Materials & Logistics

Management
An Overview

1
 Material Management
• Controlling the
kind, amount,
location, movement & Manufacturing
Raw Material Industry
timing of the various
commodities used in
and produced by the
industrial enterprise

Market

2
Functions of Material
Management
• Material Planning
• Purchasing
• Inventory Control
• Store Keeping
• Stores Accounting
• Transportation
• Disposal of Surplus Material
• Material Economics
• Waste Management

3
 Return on Investment
• Rate of ROR = Profit / Capital
Type I Type II
Profit / Sales X Sales / Capital
= =
Profit Margin X Capital Turnover
Ratio
ROR Improvement-
A) Increase Profit by Keeping Capital Constant
B) Reduce Capital by Keeping Profit Constant

4
 Importance of Material
Management
• Increasing Profit by Keeping Capital
Constant
A) Increase Number of Units Sold
B) Increase Production
C) Increase Unit Price
D) Reduce Unit Cost

5
 A) Increasing Profit Keeping
Capital Constant
Profit
1. Lifeline of Any Organization
2. Dividend Distribution to Shareholders
3. Employees- Wages & Job Security
4. Additional Capital for Business
Expansion
5. Capital for Maintenance & Replacement
6. Improves Quality of life
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 Profit
Sales - Cost
(Units Sold (Units Produced
X Unit Price) - X Unit Cost)
Example-
Car Production Cost- Rs. 3,25,000/ Unit
Car Sales Cost - Rs. 4,25,000/ Unit
Profit per Car Sale - Rs. 1,00,000/ Unit
Increase Sale OR Increase Production
Increase Unit Price OR Reduce Unit Cost

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 Capital Reduction
• Fixed Capital- Land, Buildings, Plant &
Machinery etc.
• Working Capital- Salary, Maintenance,
Inventory, Raw Material Purchase etc.

ROR = Profit / Capital

8
 Material Management Cost
• Raw Material Cost
• Govt. Levies & Taxes
• Procurement Cost
• Inventory Cost
• Packaging Cost
• Material Handling Cost
• Freight Cost
• Insurance Cost
• Wastage during Receipt, Storage, Production

9
 Improving
Competitive
Improve Relations Strength
with Good Records
Suppliers/ Vendors

Min wastage
Steady flow of
during
Raw Material
processing
OBJECTIVES
Of
Material Management
Preservation of Economy in Cost
Material of Material

Improve Corporate Quality

Governance Consistency
Reduce
Inventory

10
 Activity Chart of Materials
Management Department
• Materials Planning
• Make- or- Buy Decisions
• Purchasing
• Receiving & Inspection
• Storage
• Inventory Control
• Material Distribution
• Transportation
• Disposal of surplus &
scrap material
• Developing new suppliers
• Import substitution
• Vendor Development
• Insurance Management
• Cost reduction & control
• Waste Management
• Material Research
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 Benefits of Integrated Material
Management Department
• Fast & accurate decision making
• Fault finding or improvement activities
• Improved Coordination bet departments
• Improvement of Inter-department
relationship
• Data collection & analysis for decision
making
• Systematic approach to every aspect of
process
12
Materials Department Interface with
Other Departments
• Operations • Maintenance
• Accounting & Finance Department
• Design & Engineering • Suppliers or Vendors
• Stores • Material Planning
• Inspection & Quality • Personnel & HR
Control • Sales & Marketing

13
 Supply Chain Management
• Definition-
It is a sequence of organizations – their
facilities, functions & activities- that are
involved in producing & delivering a
product or a service.
SCM is nothing but designing, managing &
controlling of this sequence efficiently
resulting into customer satisfaction with
increase in profits.
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 Evolution of SCM
Supply Chain
Management

Manufacturing Logistics
Management Management

Sales & Distribution Materials

Management Management
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 Need of SCM
• To Improve operations
• Increase in outsourcing services/ products
• Control on transportation cost
• Market Competition
• Globalization
• E-commerce
• Inventory Management
• Complexity of various functions of Supply Chain

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 Benefits of SCM
• Lower Inventory
• Lower Cost
• Higher Productivity
• Greater Agility
• Shorter Lead Times
• Higher Profits
• Increased Customer Loyalty

17
 Elements of SCM
Element Issues
Customers Determine Demand for product / services
Forecasting Prediction of Customer Demand
Design Improvement in quality/ characteristics of
product/ services
Capacity Plan Matching Demand & Supply
Processing Quality Control & Working Schedule
Inventory Maintaining Optimum Inventory Levels
Purchase Make or buy Decision at times
Supplier Monitoring, Developing & Maintaining
Location Selection of Location 18

Logistics Choosing Mode of Flow of Materials &

 SCM Approach
• Mode I- OLD • Mode II- NEW
Suppliers & Others Supplier I,II & Others
Purchase & Planning Manufacturer I, II & III
Production with subcontractor
Sales Warehouses I, II, III
Customers Retailer I,II,III, IV
Customers

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 Logistics
• It is a channel regarding Flow of Material &
Information in the organization.
• Internal Logistics
From Stores to Packaging Department
• External Logistics
From Packaging Dept. to Customer
• 3 PL – Third Party Logistics
Packaging Dept to Warehouse to Customer

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 Assignment I
• Explain all functions & responsibilities of Materials Manager
from forecasting till disposal of scrap. Also Highlight the
principles followed.
• Explain fully the interface and interdependence of Materials
Management function with functions of a company involved
into final product manufacturing & selling.
• Define SCM. Explain Need, Benefits & Elements of SCM.
• Short Notes-
1. Advantages of Materials Management in Globalised
Competitive Economy
2. Objectives of Materials Management Function

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