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Materials Planning
2. Purchasing
3. Receiving -Inward Materials Check
4. Handling and Transportation
5. Storage and Inventory Control
6. Standardization and Cost Control
7. keeping proper records
8. Analyzing and reporting
9. Scrap and surplus Disposal
 Save cost wherever possible!
 Accelerate inventory turnover!
 Ensure Continuity of supply!
 Insist consistency of quality!
 Utilize the resources
 Reduce damages and
 Standardize and improve
Products !
 Maintain harmony with
Measure everything!
Use what is exactly Required!
Reducing wastage is equal to creating
There is a
science for
everything and
only one best =
way of doing
The average time required to
convert materials into finished
goods and then in to Cash.

Inventory conversion period =

Inventory/Sales per day
For Temple Bay
ICP = 60,00000/10,00000= 06 days
% of total annual consumption value
100 In Most of the organization 80% of the consumption
90 value is Represented only by 15 to 20% of the items,
Better to control this A class items first
70 Policies for A Items

60 Only exact quantities to be

Have more than one source
40 Centralize procurement
Individual postings , accurate
30 records
20 Continuous checks, low safety
10 Reduce Lead Time: Regular follow
0 10 up20 30 40 50 60 70 80 90 100
A Very
B strict consumptionCcontrol
Very %
of total requirement
number of items
High, Low Medium value
Assess storage and security
To keep control over consumption at
the departmental head level
Determine the frequency of stock
To evolve buying policies to control
To delegate authorities to different
buyers to make petty cash purchases.
Vital, Essential Desirable
Based on criticality.
Vital – production would come to halt.
Essential – whose stock out cost is
very high.
Desirable – items which do not cause
any immediate loss of production
o Scarcity-Short in supply
o Longer lead time
o Geographical location of suppliers
o Available but not easy to procure
o Reliability of suppliers
o Best to procure once in a year
o Reduce the effort and expenditures
Important assumptions
Demand is known, constant, and independent
Lead time is known and constant
Quantity discounts are not possible
Only variable costs are setup and holding
Stock outs can be completely avoided

Q *= optimal order quantity

Q = order quantity,
D = annual demand quantity of the product
P = purchase cost per unit
C = fixed cost per order
H = annual holding cost per unit
Use duly identified color codes -Search
Follow Banking Method in postings
Issue physical using FIFO method.
Costing weighted average Methods.
Verify stock of ten items daily random
Verify stock of ten items fast moving
Verify stock of every item monthly.
A supply chain in a
organization will comprise
of a network of facilities to
 Procure the material from the
 Transform the material to the
end product
 Distribute the finished product
to the Consumer
More the suppliers more the variations!
Two unreliable suppliers are worse than
One Reliable supplier!
Overcome feeling of insecurity!
Initiate key supplier acct management!
Develop the reliable supplier!
Develop self-certified suppliers to
reduce the inspection levels.
Moreover If you cut the
payroll cost employee will

But if you cut material

cost material will not cry…

And it is very difficult to

cut the overheads!
Reduce scrap inventory
Dispose scrap at regular intervals
Segregate scrap properly to generate more value
Take care for the environment