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MS Unit-2 Part2 C

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19 views13 pages

MS Unit-2 Part2 C

Uploaded by

Dinesh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Material Management

Material: Material refer to inputs into the production


process, most of which are embodied in the finished
goods being manufactured.

Materials management is the process of


planning and controlling material flows. It
includes planning and procuring materials,
supplier evaluation and selection,
purchasing, expenditure, shipping, receipt
processes for materials (including quality
control), warehousing and inventory, and
materials distribution.
Materials management process
Inventory
1. Raw Material
2. Semi finished goods
3. Finished goods in the production
Inventory Control
Inventory control:-is defined as the scientific method of providing the
right type of material at the right time in the right quantities and at
right price to sustain the given production schedules.

Need:
• Minimizing investments for the organization (in case of materials)
• Maximizing the service levels to the customers
Advantages of inventory control
• Maintaining an optimum level of inventories
• Helps in laying the procurement process considering the
wait-time, lead-time etc.
• Periodical inspection of inventories
• Guides us on storing and issuance of inventories from
godowns.
• A systematic record of movement of materials.
• It helps to lay out plans for physical verification of
inventories.
Economic Order Quantity (EOQ):-
EOQ is defined as that quantity of material, which can be ordered at
one time to minimize the cost of ordering and carrying the stocks.

EOQ=√2Ao/c
Where A=Annual Demand
O=Ordering cost per order
C=Carrying cost per unit
ABC Analysis
• ABC analysis is a technique used in inventory management to
categorize items based on their importance in terms of value and
frequency of usage. The analysis divides inventory into three
categories: A, B, and C.

• Items categorized as "A" are typically high-value products that


contribute significantly to revenue or production. These items are
critical for the business and require close monitoring and careful
management to ensure availability and minimize stockouts.

• "B" items are of moderate importance. They have a moderate


impact on revenue or production and are managed with less
scrutiny than A items but still require regular monitoring and
control.
• "C" items are low-value items that have minimal impact on
revenue or production. These items are generally abundant
and inexpensive, so they are managed with less attention
compared to A and B items.

• ABC analysis helps businesses prioritize their inventory


management efforts.
• By focusing on A items, which often represent a significant
portion of the inventory value, companies can allocate
resources effectively to ensure adequate stock levels while
minimizing excess inventory costs.
• B and C items are managed accordingly, with less emphasis
placed on monitoring and replenishment compared to A
items.
• This approach optimizes inventory control, improves cash
flow, and enhances overall operational efficiency.
HML Analysis: HML stands for High, Medium, and Low.

This analysis categorizes inventory items based on their unit costs.


High-value items are classified as H
Medium-value items as M
Low-value items as L.

The categorization helps in prioritizing inventory management


efforts based on the value of items rather than just their usage
frequency. High-value items may require more attention in terms of
security, storage conditions, and tracking due to their significant
contribution to revenue or production costs. Medium and low-value
items can be managed with less stringent controls, reducing the
administrative burden and costs associated with managing them.
SDE Analysis: SDE stands for Scarce, Difficult, and Easy.

This analysis categorizes items based on their availability and


procurement difficulty.
Scarce items are those that are hard to obtain or have long lead times,
requiring careful planning and inventory control to prevent stockouts.

Difficult items may be available but pose challenges in procurement, such


as items with limited supplier options or those subject to regulatory
restrictions.

Easy items are readily available with short lead times and minimal
procurement challenges.

SDE analysis guides inventory management strategies, ensuring


appropriate measures are in place to mitigate risks associated with scarce
and difficult items while streamlining processes for easy items.
VED Analysis: VED stands for Vital, Essential, and Desirable. This
analysis classifies items based on their criticality to operations.

Vital items are crucial for the continuity of operations and may have
implications for safety, compliance, or customer satisfaction if
unavailable.

Essential items are necessary for regular operations but may not
have the same level of impact as vital items.

Desirable items, while nice to have, are not critical for operations
and can be managed with less priority.

VED analysis helps in prioritizing inventory management efforts,


ensuring adequate stock levels and resources are allocated to vital
and essential items to minimize disruptions and risks.
FSN Analysis: FSN stands for Fast-moving, Slow-moving, and Non-
moving. This analysis categorizes items based on their velocity of
movement or turnover rates.
Fast-moving items have high turnover rates and require frequent
replenishment to meet demand and prevent stockouts.

Slow-moving items have lower turnover rates and may require


periodic review to prevent overstocking or obsolescence.

Non-moving items have very low or negligible turnover rates and


may need special attention to assess their relevance and
disposition.

FSN analysis guides inventory management strategies, ensuring


optimal stock levels and allocation of resources based on the
movement patterns of different items.

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