Lesson 06 Material Management

Inventory:- Inventory is the stock of goods held for doing business inventory mainly consist of :-

1. Row Material required for production process. 

2. work in process- for example semi-finished goods 

3. Capatative Consumable goods are good produced and used by producer.

4. finished good available for sale.

so Inventory management may be defined as scientific method of finding out how much stock should be maintained in order to meet production demands and be able to provide right type of material at right time, in right quantities an at competitive price.     

The main objective of inventory management is to maintain inventory at appropriate level to avoid excessive or shortage of inventory because both cases are undersirable for business.

To supply materials in time and give maximum clients service.-

1. prepare the list of all consumed item.
2. sort the list as per their value.
3. separate and count the number of costly medium and low valued items, 
4. find % of high medium and low value items.
5. plot the graph.                                               

ABC analysis :- In material management,the ABC analysis is an inventories categorization technique. The ABC analysis suggests that inventories of an organization are not of equal value.

            Thus, the inventory is grouped into three categories(A,B,C) as per their importance. 

  Where 'A' item are very important for an organization and these item are very tight control and accurate records. They have highest consumption value.

            'B' item are inter-class items with medium consumption value 'B' needs maximum-minimum standards record keeping. 

            'C' item are those items which have lowest consumption value. These item may not required much treatment of record keeping. 

Economic order Quantity:-

Economic order Quantity is a production formula used to determines the most efficient of good that should be purchased based on ordering and carrying costs.

                                          A business can use this calculator to determine exactly when an order needs to be placed and exactly how much should be ordered so that company can continue normal production and minimize inventory cost- 

                                     EOQ=

Where, 

            S= Cost to place the order 

            D= Demand for good

            P= Production cost

            I= Inventory carrying rate.

• Purchasing:- Generally the process of buying raw materials, machines and other things for a business organisation is known as purchasing.
• Objectives:-

1. To get right quantity of materials.

2. To get right quality of materials.

3. To get reliable agency.

• Functions of Purchase Department

It is the department of an organisation which buys raw materials, spare parts, services etc required by the company.

• Steps in Purchasing:- 

Purchasing process made of several steps or activities. Each step takes information, process it and gives output that is deed into the next step The purchasing process may be vary from one organisation to another but same steps are same.

• Request to Purchase/Requisition:-

Identifying the business need what to buy, how much of it and when it is need for delivery.

Modern Techniques Of Material Management:-

Just in Time Technique(JIT):-

                                                           Production Industry JIT-No Stage

                In case of production organization there are some material that may damage suddenly for such type of products instant manufacturing and instant selling are made. But this way wastage can be reduced. Such type of production technique is known as just in time(JIT) technique. This will provide benefit and better quality of the production. This techniques requires no any inventory or storage.

                    So holding cost will be negligible therefore this technique is widely prefered for valuable product.

Objective of JIT:- 

1. Reduce Cost:- one of the important aim of JIT is to reduce overall cost of the product so that better benefit can be earned.

2. Improve Performance:- Another objective of JIT is to improve the performance of the workers and machines so the production demand can be full-fill at proper time.

3. Improved Delivery:- This technique also improves the delivery system of the organization can be delivered at proper time other wise product will be least.

• Enterprise Resource Planning(ERP):- This involves following points:-

1. Human Resource Management:- For an enterprise or organization human resource is one of the important resource that must be used properly so that better benefit can be earned.
2. Production Management:- This management deals with proper production of the product, more demand more production or less demand loss production by doing so we can get better benefit from a production organization.
3. Purchase management:- This Management deals with purchasing of good quality and good quality raw materials at minimum rate and minimum transportation cost.
4. Inventory Control:- For a business organisation proper inventory of materials should be maintained in the organisation.

• System Application and Products(SAP):- For a business organisation the application of various system and machines should be proper, so that we can get more product in less time so over all benefit will be very large.

                                   If Systems and machines are not properly used then we get less number at product so over all benefit will be less, Therefore, system application and machine application in a business organization should be proper.