Short listing for better negotiation terms
•Seek order acknowledgement

9. Parameters of Purchasing

10. Purchasing Procedure

11. Special Purchasing Systems
1) Forward Buying- Depending upon the availability, the financial policies,
economic order quantity, discounts and delivery the future commitment
is decided.
2) Tender Buying- Involves a bidder’s list, solicits bids by comparing
quotations and place order with lowest bidder commonly for Govt. and
public sector.
3) Blanket order system- An agreement to provide a required quantity of
specified items, over a period of time, at an agreed price.
4) Zero Stock- The firms of the buyer and seller are close to each other so
that the raw material of one is the finished product of another.
5) Rate Contract- It is common for the suppliers to advertise that they are
on ‘rate contract’ prevalent in Govt. and public sectors.
6) Reciprocity- Buying from one’s customers in preference to others.
7) Systems Contract- The original indent, duly approved by competent
authorities, is shipped back with the items and avoids the usual
documents like purchase orders, materials requisitions, expediting
letters etc thereby reducing administrative expenses.

12. Stores Management
It is in direct touch with the user departments in its day-to-
day activities. The most important purpose is to provide
uninterrupted service to the manufacturing departments.
Stores are often equated with money, as money is locked
up in stores.
Functions of stores:
a) Receive and account for raw materials, tools etc
b)Proper storage and preservation
c) Meet the demands of departments
d)Minimise surplus, scrap and obsolescence
e) Highlight discrepancies and abnormal consumption
f) Provide information and verification of purchases

13. Inventory control
It means stocking adequate number and kind of stores,
so that the materials are available whenever required
and wherever required. Scientific inventory control
results in optimal balance.
Objectives:
a)Ensure adequate supply and avoid shortage.
b)Minimise financial investment in inventories.
c)Efficient purchasing, storing, consumption etc.
d)Maintain timely record of items.
e)Timely action for replenishment.
f)Provide reserve stock in lead times.
g)Short term and long term planning of materials.

14. Functions of inventory control
•To provide maximum supply service,
consistent with maximum efficiency &
optimum investment.
•To provide cushion between forecasted
& actual demand for a material

15. Economic order of quantity
The order quantity means the quantity procured
during one production cycle. Economic order
quantity is calculated by balancing the two costs.
EOQ is that size of order which minimises total costs
of carrying and cost of ordering.
CARRYING
COST
PURCHASING
COST
ECONOMIC ORDER OF
QUANTITY(EOQ)

16. •Re-order level: stock level at which fresh
order is placed.
•Lead time: Duration time between
placing an order & receipt of material
•Ideal – 2 to 6 weeks.

17. ABC ANALYSIS
(ABC = Always Better Control)
This is based on cost criteria.
It helps to exercise selective control when confronted
with large number of items. It rationalizes the number
of orders, number of items & reduce the inventory.
Category Percentage of
items
Percentage of
annual
consumption value
A 10-20 70-80
B 20-30 10-25
C 60-70 5-15

18. ‘A’ ITEMS
Small in number, but consume large amount of resources
•Tight control
•Rigid estimate of requirements
•Strict & closer watch
•Low safety stocks
•Managed by top management
‘B’ ITEM
Intermediate
•Moderate control
•Purchase based on rigid requirements
•Reasonably strict watch & control
•Moderate safety stocks
•Managed by middle level management
‘C’ ITEMS
Larger in number, but consume lesser amount of resources
•Ordinary control measures
•Purchase based on usage estimates
•High safety stocks
ABC analysis does not stress on items those are less
costly but may be vital

19. VED ANALYSIS
•Based on critical value & shortage cost of an item
–It is a subjective analysis.
•Items are classified into:
Vital:
•Shortage cannot be tolerated.
Essential:
•Shortage can be tolerated for a short period.
Desirable:
Shortage will not adversely affect, but may be using more
resources. These must be strictly Scrutinized
HML ANALYSIS
Based on cost per unit
Highest
Medium
Low
This is used to keep control over consumption
at departmental level for deciding the frequency of physical
verification

20. SDE ANALYIS
Based on availability
Scarce
Managed by top level management
Maintain big safety stocks
Difficult
Maintain sufficient safety stocks
Easily available
Minimum safety stocks
FSN ANALYSIS
Based on utilization.
Fast moving.
Slow moving.
Non-moving.
Non-moving items must be periodically reviewed to prevent
expiry
& obsolescence
.

21. Standardization
It means producing variety of products from the minimum
variety of materials, parts, tools and processes. It is the process
of establishing standards or units of measure by which extent,
quality, quantity, value, performance etc. may be compared
and measured.
Disadvantages:
1) Reduction in choice because of reduced variety.
2)Standard once set, resist change becomes obstacle.
3)It tends to favour only large companies.
4)It becomes very difficult to introduce new models because of
less flexible production facilities.

22. Standardisation
Advantages
1) Benefits to Design department (Fewer specifications, more time
for new design, better resource allocation)
2) Benefits to Manufacturing department (lower unit cost, Better
quality, methods, utilization of manpower, accurate delivery)
3) Benefits to Marketing department (Better sales volume,
increased margin, less sales pressure of after-sales services)
4) Benefits of production planning & control department
(Improved methods, efficient tools, accurate delivery, less time
consuming for small batches, Reduction of pre-production
activities)
5) Benefits to Purchase & stock department
6) Benefits to quality control department

23. Simplification
This concept is closely related to standardisation. It is the
process of reducing the variety of products manufactured,
product range, assemblies, parts, materials and design.
Advantages:
1) Involves fewer parts, varieties and changes in products.
2)Reduces variety , volume of remaining products.
3)Quick delivery and after sales service.
4)Reduces inventory and better inventory control.
5) Low production costs
6)Reduces price of a product.
7) Improves product quality.

24. Value Analysis
Value analysis is defined as “an organised creative approach
which has its objective, the efficient identification of
unnecessary cost-cost which provides neither quality nor
use nor life nor appearance nor customer features”. It
focuses engineering, manufacturing and puchasing
attention to one objective-equivalent performance at a
lower cost.
1) What is the item?
2)What does it do?
3)What does it cost?
4)What would the alternative cost be?

25. Ergonomics
It is the study of the man in relation to his work or human
engineering. It is the application of human biological sciences
along with engineering sciences to achieve optimum mutual
adjustment of men and his work, the benefits being measured
in terms of human efficiency.
It has two broader objectives:
1) To enhance the efficiency and effectiveness with which the
activities is carried so as to increase the convenience of use,
reduced errors and increase in productivity.
2) To enhance certain desirable human values including safety
reduced stress and fatigue and improved quality of life.

26. Just-In-Time
Just-in-time (JIT) manufacturing is a philosophy rather than a
technique. Products are assemble just before they are sold,
subassemblies are made just before they are assembled and
components are made and fabricated just before subassemblies
are made. This leads to lower WIP and reduced lead times.
Benefits of JIT:
a) Product cost is greatly reduced.
b) Quality is improved.
c) Alternative Design can be quickly brought.
d) Productivity improvement.
e) Higher flexibility in production system.
f) Ease and simplicity.

27. Seven Wastes
Sheigo Shingo, a Japanese JIT authority and engineer at the
Toyota Motor Company identifies seven wastes as being
targets of continuous improvements.
1)Waste of over production. Make only what is needed.
2)Waste of waiting. Eliminate bottlenecks and balance loads.
3)Waste of transportation. Establish layout and location to
make handling easier if not eliminate.
4)Waste of processing. Why is each process necessary?
5)Waste of stock. Reducing other wastes reduced stock.
6)Waste of motion study. Economy improves productivity
and consistency improves quality.
7)Waste of defect. Make the process fail-safe so as to eliminate
inspection.

28. PROCURMENT OF EQUIPMENT
Points to be noted before purchase of an
equipment:
•Latest technology
•Availability of maintenance & repair
facility, with minimum down time
•Post warranty repair at reasonable cost
•Upgradeability
•Reputed manufacturer
•Availability of consumables
•Low operating costs
•Installation
•Proper installation as per guidelines

29. HISTORY SHEET OF
EQUIPMENT:
History sheet
•Name of equipment
•Code number
•Date of purchase
•Name of supplier
•Name of manufacturer
•Date of installation
•Place of installation
•Date of commissioning
•Environmental control
•Spare parts inventory
•Techn. Manual / circuit
diagrams / literatures
•After sales arrangement
•Guarantee period
•Warranty period
•Life of equipment
•Down time / up time
•Cost of maintenance
•Unserviceable date
•Date of condemnation
•Date of replacement

30. DISPOSAL
1. Circulate to other units, where it is needed
2. Return to the vendor, if willing to accept
3. Sell to agencies, scrap dealers, etc
4. Auction
5. Local destruction