7. Materials Management Flashcards
The materials that must be managed in operations are:?
■ Material inputs to production (raw materials, supplies, component parts)
■ work-in-progress (unfinished goods)
■ finished goods (not yet delivered)
■ Spare parts for machinery and equipment.
Materials management is undertaken by ?
Materials management is undertaken by operations managers.
It is the planning, organising and controlling of an organisation’s inventory of these four types of materials.
As operations managers monitor output and compare the actual and planned output, they will take corrective action if they find the movement of materials is not efficient.
For most businesses, the cost of materials is a very significant figure—about half the total revenue a business receives.
Therefore poorly planned purchasing and managing of materials can jeopardise any possibility of a healthy profit.
- Material inputs to production?
Whether an organisation produces goods or services, material inputs are required for production. For production to be carried out efficiently, operations managers must ensure that the right quantity and quality of materials is on site at the right time. The early stages of operations planning normally result in the development of a general guide to operations.
- Material inputs to production
MPS?
This general guide to operations is known in operations management as a master production schedule (MPS). The master production schedule is used as a starting point to plan materials needs in detail. Large organisations use a computerised method of planning usually known as materials requirements planning (MRP) or computer-aided production management (CAPM).
A master production schedule covers: ■ what goods and services are to be produced ■ the volume to be produced ■ the production methods to be used ■ when production is to take place ■ where production is to take place ■ the staff needed to do the work.
The ultimate aim of MRP is to achieve the output schedule (in volume and timing) established in the MPS. A materials requirements plan includes: ■ specific materials required ■ exact quantities ■ best times to order from suppliers ■ best delivery times.
- Inventory Management ?
Inventory is an organisation’s stock of materials of all kinds. Inventory management refers to the storage of raw materials and component parts, unfinished production and finished goods ready for distribution. It aims to ensure that the right quantities of parts and materials are available for the operations system to keep running and that there are sufficient products to satisfy demands.
Sources of supply for raw materials and components must be identified.
Necessitates decisions about how much to order, timing of ordering and control of the stock security system.
- Inventory Control?
Inventory control takes two forms: 1 Physical control ■ storing stock ■ Security control ■ Physical movement of stock ■ Regular stocktakes (physical count of stock) 2 Accounting control ■ maintaining a secure accounting system ■ Regular comparisons between accounting records and physical inventory
Control of inventory is essential. It has two dimensions.
1. In the first place, stocks that are idle and do not move are expensive. They tie up business funds for no return, as well as taking up valuable warehouse space.
2. Secondly, an operations system cannot be allowed to run out of material inputs. Production delays or shut-downs caused by material shortages are very costly.
In addition to an inventory of inputs, businesses that produce a range of finished goods need to hold sufficient stocks to offer good quality service (choice) to customers.
Businesses must get the right balance.
They must determine the appropriate quantities to have on hand and build signals into the operations system that alert management when various inventories reach their minimum and maximum levels. Realistic inventory needs will vary from business to business.
- Improvements in inventory management control
Just In Time?
This refers to a system of inventory management. It involves the reduction or minimisation of inventory levels in the supply chain, thereby reducing inventory costs. Thus, it ensures the availability of products in the required amounts at the right time at every stage in the production process, while at the same time minimising the use of equipment, materials, labour and space.
Eliminates waste and storage costs by having all operations completed for the next stage to commence.
Key elements of JIT:
• Aims to reduce costs through minimising the amount of inventory that must be held at any time.
• Small quantities of materials are delivered more frequently to meet immediate requirements.
• Kanban method employed – Controls where orders are in response to needs further up the line and inventory is replaced as it’s used.
• Employee participation is required in identifying wasteful work practices.
- Improvements in inventory management control
ABC Analysis/Kanban Method
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- Supply Chain Management?
The movement of inputs from the providers (suppliers) to an operations system is referred to as the supply chain.
- Supply Chain Management
Procurement of inputs?
Locating and acquiring a regular and reliable supply of high quality inputs is a vital aspect of efficient operations management.
Supply chain management is critical to success in operations.
Large organisations draw on modern technology and management tools to assist the smooth flow of inputs. Computerised systems such as MRP and CAPM (see page 167) are commonly used, as are tools such as JIT (above) and quality certification.
Planning must occur in order to ascertain the exact amounts of materials that will be required.
Operations must try to anticipate price rises.
System must be established to keep inventory at required levels (e.g., JIT).
- Supply Chain Management
Relationships?
Modern operations managers take a keen interest in the quality of their organisation’s working relationships with its suppliers. Where possible, producers should get to know their suppliers personally, develop mutual trust and even visit their production facilities.
Contracts need to be established with reliable suppliers of high quality inputs.
Supplier lead in time must be taken into account (e.g. ordering).
The activities of suppliers are central to the:
■ quality and reliability of materials supplied
■ cost of material inputs
■ timing of materials delivery to the producer
■ application of new developments in technology
■ capacity to supply to the particular specifications of the producer.
Complete Supply Chain?
The complete supply chain for a product usually involves a number of business organisations before it gets to the final customer.
Typically, products move from initial suppliers (e.g. raw materials) to other organisations for value adding (processing). These products become the inputs for other operations systems. After further processing in operations, products move through distribution to retailers and on to the final customer (consumer) at the end of the chain.
From the position of any individual organisation in the supply chain, production can be seen as downstream or upstream.
Downstream processing takes place after the production (operations system) of the organisation.
Upstream processing takes place before the production of an organisation and provides inputs to its operations system.
