CHAPTER 7

Managing Materials Flow

Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin

7-2Materials Management Activities

• Anticipating materials requirements

• Sourcing and obtaining materials

• Introducing materials into the organization

• Monitoring the status of materials as a current asset

Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin

7-3Objectives of Integrated Materials

Management

• Low costs

• High level of service

• Quality assurance

• Low level of tied-up capital

• Support of other functions

Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin

7-4Differences Between Inbound and Outbound Transportation

• Market demand that generates the need for outbound movement is more uncertain and fluctuating

• Inbound transportation tends to involve bulk raw materials, supplies, or parts

• Firms exercise less control over inbound transportation due to total delivered pricing programs

Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin

7-5Types of Forecasts

• Demand forecast

• Supply forecast

• Price forecast

• Long-term

• Midrange

• Short-term

Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin

7-6Total Quality Management (TQM)

the application of quantitative and human resources to improve the material services supplied to an organization, all

the processes within the organization, and the degree to which the needs of customers

are met - now and in the future.

Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin

7-7Administration and

Control of Materials Flow

• Kanban/Just-in-time systems» Kanban (Toyota Production System)» JIT & JIT II

• MRP systems» Materials requirements planning (MRP I)» Manufacturing resource planning (MRP II)

• DRP systems» Distribution requirements planning (DRP I)» Distribution resource planning (DRP II)

Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin

7-8Benefits Resulting from Implementing Just-in-Time

• Improved inventory turns.

• Improved customer service.

• Decreased warehouse space.

• Improved response time.

• Reduced logistics costs.

• Reduced transportation costs.

• Improved quality of vendor products.

• Reduced number of vendors.

• Reduced number of transportation carriers.

Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin

7-9Elements of an MRP I System

Inventorytransactions

Customers’orders

Forecasts Engineering changes

Master productionschedule (which

products to produce, inwhat quantity, and when)

Bill-of-materials file(product structure

and routing)

Inventory status file (finished items, work in progress, planned orders)

Planned schedules and various other reports

MRP I system

Source: MCB University Press Ltd., Amrik Sohal, and Keith Howard, "Trends in Materials Management," International Journal of Physical Distribution and Materials Management 17, no. 5 (1987), p.11.

Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin

7-10Elements of an MRP II System

Materials requirements

planning(MRP)

Capacity requirements

planning (CRP)

Execute capacity plans

Execute material plans

Realistic?

Order (production plan)

Order (production plan)

Inventory records

Yes

No

Source:Karl A. Hatt, ‘What’s the Big Deal about MRP II?” Winning Manufacturing 5, no. 2 (1994), p. 2.

Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin

7-11Elements of a DRP II System

Source: “How DRP Helps Warehouses Smooth Distribution,” Mondern Materials Handling 39, no. 6 (April 9, 1984), p. 53. Modern Materials Handling, copyright 1984 by Cahners Publishing Company, Division of Reed Holdings.

Distribution center

Distribution center

Distribution center

Distribution center

Customers

Distribution center

Distribution center

Regional warehouse

Plantwarehouse

Regional warehouse

Distributionresource planning

7-11 a

Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin

7-12Elements of a DRP II System (cont.)

Source: “How DRP Helps Warehouses Smooth Distribution,” Mondern Materials Handling 39, no. 6 (April 9, 1984), p. 53. Modern Materials Handling, copyright 1984 by Cahners Publishing Company, Division of Reed Holdings.

Plantwarehouse

Final assembly (manufacturing)

Subassembly B Subassembly C

Subassembly A Part C

Raw materials

Part C

Part D

Part B

Part E

Part A

Material requirements planning

7-11 b