MATERIAL MANAGEMENT &

INVENTORY MANAGEMENTPresented By : Mr. Sem Shaikh

The M.S. University of Baroda

Faculty of Commerce

Department of Commerce & Business Management

Master of Commerce

INTRODUCTION Material management is simply the process by which an organization is supplied

with the goods & services that it needs to achieve its objectives of buying, storage & movement of materials.

Material management is related to planning, procuring, storing & providing the appropriate material of right quality, right quantity at right place in right time so as to co-ordinate & schedule the production activity in a integrative way for an industrial undertaking.

The material requirements planning, purchasing, inventory planning, storage, inventory control, material supply, transportation & material handling are the activities of materials management.

Before the production begins it is necessary to ensure availability of all the types of materials needed for production & its supply at the various production centers.

IMPORTANCE OF MATERIAL MANAGEMENT

1)Greater promise as a cost reducing device.2)Result in improved production capacity of plants.3)Saving of labour time.4)Reduction in inventories & storage space.5)Reduction in damage to materials.6)Smooth flow of production.7)Easier production control.8)Reduced employee fatigue.9)Better utilization of resources.

SCOPE OF MATERIAL MANAGEMENT

1.Material planning & control.2.Purchasing Function.3.Stores Management Function.4.Inventory Control Function.5.Other related activities.

FUNCTIONS OF MATERIAL MANAGEMENT

(A)PRIMARY FUNCTIONS :

(1)Materials Requirements Planning (MRP) :-

Planning of materials requirements in manufacturing is a necessary function in any organization, as inventory of materials involves about 60% of the total investment of the organization.

The MRP is a technique used to plan the materials starting from the raw materials, finished parts, components, sub-assemblies and assemblies as per Bill of Materials (BOM) to procure or produce them to support a Master Production Schedule (MPS).

(2) Purchasing :-

All the organizations need an efficient & economic purchasing and procurement of its various supplies of materials from the suppliers.

The Purchasing function can be stated as follows :-

1) The requisition of material is necessary by proper authority to initiate its purchase.2) To select proper supplier for the materials requisitioned, before placing an order.3) To negotiate about the price of the material form the supplier & it will be purchased at

the cheapest price.4) The quality of material must be assured & should not be compromised with the cost of

the material.(3) Inventory Planning & Control :-

(4) Finished parts & components :-

(5) Ascertaining & Maintaining the flow & supply of materials.

(6) Quality Control of Materials.

(B) SECONDARY FUNCTIONS :-

(1)Standardization & Simplification :-

(2)Design & Development of the Product :-

(3)Make & Buy Decision :-

(4)Coding & Classification of Materials :-

(5)Forecasting & Planning :-

INVENTORY MANAGEMENT

Inventory management is primarily about specifying the size & placement of stocked goods.

Inventory management is required at different locations within a facility or within multiple locations of a supply network to protect the regular & planned course of production against the random disturbance of running out of materials or goods.

It is a systems & processes that identify inventory requirements, set targets, provide replenishment techniques and report actual and projected inventory status.

It involves a retailer seeking to acquire & maintain a proper merchandise assortment while ordering, shipping, handling and related costs are kept in check.

INVENTORY CONTROLAccording to S. Anil Kumar & N. Suresh :-

Inventory control is a planned approach of determining what to order, when to order and how much to order & how much to stock so that costs associated with buying and storing are optimal without interrupting production and sales.

o Inventory control basically deals with two problems :-

(i) When should an order be placed ?(ii) How much should be ordered?

o The scientific inventory control system strikes the balance between the loss due to non-availability of an item and cost of carrying the stock of an item.

REASONS FOR KEEPING INVENTORIES

1) To stabilize production.

2) To take advantage of price discounts.

3) To meet the demand during the replenishment period.

4) To prevent loss of orders.

5) To keep pace with changing market conditions.

IMPORTANCE OF INVENTORY CONTROL

1)Improvement in customer’s relationship because of the timely delivery of goods & service.

2)Smooth & uninterrupted production and hence no stock out.

3)Efficient utilization of working capital. Helps in minimizing loss due to deterioration, obsolescence damage and pilferage.

4)Economy in purchasing.

5)Eliminate the possibility of duplicate ordering.

OBJECTIVES OF INVENTORY CONTROL

1) To ensure adequate supply of products to customer & avoid shortage as far as possible.

2) To make sure that financial investment in inventories is minimum.

3) Efficient purchasing, storing, consumption and accounting for materials is an important objectives.

4) To ensure timely action for replenishment.

5) To provide a reserve stock for variations in lead times of delivery of materials.

6) To provide a scientific base for both short-term and long-term planning of materials.

TECHNIQUES OF INVENTORY CONTROL

1) ABC analysis.

2) HML analysis.

3) VED analysis.

4) FSN analysis.

5) SDE analysis.

6) GOLF analysis.

7) SOS analysis.