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 CPM 12 Operations Mangement

 Unit-1 Materials Management

 1.4 Material Handling Systems

 Introduction:

 In the construction industry, the term 'material handling' refers to the delivery, movement,
storage and control of materials and other products.

 This forms part of the logistics management of a project.

 Types of plant used for material handling on site include; hydraulic excavators, telescopic
handlers, cranes, forklift trucks, lifting devices, conveyor systems and so on.

 From receipt and inspection of materials, through to storage, assembly and use, the material
handling system should be well-coordinated and organised so that everyone on site is aware
of how it works.

 When handling materials, safety should be the primary consideration.

 Pre-start inspections are critical, load limits should not be exceeded, method
statements should be followed, and it may be necessary for a banksman to direct material
movements around the site.

 It is important to follow best practice guidelines when designing a material

handling system for a construction project. For example:

 The proposed system of material handling should be defined in terms of needs, objectives
and functional specification.

 Methods and processes should be standardised to avoid confusion.

 Unnecessary handling or movement should be reduced or eliminated.

 Working conditions and methods should have worker safety as the primary objective.

 Unit loads should be optimised, to reduce work and risk.

 Storage areas should be kept organised and clean, maximising density as much as possible
and eliminating damage to materials.

 Sites should be kept safe, clean and easy to move around.

 Deliveries should be received and handled promptly.

 Site waste management plans should be created and maintained.

 Automated material handling technologies should be used where practicable.

 Safety equipment such as PPE should be available.

 Incorrect manual handling is a common factor in work-related injuries.

 This can be because of:

 The weight of the item being handled.

 The repetitive nature of the movement.

 The distance the item is being moved.

 Where the item is being moved to and from.

 The posture of the individual.

 Any twisting, bending, stretching or other awkward position may exacerbate problems.

 I. Rules for material handling:

 the following 11 basic rules for handling materials.

 Follow all established procedures and perform job duties as you have been trained.

 Be cautious and plan ahead.

 Think about what could go wrong paying close attention to what you are doing while you
work and where your body position is in order to prevent being caught between, in or under

 Always use the required personal protective equipment (PPE) and inspect it carefully
before each use to make sure it is safe to use.

 Replace worn out or damaged PPE because it will not provide you adequate protection.

 Make sure all containers are properly labeled and that the material is contained in an
appropriate container.

 Do not use any material not contained or labeled properly.

 Report any damaged containers or illegible labels to your supervisor right away.

 When working with chemicals, read labels and the safety data sheet before use.

 Make sure you understand the chemical’s hazards and precautions.

 If you do not understand or do not have means for precautions, STOP and ask for

 Use all materials solely for their intended purpose.

 Do not use solvents to clean your hands, or gasoline to wipe down equipment.

 Never eat or drink while handling any materials, and if your hands are contaminated, do
not handle contact lenses.

 Read the labels to identify properties and the hazards of products and materials.

 Store all materials properly, separate incompatibles, and store in ventilated, dry, cool

 Keep you and your work area clean.

 Learn about emergency procedures and equipment.

 Understanding emergency procedures means

 knowing evacuation procedures,

 emergency-reporting procedures, and

 procedures for dealing with fires, spills, drops, etc.

 It also means knowing what to do in a medical emergency if a co-worker is injured or

overcome by materials.

 II. Types of material handling equipment:

 4 Types of Materials Handling Equipment

 Material handling equipment is any tool used to aid in the

 movement,

 protection,

 storage, and

 control of materials and products.

 i) Cranes

 hoists

 ii)Overhead bridge crane

 iii) Jib Crane

 iv)Gantry Crane

 v)Electrical hoist

 vi)Elevators

 Vii) Stacker crane

 viii) Winches

 ix)Monorail

 x)Conveyors:belt, roller, bucket

 xi) Chutes:dropdown, vibrating

 xii) Trucks,, ropeways, cableways,

 ropeways

 cableways

 III. Spare parts management

 Service parts management is the main component of a complete strategic service

management process that companies use to ensure that right spare part and resources are
at the right place (where the broken part is) at the right time.
 Spare parts, are extra parts that are available and in proximity to a functional item, such as
an automobile, boat, engine, for which they might be used for repair.

 IV. Definition of spare parts

 A spare part, spare, service part, repair part, or replacement part, is an interchangeable
part that is kept in an inventory and used for the repair or replacement of failed units. Spare
parts are an important feature of logistics engineering and supply chain management, often
comprising dedicated spare parts management systems.

 Capital spares are spare parts which, although acknowledged to have a long life or a small
chance of failure, would cause a long shutdown of equipment because it would take a long
time to get a replacement for them.

 Spare parts are an outgrowth of the industrial development of interchangeable parts

and mass production.

 Classification

 spare parts can be broadly classified into two groups, repairables and consumables.

 Economically, there is a tradeoff between the cost of ordering a replacement part and the
cost of repairing a failed part.

 When the cost of repair becomes a significant percentage of the cost of replacement, it
becomes economically favorable to simply order a replacement part.

 In such cases, the part is said to be "beyond economic repair" (BER), and the percentage
associated with this threshold is known as the BER rate.

 Analysis of economic tradeoffs is formally evaluated using Level of Repair Analysis (LORA).

 Repairable

 Repairable parts are parts that are deemed worthy of repair, usually by virtue of economic
consideration of their repair cost.

 Rather than bear the cost of completely replacing a finished product, repairables typically
are designed to enable more affordable maintenance by being more modular.

 This allows components to be more easily removed, repaired, and replaced, enabling
cheaper replacement.

 Spare parts that are needed to support condemnation of repairable parts are known
as replenishment spares .

 A rotable pool is a pool of repairable spare parts inventory set aside to allow for multiple
repairs to be accomplished simultaneously.

 This can be used to minimize stockout conditions for repairable items.

 Consumable

 Parts that are not repairable, are considered consumable parts.

 Consumable parts are usually scrapped, or "condemned", when they are found to have
 Since no attempt at repair is made, for a fixed mean time between failures (MTBF),
replacement rates for consumption of consumables are higher than an equivalent item
treated as a repairable part.

 Because of this, consumables tend to be lower cost items.

 Because consumables are lower cost and higher volume, economies of scale can be found by
ordering in large lot sizes, a so-called Economic order quantity.

 Need for scientific management of spare parts

 Machines do not die like human beings .

 They are condemned before they could die.

 In order to keep machines in good repair requires timely replacement of defective or worn
out parts.

 Older factors which calls for scientific spare parts management are:

 Factors influencing spare part inventories

 Spare parts inventory management shares many traits with standard inventory
management, but requires an extra layer of cost consideration.

 Whether a maintenance and repair organization (MRO) is internal to a larger business, or

providing maintenance services to an external customer, efficient spare parts inventory
management plays a critical role in reducing costs and maximizing customer service.

 For this example, we will look at an internal MRO to a production facility

 These five steps collect the information you need for executing effective spare parts
inventory management.

 Step #1: Understanding existing (or projected) consumption

 Step #2: Calculating system failure costs

 Step #3: Estimate soft cost impact of out-of-stocks

 Step #4: Work with vendors for cost-reduction and in-stock improvement

 Step #5: Calculate costs (hard and soft) of expedited orders

 V. Manufacturers recommendations

 Most companies are reluctant to maintain a comprehensive spare part inventory because
they fear that stocking assets like spares is counterintuitive when trying to effectively control
operating costs.

 They expect plant managers to identify ways to reduce cost while maintaining
the performance and efficiency of plant operations.

 Practical spare part management is the foundation for reliable plant operation and is crucial
to a plant managers success.

 As plant manager, you need to know how to determine which spare parts are needed to
make up an effective and comprehensive inventory system.
 Rather than using perception to determine what’s needed, it’s best to establish a strategic
method that will adequately manage the movement and storage of your inventory.

 Operating strategy, inventory control and lead times are a few of the factors you should
consider when developing or reviewing your part management system.

 Taking these factors into account can help minimize performance disruption, promote
efficiency, and reduce carrying cost.

 Ultimately, producing successful spare part management.

 VI. Classification of spare parts

 Classification based on usage rate

 Regularly used sapre parts

 Irrerugarly used spare parts

 Classification of spare parts on movement analysis

 General classification of spare parts based on functional characteristics.

 VII. Classification of spare parts on movement analysis

 VIII. Logistics chain and supply chain management

 Introduction

 A supply chain is actually a complex and dynamic supply and demand network.

 A supply chain is a system of organizations, people, activities, information, and resources

involved in moving a product or service from supplier to customer.

 Supply chain activities involve the transformation of natural resources, raw materials, and
components into a finished product that is delivered to the end customer.

 In sophisticated supply chain systems, used products may re-enter the supply chain at any
point where residual value is recyclable.

 Supply chains link value chains.

 IX. Recent trends in management

 1. Man - Man in management is referred as a human resource.

 2. Material- Material is a basic ingredient in management be it a service industry or a


 3. Machine -Machine are the basic tools to produce goods or to generate services.

 4. Money- Money issue in management involes right from where an enterprise is

establishedand the owner brings money in the business.

 5. Method-Every thing has a right way to do and this right way is known as a Method
inmanagement .

 6. Management
 Internal Communications

 Satisfied employees work harder and invest more in your company, but how can business
owners encourage employee satisfaction? Promoting internal communication is a helpful
first step.

 Peer to peer communication can enhance workplace morale and improve project outcomes,
regardless of your industry.

 Mobile Accessibility

 Whether you’re in the technology industry and rely on mobile devices to achieve sales
targets, or you’re in the hospitality business and need client portals to reach your target
market, mobile accessibility is vital to the future of operations management.

 Automatization

 Automating processes throughout your business can save money and increase efficiency
when it comes to all areas of operations management.

 Performance Measurement

 Detailed analytics give companies a baseline for implementing changes in areas from
development and production to customer service.

 With metrics solutions that deliver comprehensive measurements, business owners can
make informed decisions regarding business practices moving forward.

 Not only are companies able to track website performance and on-site sales, they can also
zero in on employee productivity and communication.

 Mobile collaboration apps allow organizations to see which employees are actively
engaged in collaboration, and which may require encouragement or assistance.

 Employee Analytics

 Beyond sales figures-based analytics, employee feedback and surveys can also contribute to
better business overall.

 On the face of it, operations management may appear to span only materials and
products, but people are an essential component of any business structure.

 Acknowledging employees on a personal level as well as based on their work performance

helps create a sense of community within organizations, and keeping the line of
communication between staff and superiors is an excellent way to track team vitals.

 Outsourcing

 When it comes to reducing costs, outsourcing is often on the top of companies’ lists.

 Contracting with outside agencies or individuals can help companies save money and
ensure each task receives the appropriate attention.

 In cases where outsourcing is cheaper than hiring additional staff, or when no staff is
available to tackle extra projects, companies should have no qualms about accepting outside
 X. Cycle of operations in business

 The operating cycle is the average period of time required for a business to make an initial
outlay of cash to produce goods, sell the goods, and receive cash from customers in
exchange for the goods.

 This is useful for estimating the amount of working capital that a company will need in order
to maintain or grow its business.

 A company with an extremely short operating cycle requires less cash to maintain its
operations, and so can still grow while selling at relatively small margins.

 Conversely, a business may have fat margins and yet still require additional financing to
grow at even a modest pace, if its operating cycle is unusually long.

 If a company is a reseller, then the operating cycle does not include any time for production
- it is simply the date from the initial cash outlay to the date of cash receipt from the

 The following are all factors that influence the duration of the operating cycle:

 The payment terms extended to the company by its suppliers.

 Longer payment terms shorten the operating cycle, since the company can delay paying out

 The order fulfillment policy, since a higher assumed initial fulfillment rate increases the
amount of inventory on hand, which increases the operating cycle.

 The credit policy and related payment terms, since looser credit equates to a longer interval
before customers pay, which extends the operating cycle.

 Thus, several management decisions (or negotiated issues with business partners) can
impact the operating cycle of a business.

 Ideally, the cycle should be kept as short as possible, so that the cash requirements of the
business are reduced.

 Examining the operating cycle of a potential acquiree can be particularly useful, since
doing so can reveal ways in which the acquirer can alter the operating cycle to reduce cash
requirements, which may offset some or all of the cash outlay needed to buy the acquiree.

 Similar Terms

 The operating cycle is also known as the cash-to-cash cycle, the net operating cycle, and
the cash conversion cycle.

 XI. Supply chain management

 Supply chain management is the management of the flow of goods and services and
includes all processes that transform raw materials into final products.

 It involves the active streamlining of a business's supply-side activities to maximize

customer value and gain a competitive advantage in the marketplace.
 SCM represents an effort by suppliers to develop and implement supply chains that are as
efficient and economical as possible.

 Supply chains cover everything from production to product development to the

information systems needed to direct these undertakings.

 BREAKING DOWN 'Supply Chain Management (SCM)'

 Typically, SCM attempts to centrally control or link the production, shipment, and
distribution of a product.

 By managing the supply chain, companies are able to cut excess costs and deliver products
to the consumer faster.

 This is done by keeping tighter control of internal inventories, internal production,

distribution, sales, and the inventories of company vendors.

 SCM is based on the idea that nearly every product that comes to market results from the
efforts of various organizations that make up a supply chain.

 Although supply chains have existed for ages, most companies have only recently paid
attention to them as a value-add to their operations.

 I)Glossary of materials management terms

 1. ABC Analysis

 2.BID

 3. Bill of materials

 4. Buffer stock

 5.Carrying cost

 6. Buyer’s market

 7. Cycle time

 8. Distributed inventory

 9.Economic order quantity

 10.Effective lead time

 11.Enterprise resource planning

 12.FIFO-First in First Out

 13.Inventory

 14.Inventory Management

 15.Inbound Logistics

 16.Integrated logistics
 17.Just in Time (JIT)

 18.Just in Time II (JITII)

 19.Lead Time

 20.Master production schedule (MPS)

 21.Min-max

 22.MRP/MRPII, Manufacturing resource planning

 23.Obsolete Inventory

 24.Order cost

 25.Procurement

 26.Proprietary

 27.Public purchasing

 28.Purchase Manual

 29.Purchase order

 30.Qualified vendor/Responsible Vendor

 31.Qualified Products List (QPL)

 32.Quality

 33.Quantity

 34.Quantity Discount

i. Quantity

ii. Quantity on hand

iii. Quantity on order

iv. Quantity in transit

v. Quantity allocated

vi. Quantity available

vii. Reorder point

 35.Requisition

 i)Safety stock

 36.Single source

 37.Terms and conditions

 i)Third party logistics

 Ii) Transportation management system

 38.Unsuccessful Vendor

 39.Value Analysis

 40.Vendors List

 i)Vendor Managed inventory (VMI)

 Ii) Work-in-progress

 1. ABC Analysis

 In materials management, the ABC analysis (or Selective Inventory Control) is

an inventory categorization technique.

 ABC analysis divides an inventory into three categories—

 "A items" with very tight control and accurate records,

 "B items" with less tightly controlled and good records, and

 "C items" with the simplest controls possible and minimal records.

 The ABC analysis provides a mechanism for identifying items that will have a significant
impact on overall inventory cost,while also providing a mechanism for identifying different
categories of stock that will require different management and controls.

 The ABC analysis suggests that inventories of an organization are not of equal value.

 Thus, the inventory is grouped into three categories (A, B, and C) in order of their estimated

 'A' items are very important for an organization.

 Because of the high value of these 'A' items, frequent value analysis is required.

 In addition to that, an organization needs to choose an appropriate order pattern (e.g.

'just-in-time') to avoid excess capacity.

 'B' items are important, but of course less important than 'A' items and more important
than 'C' items.

 Therefore, 'B' items are intergroup items.

 'C' items are marginally important.

 2.BID

 Bid price, a price offered for a good by a potential buyer or a price offered by a potential
vendor to perform a specific job

 3. Bill of materials

 A bill of materials (BOM) is a comprehensive inventory of the raw materials, assemblies,

subassemblies, parts and components, as well as the quantities of each, needed to
manufacture a product.

 In a nutshell, it is the complete list of all the items that are required to build a product.
 4. Buffer stock

 A supply of inputs held as a reserve to safeguard against unforeseen shortages or demands.

 5.Carrying cost

 of inventory or holding cost refers to the total cost of holding inventory.

 This includes warehousing costs such as rent, utilities and salaries, financial costs such
as opportunity cost, and inventory costs related to perishability, shrinkage (leakage) and

 Holding cost also includes the opportunity cost of reduced responsiveness to customers'
changing requirements, slowed introduction of improved items, and the inventory's value
and direct expenses, since that money could be used for other purposes.

 6. Buyer’s market

 A buyer's market is a situation in which supply exceeds demand, giving purchasers an

advantage over sellers in price negotiations.

 The term "buyer's market" is commonly used to describe real estate markets, but it applies
to any type of market in which there is more product available than there are people who
want to buy it.

 The opposite of a buyer's market is a seller's market, a situation in which demand exceeds
supply and owners have an advantage over buyers in price negotiations.

 7. Cycle time

 The inventory period of your business is the amount of time it takes to turn over its average
inventory, and sometimes it is referred to as "cycle time."

 Calculating inventory period requires dividing the number of days in a period by the
inventory turnover ratio for the period.

 If your business turned over its inventory 10 times this past year, then its inventory period
is 365 divided by 10, or 36.5 days.

 In general, businesses with short inventory periods operate more efficiently than those with
long inventory periods.

 8. Distributed inventory

 Distributed inventory is a concept where in the goods or inventory which is to be given to

the retailers & distributors are divided into multiple shipments, each of which is used to
fulfill the inventory requirement.

 Distributed inventory enables the products or goods to reach out to every party of the
region where the products have to be sold.

 9.Economic order quantity

 In inventory management, economic order quantity (EOQ) is the order quantity that
minimizes the total holding costs and ordering costs.

 It is one of the oldest classical production scheduling models.

 10.Effective lead time

 The quoted factory lead time, or time required between placement of order until product is
received, plus any other variables which may impact receiving inventory on time, such as
order placement frequency.

 11.Enterprise resource planning

 Enterprise resource planning (ERP) is the integrated management of core business

processes, often in real-time and mediated by software and technology.

 ERP is usually referred to as a category of business-management software — typically a suite

of integrated applications—that an organization can use to collect, store, manage, and
interpret data from these many business activities.

 ERP provides an integrated and continuously updated view of core business processes using
common databases maintained by a database management system.

 ERP systems track business resources—cash, raw materials, production capacity—and the
status of business commitments: orders, purchase orders, and payroll.

 12.FIFO-First in First Out

 FIFO and LIFO accounting are methods used in managing inventory and financial matters
involving the amount of money a company has to have tied up within inventory of produced
goods, raw materials, parts, components, or feed stocks.

 They are used to manage assumptions of cost sheet related to inventory, stock
repurchases (if purchased at different prices), and various other accounting purposes.

 13.Inventory

 In the context of a construction system, inventory refers to all work that has occurred – raw
materials, partially finished products, finished products prior to sale and departure from
the system.

 In the context of services, inventory refers to all work done prior to sale, including partially
process information.

 14.Inventory Management

 Inventory management refers to the process of ordering, storing and using a company's

 raw materials,

 components and

 finished products.

 15.Inbound Logistics

 Inbound logistics refers to the

 transport,
 storage and

 delivery of goods coming into a business

 16.Integrated logistics

 Integrated logistics support (ILS) is an integrated and iterative process for

developing materiel and a support strategy that optimizes functional support, leverages
existing resources, and guides the system engineering process to quantify and lower life
cycle cost and decrease the logistics footprint (demand for logistics), making the system
easier to support.

 Although originally developed for military purposes, it is also widely used in

commercial product support or customer service organisations.

 17.Just in Time (JIT)

 Just-in-time (JIT) manufacturing, also known as just-in-time production or the Toyota

Production System (TPS), is a methodology aimed primarily at reducing flow times within
production system as well as response times from suppliers and to customers.

 Its origin and development was in Japan, largely in the 1960s and 1970s and particularly at

18.Just in Time II (JITII)

 Just-In-Time has revamped its processes and produced JIT II.

 JIT II places more responsibility with the suppliers for functions such as:

 forecasting usage;

 ordering replenishments; and

 billing the organization.

 JIT II systems are frequently implemented in client/server environments, where multiple

servers have access to a database utilizing Structured Query Language (SQL).

 The authors assert that JIT II provides the potential to

 reduce inventories,

 eliminate redundant purchasing agents and

 get cost-saving tips from having suppliers familiar with their business.

 The retailing industry denotes this as ECR, (efficient consumer response).

19.Lead Time

 A lead time is the latency between the initiation and execution of a process.

 For example, the lead time between the placement of an order and delivery of a new car
from a manufacturer may be anywhere from 2 weeks to 6 months.

20.Master production schedule (MPS)

 A master production schedule (MPS) is a plan for individual commodities to be produced in

each time period such as production, staffing, inventory, etc.

 It is usually linked to manufacturing where the plan indicates when and how much of each
product will be demanded.

 This plan quantifies significant processes, parts, and other resources in order to optimize
production, to identify bottlenecks, and to anticipate needs and completed goods.

 Since an MPS drives much factory activity, its accuracy and viability dramatically affect

 Typical MPSs are created by software with user tweaking.

 21.Min-max

 This is the simplest method of inventory control.

 You simply draw two lines, which represent a maximum amount of inventory and a
minimum amount.

 When your stock of a certain product reaches the minimum line, it’s time to reorder.

 However, you can’t order more than the maximum line.

 The simplistic approach of this method can be both a good thing and a bad thing.

 It’s easy to use, but it could leave you with shortages or overstocks, if you’re not careful.

22.MRP/MRPII, Manufacturing resource planning

 Manufacturing resource planning (MRP II) is defined as a method for the effective planning
of all resources of a manufacturing company.

 Ideally, it addresses operational planning in units, financial planning, and has a simulation
capability to answer "what-if" questions and extension of closed-loop MRP.

 This is not exclusively a software function, but the management of people skills, requiring a
dedication to database accuracy, and sufficient computer resources.

 It is a total company management concept for using human and company resources more

23.Obsolete Inventory

 Obsolete inventory is a term that refers to inventory that is at the end of its product life

 This inventory has not been sold or used for a long period of time and is not expected to be
sold in the future.
 This type of inventory has to be written down and can cause large losses for a company.

 Obsolete inventory is also referred to as dead inventory or excess inventory.

24.Order cost

 Ordering costs are the expenses incurred to create and process an order to a supplier.

 These costs are included in the determination of the economic order quantity for an
inventory item.

 Examples of ordering costs are:

 Cost to prepare a purchase requisition

 Cost to prepare a purchase order

 Cost of the labor required to inspect goods when they are received

 Cost to putaway goods once they have been received

 Cost to process the supplier invoice related to an order

 Cost to prepare and issue a payment to the supplier


 Procurement is the process of finding, agreeing terms and acquiring goods, services or
works from an external source, often via a tendering or competitive bidding process.

 The process is used to ensure the buyer receives goods, services or works at the best
possible price, when aspects such as quality, quantity, time, and location are compared.

 Corporations and public bodies often define processes intended to promote fair and open
competition for their business while minimizing risk, such as exposure to fraud and collusion.

 Almost all purchasing decisions include factors such as delivery and handling, marginal
benefit, and price fluctuations.

 Procurement generally involves making buying decisions under conditions of scarcity.

 If good data is available, it is good practice to make use of economic analysis methods such
as cost-benefit analysis or cost-utility analysis.


 Proprietary specifications are those that require the use of a single approved product type
for any particular installation.

 Proprietary specifications are often used in cases where there is existing equipment or
installations already on site.

 In these cases the owner may want to maintain consistency of materials or possibly simply
prefers a specific type of product.
 Also, in highly complex installations where there is only one specific piece of equipment
that will accomplish a specified task, a proprietary specification is required.

27.Public purchasing

 Government procurement or public procurement is

the procurement of goods, services and construction on behalf of a public authority, such as
a government agency.

28.Purchase Manual

 A document that stipulates rules and prescribes prodedures for purchasing with suppliers
and other departments.

29.Purchase order

 A purchase order (PO) is a commercial document and first official offer issued by a buyer to
a seller, indicating types, quantities, and agreed prices for products or services.

 It is used to control the purchasing of products and services from external suppliers.

 Purchase orders can be an essential part of ERP system orders.

 The issue of a purchase order does not itself form a contract.

 If no prior contract exists, then it is the acceptance of the order by the seller that forms
a contract between the buyer and seller.

30.Qualified vendor/Responsible Vendor

 A vendor determined by a buying organisation to meet minimum set standards of business

 competence,

 reputation,

 financial ability and

 product quality for placement on the vendor list.

31.Qualified Products List (QPL)

 A list of products that, because of the length of time required for test and evaluation, are
tested in advance of procurement to determine which suppliers comply with the
specification requirements.

 Also reffered to as an “Approved brands list”.

 ISO 8402-1986 standard defines quality as "the totality of features and characteristics of a
product or service that bears its ability to satisfy stated or implied needs."


 Quantity is a property that can exist as a multitude or magnitude.

 Quantities can be compared in terms of "more", "less", or "equal", or by assigning a

numerical value in terms of a unit of measurement.

 Quantity is among the basic classes of things along with quality, substance, change, and

 Some quantities are such by their inner nature (as number), while others are functioning
as states (properties, dimensions, attributes) of things such as heavy and light, long and
short, broad and narrow, small and great, or much and little.

 34.Quantity Discount

 A quantity discount is an incentive offered to a buyer that results in a decreased cost per
unit of goods or materials when purchased in greater numbers.

 A quantity discount is often offered by sellers to entice buyers to purchase in larger


 The seller is able to move more goods or materials, and the buyer receives a more favorable
price for the goods.

 At the consumer level, a quantity discount can appear as a BOGO (buy one, get one
discount) or other incentives such as buy two, get one free.

i. Quantity is a property that can exist as a multitude or magnitude.

Quantities can be compared in terms of "more", "less", or "equal", or by assigning a numerical value
in terms of a unit of measurement.

Quantity is among the basic classes of things along with quality, substance, change, and relation.

Some quantities are such by their inner nature (as number), while others are functioning as states
(properties, dimensions, attributes) of things such as heavy and light, long and short, broad and
narrow, small and great, or much and little.

ii.Quantity on hand

"On-hand quantity" The total number of stock-keeping units (SKUs) that are physically located in
the warehouse location at the current time.

This includes items that are already allocated to fulfilling production needs or sales orders.

iii.Quantity on order

The total number of stock-keeping units (SKUs) that have been ordered from a supplier.

These units are not counted as part of the quantity on hand until they actually arrive.
However, knowing the quantity on order is important for avoiding duplicate orders of the same

iv.Quantity in transit

The total number of stock-keeping units (SKUs) that are currently being shipped from one location
to another.

This information is used to forecast delivery schedules.

The quantity in transit data for a given load may be input in the inventory management software
application once a bill of lading is created for an outbound shipment or once the shipment actually
leaves the dock depending on how the system is set up.

v.Quantity allocated

The total number of stock-keeping units (SKUs) currently on the premises that are already
committed to fulfilling a given order (e.g., for production or sales).

The quantities allocated are still counted as part of the quantity on hand.

If a situation arises in which the allocated items are needed for other purposes, they may be
reallocated based on priority.

vi.Quantity available

 The total number of stock-keeping units (SKUs) that are currently available for use in filling a
new order internally or externally for purposes such as production or distribution.

 This quantity does not include items already allocated to other orders or items that are in
transit from a supplier.

vii.Reorder point

 The reorder point (ROP) is the level of inventory which triggers an action to replenish that
particular inventory stock.

 It is a minimum amount of an item which a firm holds in stock, such that, when stock falls
to this amount, the item must be reordered.

 It is normally calculated as the forecast usage during the replenishment lead time plus safety
stock. In the EOQ (Economic Order Quantity) model, it was assumed that there is no time lag
between ordering and procuring of materials.

 Therefore the reorder point for replenishing the stocks occurs at that level when the
inventory level drops to zero and because instant delivery by suppliers, the stock level
bounce back

 35.Requisition

 Written order or a formal demand by the user(s) of a good or service (which is not made
available without a specific request) to the organization's purchase (or stores) department.

 It generally includes the brand and model name or number, description, quantity, and the
required delivery date.

 Also called purchase requisition.

 i)Safety stock

 Safety stock is an additional quantity of an item held in inventory in order to reduce the risk
that the item will be out of stock.

 Safety stock acts as a buffer in case the sales of an item are greater than planned and/or the
supplier is unable to deliver additional units at the expected time.

 There are additional holding costs associated with safety stock.

 However, the holding costs could be less than the cost of losing a customer if the customer's
order cannot be filled

 36.Single source

 An acquisition where,after a search, only one supplier is determined to be reasonably

available for the required product, service or construction item.

 37.Terms and conditions

 A pharse generally applied to the rules under which all bids must be submitted to be
reasonably available for the required product, service or construction item.

 i)Third party logistics

 (abbreviated 3PL, or sometimes TPL) in logistics and supply chain management is a

company's use of third-party businesses to outsource elements of the
company's distribution and fulfillment services.

 Third-party logistics providers typically specialize in integrated

operation, warehousing and transportation services which can be scaled and customized to
customers' needs based on market conditions, such as the demands and delivery service
requirements for their products and materials.

 Often, these services go beyond logistics and include value-added services related to the
production or procurement of goods, i.e., services that integrate parts of the supply chain.

 When this integration occurs, the provider is then called a third-party supply chain
management provider (3PSCM) or supply chain management service provider (SCMSP).

 3PL targets particular functions within supply management, such as warehousing,

transportation, or raw material provision.

 Ii) Transportation management system

 A transportation management system (TMS) is a subset of supply chain management (SCM)

that deals with the planning, execution and optimization of the physical movements of

 In simpler terms, it's a logistics platform that enables users to manage and optimize the
daily operations of their transportation fleets.

 38.Unsuccessful Vendor

 A vendor whose response is not accepted for reasons such as

 price,
 quantity,

 failure to comply with specifications ,etc.

 39.Value Analysis

 Value Analysis is one of the major techniques of cost reduction and control.

 It is a disciplined approach which ensures the necessary functions for the minimum cost
without diminishing quality, reliability, performance and appearance.

 It is a creative approach to eliminate the unnecessary costs which add neither to quality nor
to the appearance of the product.

 It is a systematic application of techniques to identify the functions of a product or a

component and to provide the desired function at the lowest total cost.

 40.Vendors List

 A list of names and addresses of suppliers from whom bids, proposals and quatations might
be expected.

 The list, maintained by all the purchasing office, should include all suppliers who have
expressed interest in doing business with the government.

 i)Vendor-managed inventory (VMI)

 is a family of business models in which the buyer of a product provides certain information
to a supplier (vendor) of that product and the supplier takes full responsibility for
maintaining an agreed inventory of the material, usually at the buyer's consumption
location (usually a store).

 A third-party logistics provider can also be involved to make sure that the buyer has the
required level of inventory by adjusting the demand and supply gaps.[1]

 Ii) Work-in-progress

 goods in process,or in-process inventory are a company's partially finished goods waiting
for completion and eventual sale or the value of these items.

 These items are either just being fabricated or waiting for further processing in a queue or
a buffer storage.

 The term is used in production and supply chain management.