MATERIALS

MANAGEMENT
Production and Operations Management

What is Material
Management
planning
The function responsible for the
sourcing
coordination
purchasing
moving
of planning,
storingcontrolling
sourcing,
purchasing, moving, storing and
cost
controlling materials inminimum
an optimum
manner so as to provide a predecided service to the customer at a
minimum cost.

SCOPE OF MATERIALS MANAGEMENT

MATERIAL
PLANNING
&
CONTROL

PURCHASI
NG

STORES
MANAGEM
ENT

INVENTORY
MANAGEM
ENT

OTHER
RELATED
FUNCTIONS
STANDARDIZATIO
N
SIMPLIFICATION
SPECIFICATIONS
VALUE ANALYSIS
ERGONOMICS
JUST-IN-TIME

MATERIAL PLANNING AND CONTROL

It is a scientific technique of determining in advance the
requirements of raw materials, ancillary parts, spares as
directed by the production programme.
Macro factors

Micro Factors

Price trends
Plant capacity utilization
Business cycle
Inventory levels
Govt import and export
Working capital
policy

Techniques in Material
Bill of Materials
Planning
Part Number

Materials

Qty.

Descript
Location
ion

Cost

Notes

BOM of an Iphone 4

Subsection

Applications
Processor
Memory

Part Description
Applications Processor
DRAM Memory
Misc. Applications Processor
Components
Flash
Misc. Memory Components
Baseband
Transceiver
Memory
Power Mgmt.
PAM

K4XKG643GB (Samsung 2x 2 Gb)

Samsung NANO Flash 16GB
K9HD0BU5M-LG80
Discretes Passives etc
Infineon 337S3833
HSDPA/HSUPA/WCDMA/EDGE
Intel (Numonyx?,MCP 128 Mb NOR Flash
+

Component Cost
$ 10.75
$13.80
$9.50
$27.00
$0.30
$11.72
$2.33
$2.70

PAM

Skyworks SKY77541-32 Transmit Module

Quad-Band GSM/EDGE PAM +Antenna
Switch

PAM

Skyworks SKY77459-17 Transmit Module

PAM

Single-Band WCDMA/HSPA PAM+ Duplexer

PAM
FEM

Skyworks SKY77452-20 Transmit Module

n/a

Radio Frequency SAW Module

Misc. RF Components

Power

Bill of Materials
Part Supplier/Details
Samsung A4APL0395 45nm, Pop
SDRAM, 4GB Mobile DDR, Pop Samsung

Main PM Device
Misc. Power Mgmt.

Murata
PAMs, Modules, Discretes, Passives, etc
Dialog D1815A 338S0667-A4 Main Pwr
Mgmt.
Discretes, Passives, etc

<included in Misc. Costs

below>
<included in Misc. Costs
below>
<included in Misc. Costs
below>
<included in Misc. Costs
below>
<included in Misc. Costs
below>
<included in Misc. Costs
below>
$8.25
$2.03
$1.90

Interface
Sensors

Touchscreen Controller

Texas Instruments 3435D499 (F761568C)

$1.23

Audio CODEC

Cirrus Logi343S0589 (CLIT49580)

$1.15

E-Compass

AKM AK8975 3-Axis

$0.70

Accelerometer

ST Micro LIS331DLH 3-Axis

$0.65

Gyroscope

ST Micro L3G4200D Digital 3-Axis

$2.60

&
Missc.Interface & Sensor Components Discretes Passives etc

$3.80

Display

3'5" Diag, LTPS LCD, 960x640 Pixesl LG

(or poss TMD)

$28.50

Touch Screen

Capacitive Glass "Reinforced"

$10.00

Camera

5MP Auto Focus

$9.75

Display/Camera Camera(secondary)

VGA Auto-Focus

$1.00

Battery

Battery

1400 mAh

$5.80

Mechanicals

Enclosure, Metals, Plastics, Hardware, etc.

$10.80

Electro-Mechanicals

PCBs Acoustics, Connectors, etc.

$14.40

Misc

Accessories, Literature Box Contents

Other

TOTAL

$5.50

$187.5
1

PURCHASING
PURCHASE means buying of
equipment, materials, tools, parts
etc. required for industry.

Objectives of Purchasing

s
u
o
inu
t
n
Co
ly
p
p
su
Reduce the ultimate cost of the finished pro

Objectives of Purchasing

imize of the input cost results increases

productivity and results in profitability
he operations

Establish and maintain

good relations with the supplie

Objectives of Purchasing
Develop an
alternative
source
Of supply

Objectives of Purchasing
Producti
on Dept.

Personne
l Dept.

Financial
Dept.

Engineer
ing Dept.

Purcha
se
Functio
Maximum integration with
n
other department of the compa
Marketin
g Dept.

Parameters of
Purchasing

10

Rs

RIGHT PRICE
RIGHT ATTITUDE
RIGHT QUALITY
RIGHT CONTRACTS
RIGHT TIME
RIGHT MATERIAL
RIGHT SOURCE
RIGHT TRANSPORTATION
RIGHT QUANTITY RIGHT PLACE OF DELIVER

RECOGNITION OF
THE NEED

MAINTENANCE OF
VENDOR RELATIONS

THE
SELECTION OF
THE SUPPLIER

MAINTENANCE
OF THE RECORDS

FOLLOW-UP
PLACING THE ORDER OF THE ORDER

PAYMENT
RECEIVING AND
OF THE INVOICEINSPECTION OF THE
MATERIALS

PURCHASING PROCEDURE

Selection of Suppliers
COST FACTORS

DELIVERY

DESIGN AND
LEGAL FACTORS
SPECIFICATION
FACTORS
THE CATEGORICAL PLAN
VENDOR RATING
THE WEIGHTED-POINT METHOD
THE COST-RATIO PLAN

Special Purchasing Systems

ZERO STOCK
FORWARD BUYING
RATE CONTRACT
TENDER BUYING
BLANKET ORDER SYSTEM RECIPROCITY
SYSTEMS CONTRAC

Special Purchasing Systems

FORWARD BUYING

ommitting an organization far into the future, usually for a year.

Special Purchasing System

TENDER BUYING
It is common for
government
departments and
public sector
undertaking to
purchase through
tenders.

Special Purchasing System

BLANKET ORDER SYSTE

It is an agreement to provide a required quant

of specified items, over a period of time, usua
One year, at an agreed price.

Special Purchasing System

ZERO STOCK BUYIN

Some firms try to operate

on the basis of zero stock
and the supplier holds for
these firms.

Special Purchasing System

RATE CONTRACT
The seller and the buyer agree to the rates of items.

Special Purchasing System

RECIPROCITY

hasing from ones customers in preference to

I buy from you if you buy from

Special Purchasing System

YSTEMS CONTRACT

The original indent, duly approved by

competent authorities, is shipped back with
the items and avoids the usual documents like
purchase orders, material requisitions and
invoicing procedure.

Receivi
ng

Checki
ng

Sorting

Storag
e

Staging

Deliver
y

STORES
MANAGEMENT

CODIFICATION
It is a process of representing
each item by a number, the digit
of which indicates the group, the
sub-group, the type and the
dimension of the item.

Objectives of Codification
Bringing all items together.
To enable putting up of any future item in
its proper place.
To classify an item according to its
characteristics.
To give an unique code number to each
item to avoid duplication and ambiguity.
To reveal excessive variety and promote
standardization and variety reduction.

INVENTORY MANAGEMENT
Refers to a physical
resource that a firm
holds in stock with
the intent of selling it
or transforming into
more valuable state.

Reasons for keeping

inventories

stabilize production
take advantage of price discounts
meet the demand during the replenishment p
prevent loss of orders (sales)
keep pace with challenging market conditions

 It is a planned
approach
of
determining what
to order, when to
order and how
much to stock.

Objectives of Inventory
Ensures adequate stock of supply of products to customer
to avoid shortages as far as possible.
Ensures the financial investment in inventories is
minimum.
Efficient purchasing, storing, consumption and accounting
for materials is an important objective.
To maintain timely record of inventories of all the items
and to maintain the stock within the desired limits.
To ensure timely action for replenishment.
To provide a reserve stock for variations in lead times of
delivery of materials.
To provide a scientific base for both short-term and long-

Benefits of Inventory Control

Improvement in customers relationship
Smooth and uninterrupted production
and hence, no stock out
Efficient utilization of working capital
Economy in purchasing
Eliminates the possibility of duplicate
ordering

Techniques
1.ABC Analysis - classification of existing inventory is based on annual
consumption and annual value of the items.
2.HML Analysis - classification of existing inventory is based on unit price
of the items.
3.VED Analysis - classification of existing inventory is based on criticality
of the items.
4.FSN Analysis - classification of existing inventory is based on
consumption of the items.
5.SDE Analysis - classification of existing inventory is based on the
items.
6.GOLF Analysis - classification of existing inventory is based on on the
sources of the items.
7.SOS Analysis - classification of existing inventory is based on nature of

Economic Order Quantity

STANDARDIZATION
Standardization means
producing maximum variety
of products from the
minimum variety of
materials, parts, tools and
processes.

Advantages of
Standardization
Design Department
Manufacturing Department
Marketing Department
Production Planning Department
Production Control Department
Purchase and Stock Control
Department
Quality Control Department

Disadvantages of
Standardization

Reduction in choice because of reduced varie

Standard once set, resist change.
It tends to favour only large companies.
Difficult to introduce new models.

Simplification
A process of reducing
the product range
,assemblies , parts,
materials and design

Advantages of Simplifications
Simplification involves fewer, parts, varieties
and changes in product; this reduces
manufacturing operations and risk of
obsolescence.
Reduces variety, volume of remaining products
may be increased.
Provides quick delivery and better after-sales
services.
Reduces inventory and thus results in better
inventory control.
Lower the production costs.
Reduces price of a product.

Origin
Value Analysis was developed after WW-II in
USA at General Electric (GE) in 1947. Because of
WW- II, there were shortages of skilled labor,
raw materials, and component parts at GE.
Lawrence D. Miles, Jerry Leftow, and Harry
Erlicher at GE looked for acceptable substitutes.
They noticed that these substitutions often
reducedcosts, improved product, or both. This
led them to the discovery of a systematic

1. What is it? (a pencil)

2. What is it used for? (writing and making marks)

3. What is the main function of this product? (making marks, writing)
4. What is the method, material or procedure that was used to realize
the main function? (a graphite stick & wood)
5. What are the corresponding secondary functions? (transfer
graphite to paper and facilitate holding the graphite)
6. What does the item cost and how can we distribute the cost of
realizing the main function into each secondary function?
7. Comparing these costs to an item of a similar function, how much
should each function cost and what must be the total cost?
Important Note Focus your VA on the main function, because, during
the analysis, the secondary functions may change. The
group/committee/team may choose different secondary functions to
realize the main function. Value Analysis

ERGONOMICS
from the Greek
wordergonmeaningwork,
andnomoimeaningnatural laws)

Objectives of Human
Engineering
1.

To enhance the efficiency and effectiveness with which

activities is carried out so as to increase the
convenience of use, reduced errors and increase in
productivity.
2. To enhance certain desirable human values including
safety reduced stress and fatigue and improved quality
of life.

JUST-IN-TIME
JIT is a philosophy rather
than a technique. By
eliminating all waste and
seeking continuous
improvement.

Seven Wastes
1. Waste of over production
2. Waste of waiting
3. Waste of transportation
4.Waste of processing itself/
underutilization of employees
5. Waste of inventory
6. Waste of motion
7. Waste of making defective
products

Benefits of JIT

1. Product cost

2.
3.
4.
5.
6.

Quality
Design
Productivity improvement
Production flexibility
Simplicity

-END-