Materials Management

526 Pages·2014·21.49 MB·English

by  A. K. Chitale and R. C. Gupta

astern
conomy
dition
Third Edition
MATERIALS
MANA4dtMENT
A Supply Chain Perspective
\
Text and Cases
4A1 A.K. Chitale • R.C. Gupta
[1
MATERIALS MANAGEMENT

MATERIALS MANAGEMENT
A Supply Chain Perspective
(Text and Cases)
Third Edition
A.K. CHITALE
Academic Advisor
Govindram Seksaria Institute of Management and Research
Indore
R.C. GUPTA
Professor and Head
Department of Industrial and Production Engineering
Shri Govindram Seksaria Institute of Technology and Science
Indore
PHI Learning LD-J17E0G, It10@c9
Delhi-110092
2014
MATERIALS MANAGEMENT: A Supply Chain Perspective (Text and Cases), Third Edition
A.K. Chitale and R.C. Gupta
© 2014 by PHI Learning Private Limited, Delhi. All rights reserved. No part of this book
may be reproduced in any form, by mimeograph or any other means, without permission in
writing from the publisher.
ISBN-978-81-203-4841-7
The export rights of this book are vested solely with the publisher.
Sixth Printing (Third Edition) August, 2014
Published by Asoke K. Ghosh, PHI Learning Private Limited, Rimjhim House, 111, Patparganj
Industrial Estate, Delhi-110092 and Printed by Mohan Makhijani at Rekha Printers Private Limited,
New Delhi-110020.
CONTENTS
Preface xvii
Preface to the Second Edition xix
Preface to the First Edition xxi
Chapter 1: MATERIALS MANAGEMENT 1-13
1.1 Introduction 1
1.2 Management in Relation to Materials Function 1
1.3 Functions of Management as Applied to Materials 2
1.4 Management of Material Resources 4
1.5 Objectives of Material Management 5
1.5.1 Primary Objectives 6
1.5.2 Secondary Objectives 8
1.6 Achieving Objectives 10
1.7 Effects of Business Changes 11
1.8 Balancing of Objectives 12
1.9 Limitations to Meeting Objectives 12
Review Questions 13
Chapter 2: INTEGRATED MATERIALS MANAGEMENT 14-27
2.1 Introduction 14
2.2 Activities of Materials Management 15
2.3 Importance of Materials Department 17
2.4 Costs Involved in the Management of Materials 19
2.5 Need for Integrated Concept 20
2.6 Areas of Materials Management 20
2.7 Materials Management and Production Control 21
vi Contents
2.8 Inspection of Purchased Items 21
2.9 Relative Status of the Materials Manager 22
2.10 Desirable Qualities of Purchasing and Materials Manager 22
2.11 Interdepartmental Relationship 23
2.12 Advantages of Integrated Materials Management 24
2.13 Summary 26
Review Questions 27
Chapter 3: CLASSIFICATION AND CODIFICATION OF MATERIALS 28-48
3.1 Need for Classification and Identification of Materials 28
3.2 Classification of Materials—General Classification 28
3.3 Classification According to Condition of Materials 30
3.4 Nature of Codification 30
3.5 Process of Codification 31
3.6 Merits of Codification 31
3.7 Demerits of Codification 34
3.8 Codification Systems 35
3.8.1 Alphabetical System 35
3.8.2 Numerical System 36
3.8.3 Decimal System 37
3.8.4 Combined Alphabetical and Numerical System 39
3.8.5 Brisch System 40
3.8.6 Kodak System 41
3.9 Stores Vocabulary 44
3.10 Marking of Stores 44
3.10.1 Colour Marking 45
3.10.2 Secret Marking 46
3.11 Summary 46
Review Questions 48
Chapter 4: SPECIFICATIONS IN MATERIALS MANAGEMENT 49-58
4.1 Objective of Specifications 49
4.2 Collaborative Development 50
4.3 Categories of Specifications 50
4.3.1 Simple Specifications 50
4.3.2 Complex Specifications 53
4.4 Development of Specifications 54
4.41 Organizational Approaches 55
4.5 Purchase Management Research 56
4.6 Writing Specifications 56
4.7 Common Problems in Specifications 57
4.8 Summary 57
Review Questions 58
Contents vi i
Chapter 5: STANDARDIZATION AND VARIETY REDUCTION 59-75
5.1 Definition of Standard 59
5.2 Historical Review 59
5.3 Three Dimensions of Standards 59
5.4 Different Levels of Standards 60
5.5 Various Foreign Standards in Use in India 61
5.6 Procedure for Evolving Indian Standard 62
5.7 Benefits of Standardization 63
5.8 Standardization and Variety Reduction in Products 63
5.8.1 Advantages of Variety Reduction 63
5.9 Scope of Variety Reduction and Standardization 67
5.10 Techniques of Variety Reduction 67
5.10.1 Sales Contribution Analysis 67
5.10.2 Consumption Analysis 67
5.10.3 Renard Series (Preferred Numbers) 69
5.11 The Three S's—Standardization, Simplification and Specialization 71
5.11.1 Standardization 72
5.11.2 Simplification 73
Review Questions 75
Chapter 6: MATERIALS PLANNING 76-87
6.1 Importance of Materials Planning 76
6.2 Definition of Materials Planning 77
6.3 Flowchart for Materials Planning 80
6.4 Techniques of Materials Planning 80
6.4.1 Past Consumption Analysis 81
6.4.2 Material Requirements Planning 82
6.5 Summary 87
Review Questions 87
Chapter 7: BUDGETING AND MATERIAL PLANNING 88-95
7.1 Introduction 88
7.2 Master Budget 89
7.2.1 Sales Budget 90
7.2.2 Production Budget 90
7.2.3 Materials Budget 90
7.2.4 Labour Budget 91
7.2.5 Maintenance Budget 91
7.2.6 Overheads Budget 92
7.2.7 Administrative Budget 92
7.2.8 Capital Expenditure Budget 92
viii Contents
7.2.9 Research and Development Budget 92
7.2.10 Cash Budget 93
7.3 Flexible Budgeting 93
7.4 Summary 94
Review Questions 95
Chapter 8: STORES AND STORE KEEPING 96-110
8.1 Objectives of Store Keeping 96
8.2 Functions of Storekeeper 97
8.3 Features of Successful Store Keeping 99
8.4 Relationship of Store Department with Other Departments 100
8.5 Benefits of Store Keeping 101
8.6 Stores Organization 103
8.7 Location of Stores 104
8.8 Layout of Stores 105
8.9 Receipt Section 106
8.10 Types of Stores 106
8.11 Preservation of Stores 107
8.12 Stock Taking 108
8.12.1 Methods of Physical Stock Verification 108
8.13 Summary 109
Review Questions 109
Chapter 9: STORAGE EQUIPMENT 111-120
9.1 Types of Equipment 111
9.2 Selection of Equipment 115
Review Questions 120
Chapter 10: PRINCIPLES OF MATERIALS HANDLING 121-132
10.1 Introduction 121
10.1.1 Planning Principles 121
10.1.2 Operating Principles 123
10.1.3 Principles Related with Equipment 123
10.1.4 Principles of Cost Reduction 124
10.1.5 General Principles 125
10.2 Classification of Material Handling Equipment 125
10.3 Material Handling Equipment 126
10.4 Summary 132
Review Questions 132
Chapter 11: INVENTORY CONTROL 133-181
11.1 Introduction 133
11.2 Importance and Scope 134
Contents ix
11.3 Cost Concepts 135
11.4 Inventory Models 137
11.4.1 Economic Order Quantity (EOQ) Model 137
11.4.2 Economic Production Order (EPQ) Model 142
11.4.3 Inventory Model Allowing for Shortages 147
11.4.4 General Model 153
11.4.5 Multi-Item Deterministic Model 158
11.4.6 Inventory Model with Price Breaks 167
11.4.7 Probabilistic Inventory Models 175
11.5 Summary 177
Problems 178
Review Questions 181
Chapter 12: INVENTORY MANAGEMENT MODELS 182-194
12.1 Introduction 182
12.2 Deterministic Models of Inventory Management 183
12.2.1 The Q System (Deterministic Case) 183
12.2.2 The P System (Deterministic Case) 184
12.3 Probabilistic Models of Inventory Management 186
12.3.1 Q System (Probabilistic Case) 186
12.3.2 P System (Probabilistic Case) 190
12.4 Using P and Q Systems in Practice 192
12.5 Independent Versus Dependent Demand 193
Review Questions 194
Chapter 13: SELECTIVE INVENTORY CONTROL 195-210
13.1 Introduction 195
13.2 Selective Treatment 195
13.3 ABC Categorization 196
13.3.1 Conducting ABC Analysis 197
13.3.2 Benefits of ABC Classification 202
13.4 High-Medium and Low Price (HML) Analysis 203
13.5 VED Analysis 204
13.6 SDE Analysis 206
13.7 GOLF Analysis 206
13.8 SOS Analysis 206
13.9 FSN Analysis 207
13.10 XYZ Analysis 207
13.11 Three-dimensional Approach for Selective Control of Inventory 207
13.12 Summary 209
Review Questions 210