ST.

MARY’S UNIVERSITY
BUSINESS FACULTY
DEPARTMENT OF MANAGEMENT

Materials Management Individual Assignment

Name: Temesgen Tekeste

ID: EMD/0178/2014

Submitted to INS: Bayisa. E June 11, 2024

1. What is Materials Management?
Materials management is a scientific technique involves planning, organizing, and controlling
the flow of materials from procurement through distribution.

2. List and Describe the Functions of Materials Management:

- Purchasing: Acquiring necessary materials.
- Inventory Control: Managing stock levels.
- Receiving: Inspecting and accepting incoming materials.
- Warehousing: Storing materials efficiently.
- Distribution: Ensuring materials reach where needed.
- Quality Control: Ensuring materials meet standards.
- Logistics: Coordinating material movement.

3. What are the Objectives of Materials Management?

- Ensure a continuous supply.
- Minimize material costs.
- Optimize inventory levels.
- Enhance quality control.
- Improve supplier relationships.
- Efficiently utilize storage space.

4. What is the Importance of Materials Management?

It ensures material availability, reduces costs, minimizes waste, and enhances operational
efficiency and profitability.

5. Differentiate a Fragmented Structure from an Integrated Materials Management Structure:

- Fragmented: Different departments handle materials management independently.
- Integrated: All activities are coordinated under a single management, improving efficiency
and communication.
6. Explain the Types of Materials Commonly Used in Organizations:
- Raw Materials: Basic inputs for production.
- Work-in-Progress (WIP): Semi-finished goods.
- Finished Goods: Completed products ready for sale.
- MRO Supplies: Maintenance, Repair, and Operating supplies.

7. What is Forecasting?
Predicting future demand, trends, and events based on historical data and market analysis.

8. Write the Features of Good Forecasting:

- Accuracy: Reliable predictions.
- Timeliness: Provided at the right time.
- Flexibility: Adaptable to changes.
- Simplicity: Easy to understand.
- Cost-effectiveness: Balancing accuracy and cost.

9. Write Steps in Forecasting Process:

- Define objective.
- Collect and analyze data.
- Select forecasting method.
- Generate forecast.
- Validate and monitor.
- Implement forecast.

10. Discuss Types of Forecasting:

- Qualitative: Based on expert opinions (e.g., Delphi method).
- Quantitative: Based on statistical models (e.g., time series analysis).
11. Define What is Purchasing:
Acquiring goods and services to meet organizational needs.

12. Discuss the 5 Rs of Purchasing:

- Right Quality: Materials meet standards.
- Right Quantity: Correct amount of materials.
- Right Time: Available when needed.
- Right Price: Cost-effective pricing.
- Right Source: Reliable suppliers.

13. Identify and Explain the Steps in the Purchasing Process:

- Identify needs.
- Select suppliers.
- Negotiate terms.
- Place order.
- Receive and inspect goods.
- Approve payment and maintain records.

14. Identify the Reasons for Buying in the Make-or-Buy Decision:

- Cost savings.
- Access to expertise or technology.
- Flexibility in demand management.
- Reducing capital investment and risk.

15. What are the Motivations for Holding Inventory?

- Ensure continuous supply.
- Take advantage of bulk discounts.
 - Buffer against uncertainties.
- Decouple production processes.

16. Describe the Relationship Between Purchasing and Other Functional Departments:
- Production: Ensures material availability.
- Finance: Aligns with budget and cash flow.
- Marketing: Supports promotions and launches.
- Logistics: Coordinates delivery and storage.

17. How Can Purchasing be Organized?

- Centralized: A single department handles all purchases.
- Decentralized: Each department manages its own purchasing.

18. Based on Time Dimension, there are Four Time-Based Types of Purchasing. List and
Explain Them:
- Forward Buying: Purchasing in advance.
- Just-in-Time (JIT): Materials arrive as needed.
- Spot Buying: Immediate purchasing for urgent needs.
- Scheduled Buying: Regular, periodic purchasing.

19. What are the Most Commonly Used Types of Discount in Purchasing? Explain Them:
- Quantity Discounts: Reduced price for bulk buying.
- Cash Discounts: Reduced price for early payment.
- Trade Discounts: Discounts to intermediaries or resellers.
- Seasonal Discounts: Reduced prices during off-peak periods.

20. Write a Short Note on the Functions of Purchasing Department:

- Identifying and evaluating suppliers.
- Negotiating contracts and prices.
 - Placing and managing orders.
- Ensuring timely delivery and quality.
- Managing supplier relationships.

21. List Criteria to Select a Supplier:

- Quality: Consistency and reliability.
- Cost: Competitive pricing.
- Delivery: Reliable schedules.
- Capacity: Ability to meet demand.
- Reputation: Market standing and references.
- Service: After-sales support.

22. Explain Inventory and Inventory Management:

- Inventory: Goods held for production or sale.
- Inventory Management: Ordering, storing, and using inventory efficiently.

23. Write and Explain the Types of Inventories:

- Raw Materials: Basic inputs.
- Work-in-Progress (WIP): Semi-finished goods.
- Finished Goods: Completed products.
- MRO Supplies: Items for maintenance and repairs.

24. Discuss Materials Requirements Planning (MRP):

MRP is a system for managing manufacturing processes by determining the materials needed,
quantities, and timing based on production schedules.

25. What are the Motivations for Holding Inventory?

- Ensuring Continuity of Supply:
- Safety Stock: Prevent stock-outs.
 - Buffer Stock: Absorb demand variability.
- Economies of Scale:
- Bulk Purchasing: Lower prices per unit.
- Reduced Shipping Costs: Economical transportation.
- Production Efficiency:
- Decoupling Production: Ensure stages proceed smoothly.
- Avoiding Delays: Ensure constant material availability.
- Customer Service:
- Meet Demand: Avoid losing sales.
- Quick Response: Adapt to market changes.
- Hedging Against Price Increases:
- Price Protection: Avoid future cost increases.
- Speculative Purposes:
- Market Speculation: Forecast future demand spikes.
- Operational Continuity:
- Seasonal Stocking: Anticipate peak periods.
- Mitigating Supplier Risks: Guard against unreliability.

26. The Demand for Inventory May be Dependent or Independent. Explain Them:
- Dependent Demand: Driven by production schedules (e.g., components of a product).
- Independent Demand: Driven by market conditions (e.g., finished goods).

27. What Do You Mean by ABC Analysis?

ABC analysis categorizes inventory into three classes (A, B, C) based on value and usage,
helping prioritize management efforts.

28. What is VED Analysis?

VED analysis classifies inventory into Vital, Essential, and Desirable categories based on
criticality to production processes.
29. Write a Note on FSND Analysis:
FSND analysis classifies inventory based on consumption rate:
- Fast-moving: Frequently used or sold.
- Slow-moving: Less frequently used or sold.
- Non-moving: Not used or sold for a long time.
- Dead stock: Obsolete items with no demand.

30. What is Material Handling?

Material handling involves the movement, protection, storage, and control of materials
throughout manufacturing, warehousing, distribution, and disposal processes.

31. Define Stores Location:

Store’s location refers to the specific placement and organization of materials within a storage
facility to maximize space utilization and accessibility.

32. Write and Explain Inventory Holding Costs:

- Storage Costs: Expenses for warehousing space, utilities, and maintenance.
- Insurance Costs: Costs of insuring inventory against risks.
- Obsolescence Costs: Losses from inventory becoming outdated.
- Spoilage Costs: Losses from deteriorated or expired inventory.
- Capital Costs: Opportunity cost of capital tied up in inventory.
- Handling Costs: Expenses for moving and managing inventory.

33. What is EOQ (Economic Order Quantity)?

EOQ is a formula used to determine the optimal order quantity that minimizes total inventory
costs, balancing ordering and holding costs.

34. Discuss the Term Lead Time and Stock-Out:

 - Lead Time: The time between placing an order and receiving it, including order processing,
production, and delivery.
- Stock-Out: A situation where demand cannot be met due to insufficient inventory, leading to
lost sales and customer dissatisfaction.