Upload
subhabrata-banerjee
View
233
Download
0
Embed Size (px)
Citation preview
8/2/2019 Materials Mgt
1/47
MATERIALS MANAGEMENT
Presented by
Prof. S. N. RayHead MBA (Day) Deptt.
Indian Instt. of Social Welfare & Business ManagementKolkata
McNally Bharat Engineering Co. Ltd.11 th , 12 th , 15 th , 16 th and 17 th October, 2007
8/2/2019 Materials Mgt
2/47
Session # 1
CONCEPT EVOLUTION OF MM
11 th October, 2007
8/2/2019 Materials Mgt
3/47
Period One : The Early Years (1850-1900)
Greatest interest in and development of purchasing during theearly years occurred after the 1850s growth of the Americanrailroad.
By 1866, Pennsylvania Railroad had given the purchasingfunction departmental status, under the title of Supplying
Department.Comptroller of the Chicago and Northwestern Railroad wrote the
first book exclusively about the purchasing function. Handling ofRailway Supplies Their Purchase and Disposition, in 1987.
Period Two : Growth of Purchasing Fundamentals (1900-1939)
In 1905 the second book devoted to purchasing. Book on Buyingcontained 18 chapters, each written by a different author.
8/2/2019 Materials Mgt
4/47
Purchasing gained importance during World War-I of its role inobtaining vital war materials.
Harold T. Lewis noted that from World War-I to 1945, gradual ifuneven recognition development of the importance of soundprocurement to company operation.
Period Three : War Years (1940-1946)
World War-II introduced a new period in purchasing history. Themembership of the National Association of Purchasing Agentsincreased from 3,400 in 1934 to 5,500 in 1940 to 9,400 in theautumn of 1945.
8/2/2019 Materials Mgt
5/47
Period Four : The Quiet Years (1947-Mid 1960s)
Bruce D. Henderson, also commented about the state of affairsfacing purchasing. He noted that purchasing was a neglectedfunction in most organizations because it was not important tomainstream problems. Procurement is regarded as a negativefunction can handicap the company if not done but can makelittle positive contribution.
Postwar period saw the development of the value analysistechnique, pioneered by General Electric in 1947. GEs approachconcentrated on the evaluation of which materials or changes inspecifications and design would reduce overall costs.
Emphasis during the postwar years and throughout 1960s wason satisfying consumer demand and the needs of a growingindustrial market.
8/2/2019 Materials Mgt
6/47
Period Five : Materials Management Comes of Age(Mid 1960s Late 1970s)
Vietnam War, resulted in upward price and material availabilitypressures. During the 1970s, firms experienced widespreadmaterial problems related to oil shortages and embargoes.
The role of purchasing throughout the age of materialsmanagement was notable. Purchasing managers emphasizedmultiple sourcing competitive bid pricing and rarely viewed as avalue-added partner.
Period Six : The Global Era (Late 1970s - 1999)
Global competitors from the Pacific Rim and Europe capturedworld markets from American firms. These firms emphasizedquality at a lower cost in order to capture market share.
8/2/2019 Materials Mgt
7/47
Individual-country-based organizational structure favored bymost U.S. firms during the 1960s and 1970s became inadequatefor competing in global markets.
Technological innovation spread rapidly around the world.World Wide Web emerged ability supported taking a global view
of purchasing to achieve maximum performance benefit.
Period Seven : Integrated Supply Chain Management(2000 and Beyond)
It is possible to reach three conclusions about the new eraReshaping of purchasings role in the modern economy is
underway
Overall importance of the purchasing process is increasing
Purchasing must continue to become more integrated with customer requirements, as well as with operations, logistics,human resources, finance, accounting, marketing, and
information systems
8/2/2019 Materials Mgt
8/47
Session # 2 & 3
INTEGRATED APPROACH TO MM
11 th October, 2007
8/2/2019 Materials Mgt
9/47
MATERIALS MANAGEMENT INTRODUCTION
The word materials is synonymous with civilization.
The evolution of man is known by the material they used.
Stone Age
Bronze Age
Steel Age
Plastic Age
Nuclear AgeElectronic Age
8/2/2019 Materials Mgt
10/47
Material management can be defined as the functionresponsible for
Coordination of planningSourcing
Purchasing
Moving
Strong & controlling in an optimum manner so as to providea predecided service to the customer at a minimum cost.
Scope of achievement
We live in materials and grow on profits says JapaneseManagement Expert.
8/2/2019 Materials Mgt
11/47
ACTIVITIES OF MATERIALS MANAGEMENT
The functions of materials management are -Materials planning & programming
Purchasing & subcontracting
Inventory control
Store keeping & warehousing
Codification, standardisation & variety reduction
Transportation & material handling
Inspection & quality controlCost reduction through value analysis
Disposal of surplus materials / scrap / obsolete materials.
8/2/2019 Materials Mgt
12/47
Distinguished characteristics of project purchase
Materials management for project in the business is relatedto managing and directing materials, time, personnel,transport & costs to complete a particular project in anorderly, economical manner and to meet establishedobjectives in time, rupees and technical results.
In a project
There is a specific start and a specific end point
There is a well defined objective
The endeavour is unique and not repeatative
The project usually contains costs and time schedule toproduce a specified result or product.
8/2/2019 Materials Mgt
13/47
BASIC APPROACH
The alphabetical result approach to materials managementfor a project.
Mind your Ps
Plan for the proper utilisation of the companys fund.
Procure the most effective materials and service
Put a way to efficiently receive, inspect & utilise storagefacilities at site.
And Qs Quality is important from raw materials through
workmanship to final product.
Quality must be controlled to ensure the right quantity atright time.
8/2/2019 Materials Mgt
14/47
Using the Rs
Record with accuracy all transactions
Reports must be made to ensure satisfaction of objectivesand customer service.
With a basis of the Cs
Cost must be considered not only as the initial expensebut as the ultimate factor.
Communication must ensure that there is no information
gap and duplication of effort.Coordination of all materials management functions.
Cooperation among all areas of the business.
8/2/2019 Materials Mgt
15/47
Session # 4
BASIC PRINCIPLES OF PROCUREMENT
11 th October, 2007
8/2/2019 Materials Mgt
16/47
Right Quality
Right Quantity
Right Price
Right Source
Right Time
Right Place of Delivery
Right Transport
8/2/2019 Materials Mgt
17/47
Session # 1 VENDOR SELECTION PRINCIPLES
& BEST PRACTICES
Session # 2 VENDOR EVALUATION
TECHNIQUES 12 th October, 2007
8/2/2019 Materials Mgt
18/47
PROCEDURE
Searching Stage
Selection StageNegotiation & Trial Order
Rating & Experience Stage
DEVELOPMENT OF NEW SOURCES IS NECESSARYFor import substitution
To incorporate functional improvement
To reduce the overall cost of the product
To avoid the monopoly situation
Due to delay of delivery by existing vendors.
When capacity of existing vendor is limited.
To ensure availability from more than one source.
8/2/2019 Materials Mgt
19/47
VENDOR DEVELOPMENT AND INVENTORY CONTROL
Definition
Why vendor development or significance of it
Types of supplier development
How vendor development
8/2/2019 Materials Mgt
20/47
Types of supplier development
Standard items from established suppliers, e.g., steel millsfor alloy steel, large chemical industries for petroleumproducts, manufacturer of aluminium.
Proprietory item suppliers, e.g., Bearing, Grinding Wheels,etc.
Govt. Policy determines supplier, e.g., MMTC.
Items procured from Dealer, Stockist.
Procurement of near similar or standard items andconversion to original desired or non-standard items.
8/2/2019 Materials Mgt
21/47
Non standard items on medium or large suppliers.
Non standard items on small scale suppliers.
Off-loading of process, I.e., after carrying out someoperations on raw materials in house, balance operationsare off-loaded.
Ancillary suppliers develop suppliers as ancillarieswherein the substantial portion of the production would belifted by the purchaser.
8/2/2019 Materials Mgt
22/47
How vendor development
Suppliers
Who are my immediate suppliers ?
What are my true requirement ?
How do I communicate my requirements ?
Can my suppliers measure and meet my requirements ?
How do I inform them of changes in my requirements ?
Vendor Behaviour
Vendor behaviour can be defined as the behaviour that avendor displays in a dynamic market, searching for buyers,marketing goods and services.
8/2/2019 Materials Mgt
23/47
Procedure
Searching stage
Selection stage
Negotiation & trial order
Rating & experience stage
Monitor and upgrade performance of existing vendor.
Develop a common concern.
While searching following points are to be considered for
vendor Sound business sense and attitude.
A good track record in supplying the market in which the buyeroperates.
8/2/2019 Materials Mgt
24/47
A sound financial base.
A suitable technical capability with modern facilities.
A total quality orientation.
Cost effective management.
Effective purchasing acquisition and control.
Good morale among the work force.
Effective logistical arrangement.A customer service mentality.
Mainly the variables which determine the choice of supplier are :
1. Quality
2. Quantity
3. Timing
4. Service
5. Price
8/2/2019 Materials Mgt
25/47
While searching following points are to be considered for buyer :
Appreciate the vendors problems and help them to performtheir part of obligations.
Vendors views to be respected instead of talking to them in thelanguage of legal terms.
Treat the vendors as equal to that of customers as the goodwillof the vendor is not less important that customers in actualpractice.
Vendors must be treated as persons equally responsible forachieving the target. Periodical meeting with all the vendors toiron out the difficulties.
Be generous in arranging payment without feeling of doing acourtesy.
Initiate appropriate rewarding schemes for prompt suppliersand encourage for continuous defect-free supplies.
Gain the confidence of the vendors by consistent and soundbusiness ethics extending uniformly to all the vendors.
Lastly establish a relation of Mutual Trust.
8/2/2019 Materials Mgt
26/47
Techniques of Vendor DevelopmentCriticality
Selection of Items Technology
AvailabilityEconomy
Notifications in Media Trade Directories, etc.
Response from Vendors
Analyse Criteria
Select Vendors
Sample Order
Lab / Field Test
Not Accepted Accepted
Reject Make Contract
8/2/2019 Materials Mgt
27/47
Method of Appraisal
Preparation and issue of a questionnaire
Checking returned questionnaire
Verifying statements of short listed suppliers
Visiting suppliers premises after inspection
Verification of solvency ratios
Current ratio = Current assets
Current liabilities
Return on Capital Employed = Profit x 100%Capital employed
Vendor RatingCategorical PlanWeighted Point PlanCost-Ratio Plan
8/2/2019 Materials Mgt
28/47
Vendor Rating
a) Price Rating = P = Lowest Price (X initial) x 10Vendor Price (Y initial)
Data for price shall be collected from vendors initial offers.
b) Delivery Rating = D = P O Delivery (X) x 50Actual Delivery (Y)
Data for delivery shall be collected from vendors challan
Ref Transporters Consignment Note, as follows :
Delivery as per P O = X days from P O Date
Actual Delivery = Y days from P O Date
8/2/2019 Materials Mgt
29/47
c) Quality Rating = Q = Accepted Quantity (X) x 40
Inspected Quantity (Y)
The Data for quality shall be collected from Inspection Report.
In cases, a, b and c, if Y X, then the weightage value 10, 50 and40 respectively are to be considered as maximum value.
Minimum qualifying marks in our organization has beensuggested as below :
Price Rating : 05
Delivery Rating : 25
Quality Rating : 20Total points if 90 : Type A
75 90 : Type B
50 75 : Type C
8/2/2019 Materials Mgt
30/47
Session # 3
ETHICS IN PROCUREMENT MANAGEMENT
12 th October, 2007
8/2/2019 Materials Mgt
31/47
Framework of Ethical Behavior
Perceived ethicalissue confronts
buyer
Variablesaffecting buyers
ethical perspective
Judgment renderedby buyer
Buyer behavior
Organizationalenvironment
Personalexperiences
Culturalenvironment
Industryenvironment
8/2/2019 Materials Mgt
32/47
Types of Unethical Purchasing Behavior
Esciprocity
Personal BuyingAccepting Supplier Favors
Sharp Practices
Financial Conflicts of Interest
SMI Professional Code of Ethics
Supply Management Institute (formerly the National Associationof Purchasing Managers (NAPM)) is the organizationrepresenting the purchasing profession. SMI officially adoptedits initial Standards of Conduct. Standards of Conduct specifiesthree guiding principles of purchasing practice : 1) Loyalty tocompany, 2) justice to those with whom a buyer deals, and 3)faith in the purchasing profession.
8/2/2019 Materials Mgt
33/47
Code of Ethics
1. Consider, first, the interest of your company in alltransactions and carry out and believe in its establishedpolicies.
2. Be receptive to competent counsel from your colleaguesand be guided by such counsel without impairing thedignity and responsibility of your office.
3. Buy without prejudice, seeking to obtain the maximumvalue for each dollar of expenditure.
8/2/2019 Materials Mgt
34/47
Supporting Ethical Behavior
Developing a Statement of Ethics
Top-Management Commitment
Closer Buyer-Seller Relationships
Ethical Training
Developing Consistent Behavior
Internal Reporting of Unethical Behavior
Preventive Measures
Example : A firms policy limit a buyers authority awarding
purchase contracts amounts of $ 10,000. Contracts greater than$ 10,000 then require a managers signature. Must justify theselection decision based on sound purchasing criteriaobtaining the final sign-off. This provides a system of checksand balances and reduces the possibility of unethical supplierselection.
8/2/2019 Materials Mgt
35/47
Sources of U. S. Purchasing Law
Written law
Common law
Administrative law
8/2/2019 Materials Mgt
36/47
Session # 4
LEGAL ASPECTS OF PROCUREMENT
12 th October, 2007
8/2/2019 Materials Mgt
37/47
The Sale of goods Act, 1930
The Negotiable Instruments Act, 1881
The Central Sales Tax Act, 1956
The Indian Contract Act, 1872The Partnership Act, 1932
The Sales Tax Acts and Rules of various States
The Companies Act, 1956
The Arbitration Act 1948 (Arbitration & Conciliation Act, 1998)
8/2/2019 Materials Mgt
38/47
The Sale of goods Act, 1930SaleAgreement to sale
GoodsContract of Sale of Goods
A contract may provide for a) Immediate delivery of goods or immediate payment or both
b) Delivery or payment by installments or both at a future dateThe Price :a) may be fixed ; orb) may be left to be fixed in a manner agreed upon ; orc) may be determined in the course of dealing between the two
parties ord) may be fixed after valuation by a third party
If the price is not fixed as per a) or b) or c) or d) the buyer shallpay to the seller a reasonable price.
8/2/2019 Materials Mgt
39/47
Conditions and warranties
Effects of a contract
Transfer of title
Delivery
Rights of unpaid seller
Agency
Definition of agent
a person employed to do any act for another, or torepresent in dealings with third persons
8/2/2019 Materials Mgt
40/47
Termination of agency
If the principal revokes his authority or
If the agent renounces the business of the agency or
If the business of the agency is completed or
If either the principal or the agent dies.
Arbitration
8/2/2019 Materials Mgt
41/47
Session # 1
INVENTORY MANAGEMENT /FORECASTING TECHNIQUES
17 th October, 2007
8/2/2019 Materials Mgt
42/47
TYPE OF INVENTORY
Inventory
Direct Inventory Indirect Inventory(MRO Inventory)(Maintenance, Repairs& Operating Supplies)e.g., Petrol, Oil,Lubricating Oil, M/cand Repair Parts, Jigs,Tools, etc. These arenot part of finishedproduct but requiredfor maintenance of theproduction process.
ProductionInventory
WIPInventory
FinishedInventory Goods
1. Raw Materials
2. Components3. Special parts
for finishedproducts
8/2/2019 Materials Mgt
43/47
CLASSIFICATIONS CRITERIA
1. A-B-C (sometimes Annual value of consumption ofcalled : Always the items concerned.Better control) (It has nothing to do with the
unit value of the item)
2. H-M-L Unit Price of material.(High, Medium, Low) (This is opposite of A-B-C
and does not take consumptioninto account)
3. V-E-D By the critical nature of the(Vital, Essential component or material with& Desirable) respect to production.
4. S-D-E (Scarace, Purchasing problems in regardDifficult to obtain, to availability.
easy to obtain)
8/2/2019 Materials Mgt
44/47
CLASSIFICATIONS CRITERIA
5. G O L F (Govt., Source from which the materialordinary, local, is obtained.foreign)
6. F S N (Fast moving, Issues from stores.
Slow moving &Non-moving)
7. S-O-S (Seasonal, Seasonality. This applies
Off-seasonal) specially to commodities.
8. X-Y-Z The inventory value of theitems stored.
8/2/2019 Materials Mgt
45/47
Session # 2
E-COMMERCE LOGISTICS
Session # 3
PROJECT MANAGEMENT &GLOBAL SOURCING CASE
ANALYSIS
17 th October, 2007
8/2/2019 Materials Mgt
46/47
PROCESS OF GLOBAL SOURCING
MBE AGMPurchase
Search for productand suppliers
CatalogueTest Drives
Orderproduct
Vendor communication& negotiation
World widewev
Test andinspection passed
Delivery ofconsignment
RamseyAustralia
Credit suppliersaccount
Pay by cardE-cash
KEY___ Electronic Highway of Internet----- Physical Highway
E-Cash - Emergency cash of cyberspace available to buyerfor Global procurement through Internet.
8/2/2019 Materials Mgt
47/47
THANK YOU