MATERIAL MANAGEMENT

Report
MATERIAL MANAGEMENT
By
A S BHALERAO
Definition
Material management is a scientific technique,
concerned with Planning, Organizing &
Control of flow of materials
from their initial requirement by user
to receipt at ware house after purchase.
It is essentially extension of maintenance planning.
AIM OF MATERIAL MANAGEMENT
To ensure availability of material to plant of
 Right quality
 Right quantity
 At the Right time
 For the Right cost
 At optimum inventory level
“Every management mistake ends up in inventory.”
 Why we need store stock items ?
 How to identify items for store stock ?
 How to define min max ROL levels ?
 History of store stock items in GHCL
 It is one most widely used & proven tool for inventory
optimization .
 Advantages
 Avoids multiple ,frequent indents in small qty .
 Ease of operation for user as well buyer.
 Reduces inventory carrying , ordering cost .
 Works on Just in time principle thus reduces
chances of storage of material beyond defined shelf
life .
 Better monitoring of consumption pattern thus Avoids
hoarding of material in sub store by user.
ABC ANALYSIS
(ABC = Always Better Control)
This is based on cost criteria.
It helps to exercise selective control when confronted with
large number of items it rationalizes the number of orders,
number of items & reduce the inventory.
About 10 % of materials consume 70 % of resources
About 20 % of materials consume 20 % of resources
About 70 % of materials consume 10 % of resources
•
VED ANALYSIS
Based on critical value & shortage cost of an item
–It is a subjective analysis.
•Items are classified into:
Vital:
•Shortage cannot be tolerated.
Essential:
•Shortage can be tolerated for a short period.
Desirable:
Shortage will not adversely affect, but may be using more resources.
These must be strictly Scrutinized
V
E
D
ITEM
COST
A
AV
AE
AD
CATEGORY 1
10
70%
B
BV
BE
BD
CATEGORY 2
20
20%
C
CV
CE
CD
CATEGORY 3
70
10%
CATEGORY 1 - NEEDS CLOSE MONITORING & CONTROL
CATEGORY 2
- MODERATE CONTROL.
CATEGORY 3
- NO NEED FOR CONTROL
•Re-order level: stock level at which fresh order
is placed.
•Average consumption per month x lead time +
buffer stock
•Lead time: Duration time between placing an
order & receipt of material
Economic order of quantity
EOQ = Average Monthly Consumption X Lead Time [in
months] + Buffer Stock – Stock on hand
ECONOMIC ORDER OF
QUANTITY(EOQ)
PURCHASING
COST
CARRYING
COST
Service level for Moving items-Objective
To fix Re Order Level ( ROL ) for moving items in the inventory. In other words,
inventory levels are to be controlled on the basis of a continuous analysis of
consumption, with a view to achieving a pre-defined service level . The service level
required for each item is set according to its criticality and consumption value.
Identifying Service Level for items in Inventory is a major step towards selective
Inventory Control .This is done based on V-E-D and A-B-C classifications for moving
items .
Service Level Based On V-E-D And A-B-C Classifications - For Moving Items
CONSUMPTION
VALUE
V
E
D
A
Moderate Stock
And Constant
Control
85%
Moderate Stock
75%
Very Low Stock
60%
B
Moderate Stock
90%
Moderate Stock
80%
Very Low Stock
67%
C
High Stock
99%
Moderate Stock
90%
Low Stock
75%

•
•
•
•
•
Movement analysis
Based on Item movement (Velocity)
The items are classified as Fast moving , Medium moving
and Slow moving based on the following;
Fast moving
--- Annual consumption (AC) > 12
Medium moving --- AC >5 and <=12
Slow moving
--- AC <=5
Item Class
Annual Consumption
No of Items
Fast
> 12
1885
Medium
>5 and = 12
1068
Slow
< =5
5633
Total
8586
Confidential and Property of Prumatech
Infosystems
11
Typical inventory trend for any Soda Ash Plant
Activity
SEPT TO NOV.
DEC TO MARCH
Maint.
Full swing Maint
Activities
Lean period
for maint .
Activities
Max. Maint
Activities
Production period
only necessary maint
activities
Procurement
Moderate
Max
Min. after ASD
Min.
Consumption
Max.
min.
Max.
As per requirement
Increasing trend
Increasing
trend
Max. Decreasing
trend
Decreasing almost
same level
Inventory
APR TO JUNE
JULY TO AUG
In GHCL this concept is in place since 1999 when Baan ERP
System was implemented.
But due to some practical issues auto indenting was stopped
and it was converted into annual indents with phased delivery
1200 + items were under annual indent till Jan 2012.
From 1/1/2012 onwards Auto indenting for min max items
started for C class 1600 items .
Slowly they were increased and now almost 4010 items are
under auto indent , VMI , annual indenting .
Major hurdles faced till date
Cyclic ,uneven consumption pattern.
Tendency to issue material even if not required.
Increase in consumption pattern.
Lead time

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