PEM M C07

Project Materials Management

 Materials Management
10 sessions
Dr. Deepak Sundrani
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Projects Procurement Management
10 sessions
Dr. T.K.Ganguli
Materials Management

Dr. Deepak Sundrani

 Internal assessment
of Prof Sundrani’s portion
 MCQ Test of 10 marks at the beginning of the
6th session
 MCQ Test of 10 marks at the beginning of the
10th session
 5 marks for Attendance
-----------------------------------
Total 25 marks
 Books
1) L.C. Jhamb : Materials and Logistics
Management
2) A.K. Datta : Materials Management
3) P. Gopalakrishnan and M. Sundaresan :
Materials Management : An integrated
approach
4) Arnold and Chapman : Introduction to
Materials Management
 Books Specific to Construction
5) Ian Chandler : Materials Management on
Building sites
6) “Purchase and Stores Manual for a
construction organisation” Chapter 6 in
“Handbook of Construction Management “
2e by P.K.Joy
 The best and easily observable
example of a Materials Manager

Is a HOUSEWIFE
• We all do Materials Management :
Hostelite buys : Toothpaste, soap, etc.
 Introduction
Materials are the key resource in a
manufacturing organisation since no
production is possible without materials.
About 60- 70 % of the total cost is the cost of
materials. ( largest expenditure item)
 Definition
• Materials Management is that process of
management which co-ordinates, supervises
and executes the tasks associated with the
flow of materials to, through, and out of an
organisation in an integrated fashion.

(Materials Manager regulates this flow)

 Functions of materials
management
1) Materials Planning
2) Purchasing
3) Inventory control
4) Store-keeping
5) Stores accounting
6) Transportation ( Internal, external)
7) Disposal of scrap, surplus and obsolete materials
8) Materials economics
9) Waste management
 Importance of materials
management
• Profitability depends on efficiency of Materials
Management
• A penny saved is a penny earned.
 Costs involved in Materials
Management
1) Basic cost of materials
2) Government levies and taxes
3) Ordering cost
4) Inventory carrying costs
5) Packaging and packing cost
6) Material handling costs
7) Freight cost ( from supplier to site)
8) Insurance cost
9) Wastage during receipt , storage, production, etc.
 10 Objectives of Materials
Management
1) Maintain uninterrupted flow of materials (If
stock out : then there will be loss of production)
2) To achieve economy in cost of materials by
adopting cost reduction techniques (Value
Analysis, variety reduction, JIT, etc)
3) Buy Right quality, Right quantity at Right time
4) To reduce inventory investment (Releasing
working capital by ensuring effective control
over inventories)
contd….
Contd… 10 Objectives of Materials
Management
5) To improve corporate image by improving
good-buyer supplier relations (Establishing a
harmonious buyer-seller relationship)
6) To maintain proper records of purchase,
stores, etc
7) To preserve / conserve materials in stock so
that losses due to pilferage, deterioration,
obsolescence are kept at minimum
contd…
Contd… 10 Objectives of Materials
Management
8) To reduce operating costs by
minimising/eliminating wastage
9)To improve competitive strength of the firm
by producing the best quality products at the
lowest possible cost.
10) Speedy disposal of surplus materials.
 Integrated approach
to materials management
For best result, all activities related to
materials must be placed under one
department. These activities are as follows :
1) Materials planning
2) Make or buy decisions
3) Purchasing
4) Receiving and inspection
contd…
 Contd…Integrated approach to
materials management
5) Storage
6) Inventory control (optimum investment)
7) Transportation ( incoming)
8) Distribution of materials (to indentors)
9) Disposal of surplus, obsolete and scrap
materials
10) Developing new sources of supply (for
improving quality and reducing cost)
contd…
 Contd…Integrated approach to
materials management
11) Import substitution
12) Ancillarisation
13) Insurance management
14) Material cost reduction and cost control
( Value analysis, variety reduction, JIT, etc.)
15) Waste Management
16) Materials research ( systematic, formal and
continuous analysis of all factors affecting
materials management function)
 Benefits of Integrated materials
management
1) Decisions can be taken speedily and
accurately
2) Corrective actions are easy to be taken as
accountability is clearly known
3) Right balance of various conflicting interests
are taken
4) Coordination is much better
contd…
 contd… Benefits of Integrated
materials management
5) Other departments are able to do their work
properly as they do not have to search for
materials
6) It is much easier to collect and analyse data
for improved decision making.
 Materials Planning
Materials Planning is a scientific technique of
determining in advance the requirements of
raw materials, ancillary parts and
components, spares, etc. as dictated by the
production programme, to ensure their
availability in the right quantities at the right
time with minimum capital lockup
The basis of materials planning is generally
production-plan based on demand forecasts
for finished goods.
In working out the materials plan,
anticipated longest lead-times must be taken
into account. (especially for imported
materials)
Relationship of material planning
with other major functions

Production Materials plan

Sales forecast
programme

Feedback information and review

 Lack of materials planning
1) Causes ill-planned purchasing ( over ordering
or under ordering)
2) Leads to unwanted emergency orders which
are usually purchased at high cost
3) Increases workload of the purchase
department, receiving stores and primary
(inward) inspection.
Factors influencing materials planning
a) External (Macro) factors
b) Internal (Micro) factors
 External (Macro) factors
1) National economy
2) Price trends
3) Credit policy
4) Direct and Indirect taxes
5) Foreign exchange regulations ( for imported
products)
6) Import policy ( for imported products)
7) International market
8) Business cycle
 Internal (Micro) factors
1) Corporate objectives
2) Technology available
3) Market demand and supply
4) Procurement lead times
5) Rejection rates
6) Working capital available
7) Inventory norms
8) Storage facilities contd…
 Contd….. Internal (Micro) factors
9) Nearness to sources of supply
10) Information data (suppliers, materials
substitutes)
11) Delegation of power
12) Communication system
13) Management policy owards stocking
14) Buyer-seller relationships
15) Company’s financial position
16) Company’s corporate image
Relate buying with supply and price trends
If forecasts predict ample supply of material
and prices are expected to go down, then low-
buying policy
But if forecasts predict the possible shortage
in supply position and increasing price
trends : overbuying ( eg. In homes : buy lot of Onions in summer)
• Seen till here in session 2
• On 27 january
Techniques for materials planning
1) Bill of Materials (parts list).
Document generated at design stage, gives
details of individual parts required. (Part
number, description, quantity required,
material specifications, etc.).
Total Quantity required = Quantity required
per item x Number of units to be produced.
2) Past consumption analysis
Which are consumed on continuous basis for
which no bill of materials is possible, such as
tools, lubricants, electric supplies, packaging
materials
 Budgeting
• Materials budget can be prepared once the
requirements are worked out. It takes into
account the inventory on hand and orders on
hand.