2. Introduction
• Materials Management is more than just Material
Requirement Planning
• It also encompasses
– Purchasing
– Internal control
– WIP
– Warehousing
– Shipping
– Distribution
3. Organizational Position
• Often separated into procurement/purchasing and material
planning functions
• The recent trend however is towards the Sourcing model
which would incorporate all functions related to materials
management with importance and organizational level
similar to other primary supply chain functions such as
planning and manufacturing
4. Material Handling Systems
• Handling materials for storage or delivery
constitutes an important part of materials
management
– Automated storage/retrieval systems
– Flow racks
5. Material Transportation
• Choice of transportation is a key
determinant of costs of the materials
management system
• Value Density – Value of an item per unit of
weight
– The higher the value density, the more it can
usually absorb higher transportation cost
6. Purchasing
• Purchasing is responsible for a substantial
portion of cost control of an organization
– Direct Materials – Materials used in the product
itself
– Indirect Materials – Other items purchased by
the organization that do not go into the finished
product
7. Value Based Purchasing
• A value chain may be thought of as the
links in the supply chain adding value to
the product flowing through it
• Value based purchasing would be when
the purchase decision considers the total
value proposition and not just the purchase
price
8. Purchasing Functions
• Purchasing is usually involved in the following functions or
tasks
– Review of procurement requests
– Solicitation and evaluation of proposals
– Supplier analysis
– Negotiation
– Contract execution, implementation and administration
9. Purchasing Functions
• Purchasing is usually involved in the following functions or
tasks (continued)
– Forecasting and strategies
– Material flows
– Enhancement of purchasing performance
– External and internal relationships
– Administrative aspects of purchasing
– Personnel issues
10. JIT Purchasing
• Often used to support Just In Time production systems
• Established agreements with vendors to deliver small
quantities of materials just in time for production
• Attributes include
– Reduced lot sizes
– Frequent and reliable delivery schedules
– Reduced and reliable lead times
– Consistently high quality of purchased materials
11. JIT Purchasing
• Benefits of JIT purchases often cited include
– Lower costs
– Better quality
– Improved service
– Reduce supplier network
12. JIT Purchasing
• The benefits seen in JIT purchasing however may often
be a result of sourcing practices which are not JIT specific
but required to support JIT
– Preferred suppliers
– Single sourcing
– Long term partnerships
– Collaborative efforts on product development
– Collaboration in cost control and quality enhancement
13. JIT Purchasing
• Often suppliers face problems fitting their production
schedule to the JIT requirements of the customer
• The problem usually starts when there is not a dedicated
supplier/buyer relationship
• Conditions such as this trigger the utilization of best
sourcing practices as mentioned in the previous slide
• Benefits misinterpreted as JIT benefits
14. Global Sourcing
• Coordinated collaborative effort to source globally
involving multiple buyers/suppliers facilitated by
some type of electronic commerce tool
– E-marketplace
– Example: International Leaf Purchasing Team
– Example: SparesFinder
15. Global Sourcing
• Political boundaries are the biggest barrier
• Restrictive customs practices
• Lack of convertible currency
• Foreign exchange regulations
