Purchasing & Procurement, Factors influencing purchase policies, Material handling principles, Criteria for selection of MHE, Codification & Standardization, Ergonomics Inventory management

1. PRODUCTION AND
OPERATIONS
MANAGEMENT
MATERIAL MANAGMENT
Learnito Study Series for Business Students
Notes, QnA and case studies at www.learnito.com/catalog

2. Contents
• Materials Management - Meaning
• Purchasing & Procurement
• Factors influencing purchase policies
• Material handling principles
• Criteria for selection of MHE
• Codification & Standardization
• Ergonomics
• Inventory management
• Assess yourself
• Case Study

3. Materials Management: Meaning
• Materials Management – is a study of
procuring, organizing, storing, processing
and management of inventory until the
final sales of the product.
• Materials cost money, hence proper
management of materials leads a
company to tremendous cost savings

4. Purchasing & Procurement
• Purchasing is a managerial activity that
broadly covers varied activities such as
enquiry, raising order, ensuring inventory
and maintenance of buffer inventory in an
Organization
• Procurement involves not just purchasing,
but the management of inventory, keeping in
mind the vendors and production planning. It
is a broader term as compared to
Purchasing.

5. Factors influencing Purchasing
• There are two types of factors that
influence Purchasing as a policy. They
are Major factors and Minor factors.
• Major factors:
a) Ancillary Development: Non core components are left to
the experts, since all the components cannot be
manufactured by single company itself.
b) Make or Buy: Based on the Economies of Scale, all
companies decide to either manufacture a particular
product themselves or arrange a sub contracting partner.

6. Factors influencing Purchasing
Major factors Contd.:
c) Vendor Ratings: Vendors or supplier of components are
rated on weighted plan or check list method over certain
criterion such as delivery, price and others to ascertain
the strength of relationship
d) Value Analysis: is an area, where the purchasing
personnel can give substitute suggestions for existing
components in order to raise utility and minimize cost.

7. Minor factors:
a) Speculative Buying: where the purchasing person
expects the prices to go high.
b) Ethical Buying: Where purchasing happens based on
the contract, even if it means minor losses.
c) Reciprocal Buying: Some companies tend to exist in
industries where the supplier and Buyer will have
products they can buy and sell. This is common in family
run business.
Factors influencing Purchasing

8. Material Handling Principles
• Minimize excessive movements
• Minimize unorganized / zig-zag movements
• Principle of direct movement is suggested
• Material handling equipment(MHE) to be
designed in order to reduce human effort
• Bulk and heavy objects to be moved to short
distances only
• Transport equipment should be in full load
conditions at all times.

9. Criteria for selection of MHE
• Production issue
- Economies Of scale
- Class of materials to be handled
- Layout of plant and building facilities
• Capability of handling equipments
available
- Adaptability and flexibility
- Load capacity
- Power, speed and Supervision
- Ease of maintenance
• Human element
- Technical competence of personnel to handle the equipment
- Safety aspects of the personnel.

10. Codification & Standardization
• Codification is a simple indication of the
product by a certain code.
• Bases for coding:
- Who will be the users
- What is the use of codification
- What kind of mechanization is needed.
• Types of Coding
- Mnemonic Coding: Is a type of coding that consists of both
alphabets and numerals.
- Hybrid Coding: it is a type where there is mnemonic coding
plus classification of products by group.

11. Codification & Standardization
Characteristics of a good codification
system:
– The codification must be precise and flexible to
handle.
– It should follow the principle of brevity.
– It should be comprehensive.
Standardization: A good codification system
leads to better standardization of product.
Advantages of Standardization:
- The purchase costs will be lower
- Lesser stocks to be maintained for current consumption
- Amount of Paper work is reduced.

12. Assess Yourself
• Have you understood the difference
between procurement and purchasing.
• Do you have an idea on critical factors
that influence vendor selection
• What is Ergonomics? Can it be used in
marketing of products
• Why inventory management is crucial for
industries? Discuss the role of inventory
control techniques.

13. PRODUCTION AND
OPERATIONS
MANAGEMENT
MATERIAL MANAGMENT
Learnito Study Series for Business Students
Notes, QnA and case studies at www.learnito.com/catalog