}pDRAFTNI }  MATERIAL MANAGEMENT SYSTEM :

==========================
Material Management is the heart of any organisation/company
as it covers most of the applications in the business viz.
Purchasing, Inventory Management, Production Planning & Control,
Material Requirements Planning, Costing, Quality Assurance,
Warehouse Management etc.
We will discuss these sub systems as we go ahead.
Purchasing:
----------
As discussed in Sales & Distribution , Purchasing starts with
requirements of any raw/packing material for manufacturing
finished goods or due to stocks below Reorder level in the warehouse.
reorder level is the quantity of any material which should be present
in the godown/warehouse at any time. When stock of that material
falls below reorder level, automatically Purchase requisition is
generated.
So PURCHASE REQUISITION is the first document in Purchasing which
determines or demands the need for material or some service.
Sometimes requisition is also called as Purchase Order Indent.
Once the requisition is generated, then a request is sent to all
suppliers/vendors for quotation for prices,delivery dates,materials.
So next document in Purchasing is REQUEST FOR QUOTATION (RFQ).
According to the request, these suppliers send us the quotations for
our demand. So QUOTATION is next document in Purchasing. All such
quotations from suppliers are compared for feasibility. ie.
right prices, delivery dates as per our demand etc,
& purchase Order is generated for most feasible quotation.
Letters are sent to suppliers/vendors for rejecting their
quotations.
There are two types of purchase order processing ,
One time orders - These contain the item description with fixed
deadline for delivery , processed once only.
Outline Agreements - These also have items but no fixed
deadline for delivery. In short outline agreement is the agreement
with the vendor for delivery of :
- material or external services
- within certain range of period
- with agreed quantities & prices
so these are processed as & when necessary.
There are two types of outline agreements. Contracts & Scheduling
agreement.
Amaterial
CONTRACTor
issome
created
service
between
within
Company
certain
(us)period
& theon
supplier
quantity accept ð7 3 
toor
value basis. following types of contracts are generally observed.
Quantity contract - Contract is made on quantity basis with vendor.
Value contract - Contract is made on value basis with vendor.
Both these contracts are further processed by Release orders.
SCHEDULING AGGREEMENT is generated between both parties as
supplier will deliver the goods/materials/services at certain
intervals of time. i.e. deliveries are scheduled on time bound basis.
Information stored on this document is schedule delivery date
& time, scheduled & delivered qty, Purchase requisition no etc.
Next document in the system is PURCHASE ORDER.
Purchase order can be created manually or from requisitions.
There are different types of purchase orders e.g.
- Standard Purchase Order
- Sub contract order
In this case vendor is provided with initial material
& then he manufactures ordered material.
- Consignment order
This is purchase order to Consignement vendor.
- Third party order
This is an order to a supplier/vendor to deliver goods or
provide services directly to the third-praty..i.e. some other
customer/vendor/supplier.
- Transport Order
This transfers stocks from one plant to another within company
or between companies.
- Order for provision of material
This order is a request to the customer to provide necessary
materials for his sales order.
All these different types contain the same information like
- what materials to be ordered
- how much qty
- delivery date
- supplier/vendor
- price conditions etc.
Price information in purchase orders is restricted to authorised
users only.
Dunning letters are the reminder letters sent to suppliers/vendors
for delivery in time etc.
Two types
- a reminder
of dunning
for letters
deliveryare
or generated
a deadlinefor
which
purchase
is notorders.
kept ð7 3 
- missing order acknowledgement from vendor
These letters are sent to vendors as & when required.
Whenever goods/materials are received , they are checked against
Purchase Order for verification.
All information like price ranges, vendors with previous POs etc
is stored in information records for future reference.
Whenever an Invoice is received from vendor it is checked with
 purchase order & goods receipt & verification is done for
material, qty, value , terms of payment etc.
Thus an invoice is posted with reference to purchase order
or good receipt & entry is created in Accounts Payables for
that vendor account.
Thus complete flow of Purchasing can be summarised as below :-
Material Requirement Planning
|
|
Purchase Requisition
|
Request for Quotation
|
Quotation
|
Contract/Scheduling Agreement
|
Purchase Order -------------
| 3 Verification of
Order Follow up 3 material, qty etc.
| 3
Goods Receipts ------->-----
|
Purchasing Information Records
|
Invoice Verification
This completes Purchasing. Please bear in mind that this is just
the general idea of the system .