This document discusses production management topics such as materials management, inventory control, and purchasing methods. Materials management aims to coordinate planning, sourcing, purchasing, moving, storing, and controlling materials in an optimal way to provide customer service at minimum cost. Inventory control objectives include ensuring smooth material flow, providing required quality, controlling investment, and protecting against demand and output fluctuations. The document describes different purchasing methods like centralized, decentralized, and just-in-time purchasing and discusses their advantages and disadvantages.

1. PRODUCTION MANAGEMENT
BBA SEMESTER 6
Module 3

2. Contents
Materials management
Scope & Importance , methods of purchasing
Inventory control –
Objectives
Functions and
importance

3. MM can be defined as “ that of business / management function that
is responsible for the coordination of planning ,sourcing ,purchasing
, moving, storing and controlling materials in an optimum manner so
as to provide service to the customer at a pre-decided level at a
minimum cost.

4. Scope of Material Management
Materials planning and control
Purchasing
Materials handling
Stores
Receiving, Inspection and Despatching.
Inventory control

5. Advantage of Material Management
Accurate stock forecasting
To minimize errors
Better coordination
BETTER PERFORMANCE :
Timely provision of material

6. i. Centralized Purchasing
ii. Decentralized Purchasing
iii.Just-in-Time Purchasing

7. 1. CENTRALIZED PURCHASING
• Responsibility of purchasing is delegated
to only one department.
• Other departments submit their
requisitions to the Purchase Department.

8. Advantages of Centralized
Purchasing
• Increased efficiency and effectiveness.
• Minimizes ordering costs.
• Avoids duplicity.
• Ensures better control.
• Other Depts. Can save time.
• Better Supplier- Partnership.

9. disadvantages of Centralised
Purchasing
• Local Purchase: The benefits arising out of local
purchase cannot be availed of where there is
centralized purchase in operation.
• Emergency Purchase: In case of centralized
purchasing, emergency purchase cannot be made.
• Communication difficulty: This system of
purchase leads to communication difficulty between
centralized purchase office and the plants.
• Less flexible: The purchasing procedure under
centralized purchasing is less flexible.

10. 2. Decentralized purchasing
• Purchasing work is assigned to all
departments.
• No separate Purchase Department exists.
• Different departments purchase from
different suppliers.

11. 3. just-in-time purchasing
• It is the purchase of materials and parts so that
delivery immediately precedes the demand or
use.
• Primary objective is to achieve product quality
through a long-term contract and fair price.
• Relies on a single source of supply in a nearby
geographical area.

12. advantages
• Increase in ability to meet delivery
promises.
• Reduction in delivery lead time.
• Reduction in storage cost.
• Improved product quality.
• Increased productivity.
Eg. Toyota, General Motors, Ford, Xerox.

13. INVENTO RY
Inventory consists of materials, parts, and finished goods.
Inventory is depleted when its sold or destroyed.
An inventory-manager’s job is to balance the advantages and
disadvantages of both low and high inventories.
• Both low and high inventory levels have associated cost
characteristics.
• The ideal cost situation is to have “some” inventory

14. TYPES OF INVENTORY
INPUT
PROCESS
OUTPUT
Raw Materials
Work In Process
Consumables required for processing.
Semi Finished Production in various stages, Finished Goods at Distribution Centers
lying with various departments like
through out Supply Chain
Production, WIP Stores, QC, Final Assembly,
Paint Shop, Packing, Outbound Store etc.
Eg : Fuel, Stationary, Bolts & Nuts etc.
required in manufacturing
Finished Goods
Maintenance Items/Consumables
Production Waste and Scrap
Finished Goods in transit
Packing Materials
Rejections and Defectives
Finished Goods with Stockiest and Dealers
Local purchased Items required for
production
Spare Parts Stocks & Bought Out items
Defectives, Rejects and Sales Returns
Repaired Stock and Parts
Sales Promotion & Sample Stocks

15. INVENTORY CONTROL
Inventory control is defined as “the planning and scheduling of
materials used in the manufacturing process. It is possible to
exercise control over the three type of inventories recognized by
the accountant as raw-material, work-in- progress and finished
goods”.
L.V. Fine

16. I. To ensure smooth flow of stock
II. To provide for Required Quality of Materials
III. To Control Investment in stock
IV. Protection against fluctuating demand
V. Protection against fluctuations in output
VI. Risk of obsolescence
VII. Minimization of material cost

17. Functions of Inventory control
To ensure the timely availability of material
Better use of financial resources
Protecting inventories from losses
Provides protection against the uncertainties of demand and supply
Preparation of accurate material reports
To minimize wastages and rate of deterioration