Free Essay

Promotional Strategies

In: Business and Management

Submitted By premdsouza
Words 18424
Pages 74
Chap -1
Production management
As any premises in which person are employed for the purpose of making altering , repairing ornamenting , finishing , clearing , washing , breaking , adopting for sale any article
Production process of changing input into output .

Lab our

Goods and services
Conversion Process
Actual V/s Planned

The input to the production system are raw material , parts , energy , production schedules , information technology , capital or management and output are the goods , transported goods ,delivered message , services customers.
For example :- 1) In manufacturing organization like steel plant , input are materials like iron , ore , coke , lime stone ,etc 2) In service organization like bank , inputs are customer and output are serviced customer


PLANNING | * Product selection and design * Process selection and planning * Facility location * Facility layout and materials handling * Capital planning * Forecasting * Production planning | ORGANISING | * Work study and job design | CONTROLLONG | * Production control * Inventory control * Quality control * Maintenance and replacement * Cost of reduction and cost control |

1. Production selection and design -A right kinds of products and good design of the product are crucial for the success of organization . A wrong selection of the product and /or poor design of the product can render the company operation ineffective and non-competitive . 2. Process selection and planning – selection of the optimal conversion system is important as choice of product / services and their design 3. Facilities location – A poor location of the plant can be constant sources of higher cost , difficult marketing and transportation , dissatisfaction among employee and customers. plant location are strategic decision 4. Facilities layout and materials handling – Plant layout is concerned with relative location of one department with another in order to facilities material flow and processing of a product in the most efficient manner through shortest possible distance and through the shortest possible time 5. Capacity planning - capacity planning concern determine and acquisition of productive resources to ensure that their availability matches the demand . capacity decision have a direct influence in performance of the production system in respect of both resources productivity and customer services 6. Production planning and control – production planning s is the system for specifying the production procedure to obtain the desired output in a given time at optimum cost in conformance with specified standard of quality and control is essential to ensure that manufacturing takes place in the manner stared in the manner started in the plan 7. Inventory control – inventory control deals with determination of optimal inventory level of raw material , components , parts , tools , finished goods and supplies to ensure their availability with minimum capital lock up. material requirement planning and just in time are latest technique that can inventory control 8. Quality assurance and control – quality is an important aspect of production system and it must ensure that services and products produced by the company conform to the declared quality standards at the minimum cost. 9. Work study and job design – work study , also called time and motion study , concerned with improved of productivity in the existing jobs and the maximization of productivity in the design of new jobs. 10. Maintenances and replacement – maintenances and replacement involve selection of optimum maintenance policy to ensure higher equipment availability at minimum maintenances and repair cost. 11. Cost reduction and cost control – effective production management must ensure minimum cost of production and in this context cost reduction and cost control acquires significant importance. OBJECTIVE OF PRODUCTION MANAGEMENT

* Production the right kind of goods and services that satisfy customers’ needs (effectiveness objective ) * Maximizing output of goods and services with minimum resources input ( efficiency objective) * Ensuring that goods and services produced conform to pre set quality specification (Quality objective ) * Maximum utilization of manpower , machines (Capital utilization objective) * Minimize the cost of producing goods (cost objective)

RESPONSIBILITIES OF A PRODUCT MANAGER * To forecast the requirement of factor of production to meet target of production * To utilize the factor of production in the most efficient manner * To reduce quality cost by periodical analysis of nonconformance and undertaking suitable corrective and preventive actions * To reduce material handling cost by using efficient material handling system * To continually improve labour productivity by training of workman * To build the team spirit and motivate workmen by personal involvement and by designing and implementing suitable financial incentive schemes
QUALITY OF PRODUCTION MANGER * Intelligence- intelligences is essential for a production manager and infact for any manager. He must be aware of the goals and objectives of the organization . intelligence is essential for optimum utilization of resources * Imagination-imagination is an essential quality of a production manger .An imaginative production manger will innovate new methods and make efficient use of available resources * Resourcefulness- resourcefulness is the ability to use resources are available to overcome problem in different situation . too often problem of operators absence , machine breakdown , rush order etc * Self control – A production manger should not get panicky , discourage or get angry when things go wrong . he should not lose control over himself since lack of self control . * Communication ability – A production manager needs to give instruction , communicate management decision , resolve conflicts , motivate employee , sell new ideas to the employee etc * Flexibility- situation do not same ,they change ,for example customer priorities change , product mix change , A production manager must be flexible so that plan is modified to suit new condition
A production function shows the relationship between inputs of capital and labor and other factors and the outputs of goods and services For example, if one worker can produce 500 pizzas in a day (or other given time period) the production function would be Q = 500 L It would graph as a straight line: one worker would produce 500 pizzas, two workers would produce 1000, and so on. However, more realistic production functions must incorporate diminishing returns to labor or to any other single factor of production. This may be done simply enough: replace the production function
Q = 500 L with the production function Q = 500 L a where a is any fraction, and you will have a production function which shows the curvature characteristic of diminishing returns.
For example, if we choose a = 0.5, so that we are taking the square root of L, we could compute the following relationships: Labor | Output | Marginal Product of Labor | 100 | 5000 | 50 | 200 | 7071 | 20.71 | 300 | 8660 | 15.89 | 400 | 10000 | 13.4 | 500 | 11180 | 11.8 |

Note that the final column, marginal product of labor, shows how much additional output is due to the addition of one more worker, that is, it is given by
Change in output / change in labor and the change in labor is 100 at each level
RELATION OF PRODUCTION WITH OTHER FUNCTION 1) Relation of production with Purchase Function –
Purchasing and production functions coincide because of the fact that the which production will be carried out according purchase department purchase raw material . which raw material needed and how much quality , which quality will decided by production department . purchase department just purchase the material accordingly production department given list.
For example - For example, some restaurants near the sea; for instance, various restaurants in Maine may serve fresh clams or lobsters, which were caught that day. Another example of this are the various restaurants in Italy serving freshly caught fish from the sea. Both of these instances would reduce the amount of frozen fish needed/bought from various food distributors (Clark, Gordon, Sysco) instead, these purchases could be obtained through local markets/docks. In addition, more inland, where fish would be delivered frozen, chefs/cooks have more time between the purchase and preparation time; since the food is frozen, these menu items do not have to be cooked right away. Another factor is the price that can be charged; restaurants near the sea are able to charge higher prices; conversely, if restaurants more inland decide to have fresh fish shipped in, they too are able to raise the menu prices for these special occasions. High quality production of food requires the purchase of high quality food products, proper storage, and food to be held at proper holding times, prior to service. In addition, geographical location as well as availability may decide which food items are served at restaurants; however, the menu will always decide which food items are purchased from distributors.

2) Relation of production with Plant layout
Plant layout- plant layout is important for production . Plant layout is concerned with relative location of one department with another in order to facilities material flow and processing of a product in the most efficient manner through shortest possible distance and through the shortest possible time . if plant layout is good then maximum production will be carried out to minimum time and cost

A good, idea, method , information , object or service that is the end result of a process and serves as a need or want satisfier. It is usually a bundle of tangible and intangible attribute (benefits , features , functions , uses) that a seller offers to a buyer for purchase .
Goods are tangible. You can see them, feel them, touch them etc. services are intangible. The result of human or mechanical efforts to people or objects.
Major distinguishing characteristics of Services: * Intangibility-major component of a service is intangible * Pershibality-many cannot be stored for future sales Airline/Amusement ride
Number of hair cut hours in one week: i.e., if Christies employs 3 people, who work forty hours per week, they have potentially 120 hair cut hours to offer. If they do not have any customers at a particular period during the day, they will lose the opportunity to cut hair at that time and therefore the opportunity to generate revenue...the opportunity has perished...they no longer have the ability to earn revenue from 120 hair cut hours that week!! * Inseparability-customer contact is often the integral part of the service...Legal services/hair dresser, therefore often a direct channel of distribution. * Variability-in service quality, lack of standardization, because services are labor intensive.
PRODUCT CLASSIFICATION 1) Consumer product 2) Industrial product

CONSUMER PRODUCT * Convenience: Packaging is important to sell the product. Consumers will accept a substitute. Marketers focus on intense distribution , time utility. Convenience products can be categorized into staple (milk), impulse (not intended prior to shopping trip). * Shopping: Consumers expend considerable effort planning and making purchase decisions. IE appliances, stereos, cameras. Consumers are not particularly brand loyal. Need producer intermediary cooperation, high margins, less outlets than convenience goods. Use of sales personnel, communication of competitive advantage, branding, advertising, customer service etc. Attribute based (Non Price Competition), product with the best set of attributes is bought. If product attributes are judged to be similar, then priced based. * Specialty: Buyer knows what they want and will not accept a substitute, IE Mercedes. Do not compare alternatives. Brand, store and person loyal. Will pay a premium if necessary. Need reminder advertising. * Unsought: Sudden problem to resolve, products to which consumers are unaware, products that people do not necessary think of purchasing. Umbrellas, Funeral Plots, Encyclopedia
INDUSTRIAL PRODUCT * materials and parts, * capital items, and * supplies and services

Product development
Product development aims to provide the goods wanted by the market , at the time and in the quantities desired by it , at the price it is willing to pay yet leaving a sufficient margin for the manufacturer

PRODUCT DEVELOPMENT FAIL IN TO TWO CATEGORY * Introduction of new product * Improvement of existing product 1) Introduction on new product Product are created to * Give practical shape to the ideas struck accidentally * Fill the gap between incomplete range of product * Utilize the idle resources * Give the scope or utilize the special skill available with company * Meet the new requirement of customer

2) Improvement of existing product

* Short term objective of product improvement are * To provide a new look to the product * To utilize the existing equipment and manpower * To satisfy immediate needs of the customer * Long term objective of product improvement are * To ensure long term growth of business by tying up the customer to only branded product * To reduce the cost of manufacture of the product


Stage 1: Idea Generation
New product ideas have to come from somewhere. But where do organizations get their ideas for NPD? Sources include: * Market Research * Employees * Consultants * Competitors * Customers * Distributors and Suppliers

Stage 2: Idea Screening * This process involves shifting through the ideas generated above and selecting ones which are feasible and workable to develop. Pursing non feasible ideas can clearly be costly for the company.
Stage 3: Concept Development and Testing
The organization may have come across what they believe to be a feasible idea, however, the idea needs to be taken to the target audience. What do they think about the idea? Will it be practical and feasible? Will it offer the benefit that the organization hopes it will? or have they overlooked certain issues? Note the idea taken to the target audience is not a working prototype at this stage, it is just a concept.
Stage 4: Marketing Strategy and Development
How will the product/service idea be launched within the market? A proposed marketing strategy will be written laying out the marketing mix strategy of the product, the segmentation, targeting and positioning strategy sales and profits that are expected.
Stage 5: Business Analysis
The company has a great idea, the marketing strategy seems feasible, but will the product be financially worth while in the long run? The business analysis stage looks more deeply into the Cashflow the product could generate, what the cost will be, how much market shares the product may achieve and the expected life of the product
Stage 6: Product Development
At this stage the prototype is produced. The prototype will clearly run through all the desired tests, and presented to a selection of people made up of the the target market segment to see if changes need to be made
Stage 7: Test Marketing
Test marketing means testing the product within a specific area. The product will be launched within a particular region so the marketing mix strategy can be monitored and if needed modified before national launch
Stage 8: Commercialisation If the test marketing stage has been successful the product will go for national launch. There are certain factors that need to be taken into account before a product is launched nationally. These include: * timing of the launch, * how the product will be launched, * where the product will be launched, * will there be a national roll out or * will it be region by region?

designed products should have following characteristics

* Function * Maintainability * Simplification * Productivity * Quality * Minimum cost

Factors influencing design of the product

* Cost / price ratio * Break even chart * Quality policy * Packaging

Research must be systematic and follow a series of steps and a rigid standard protocol. These rules are broadly similar but may vary slightly between the different fields of science

There are three types of research. These are basic research, applied research, and developmental research.
1. Basic research.” This is also called as “fundamental research” or “pure research.” It seeks to discover basic truths or principles. It is intended to add to the body of scientific knowledge by exploring the unknown to extend the boundaries of knowledge as well as to discover new facts, and learn more accurately the characteristics of known without any particular thought as to immediate practical utility. In other words, the results of basic research in theoretical knowledge have no immediate usefulness or value to man.
2. Applied research. This type of research involves seeking new applications of scientific knowledge to the solution of a problem, such as the development of a new system or produce, new device, or new method in order to solve the problem. In other words, applied research produces knowledge of practical use to man. For instance, fish wastes pollution problem. Fish bone meal as wastes or offal of boneless milkfish, goatfish tapa, tilapia fillet, boneless siganid, canned sardines, canned tuna, and many others are great problems in the community. The people in the community always smell putrid odor which is unhealthful. To solve this problem, utilization and commercialization of fish bone meals as offal of boneless milkfish, goatfish, tapa, canned sardines, canned tuna and many others into fish value-added products are conducted. Hence, fish wastes utilization is applied research because a new method and new procedure are applied to solve into food items.
Another problem is gas shortage. To solve this problem, research on the production of gas is conducted to roll back the prices of oil.

3. Developmental research. This is a decision-oriented research involving the application of the steps of the scientific method in response to an immediate need to improve existing practices. This process involves practitioners who study a certain problem in vivo and from such experience draw their decisions and development as well as evaluation. In other words, if a researcher continues to find practical applications from theoretical knowledge and use this existing knowledge to produce useful products it is called development research. Research and development (R and D) often refers to activities in this field performed or sponsored by funding agencies. For instance, the culture of seaweeds, particular Eucheuma using staking method has existed in a particular locality. This can be improved by using lantay method.

1. Exploratory
This type of research investigates an area or issue on which little previous work has been carried out. In an organisational setting it may be used to discover whether or not a problem exists.
2. Speculative
Sometimes research is implemented strategically, where researchers take account of current situations and speculate as to their future implications. For example, the introduction of a specific government policy might raise implications for practitioners involved in its implementation. Research of this nature might speculate as to what these implications might be and develop a programme of inquiry that can inform future responses to these issues.

3. Descriptive
Descriptive work aims to gather information that illuminates relationships, patterns and links between variables. An example would be an investigation of the link between students' study skills and course drop-out rates.
4. Explanatory
Explanatory research aims to show why relationships, patterns and links occur. Using the example from 3, how could study skills support improve student retention? And does this depend on other factors such as different types of support available?

5. Predictive
The purpose of this type of research is to develop a model that predicts the likely course of events given particular intervening variables or circumstances.

6. Evaluative
To evaluate the impact of something, for example a new policy, event, law, treatment regime or the introduction of a new system.

Pant location and layout
Plant location decision concern both manufacturing and assembly units as well as service organization
Plants location decision being strategic , long term and non repetitive require detailed analysis of long term consequences because 1) Poor location of the plant can be constant sources of higher cost , difficult marketing and transformation , dissatisfaction among the employees and customer 2) Once plant is set up at a particular location , it is comparatively immobile and can be shifted late only at a considerable cost and interruption on production

WHEN DOES A LOCATION DECISION ARISE * A new manufacturing units is to set up * Existing plant operation are difficult to expand due to poor selection of the site earlier * There is emergence of new social , political or economical conditions which suggest a change in the location of plant
There are three factor * Regional factor * Community factor * Site factor

1) Regional factor -Decide the overall area within the country , such factor are : proximity to market , proximity to source of raw material , transport facility

2) Community factor-Influence selection of the plant location within the region . Such factor re : available of labor , industrial; and labor attitude
3) Site factor- Favor specific site within the community . Such factor are available and cost of the land , suitability of the land

Factor influencing three phase of plant location Location factor | Regional factor | Community factor | Site factor | Proximity to market | * | | | Proximity to raw material | * | | | Infrastructural facilities | * | * | | Labor and wages | * | * | | Transportation facilities | * | * | | Industrial and labor attitude | * | * | | Waste disposal | | * | * | Availability of cost of land | | * | * | Suitability of land | | * | * |
URBANE V/S RURAL LOCATION URBAN | RURAL | Proximity to market which reduce cost of distribution of finished produced | Away from market which increase cost of distribution of finished product | Adequate availability of diversified labor | Difficult in getting skilled labor | Availability of good transport facility | Non availability of adequate transport facility | High cost of land , even at high cost , sufficient land may not be available . | Sufficient land at reasonable cost is available | Greater restriction on construction of factory building | Few restriction on construction of factor building | Availability of good communication facility like telephone | Inadequate availability of good communication facility |

Availability of community facilities like school , medial facility | Poor availability of community facilities | Salary and wages structure is high on account of high living cost | Labors cost is low due to low living of cost | Great deal of efforts are required for anti pollution measures | Lesser efforts required for anti pollution measures | Availability of training school , colleges and management institute which reduce the company internal training needs | Absence of training schools , colleges and training institute | Higher labor turn over due to large number of industries | Lower labor turn over due to lesser or no other industrial around | Good public transport facility like road , railway etc | Inadequate public transport facility |

Suburban area is the area located at the outskirts of city . Suburban location provided a compromise between rural and urban location .
Advantages of sub urban location * Availability of adequate land at low cost * Both skilled and unskilled labor can be had from he nearest city * Ancillary industries and services facilities from the near by urban area can be trapped for requirement * Social amenities like education , medical are available in the nearby urban area * Services and training institute located in the nearby urban area * Plant expansion are easier than in the city


The location of the plant can have a crucial effect on the overall profitability of a project, and the scope for future expansion. Many factors must be considered when selecting a suitable plant site.
The principal factors are: * Location, with respect to the marketing area * Raw material supply * Transport facilities * Availability of labor * Availability of suitable land * Environmental impact and effluent disposal * Local community consideration * Climate * Political and strategic consideration
The economic construction and operation of a process unit will depend on how well the plant equipment specified on the process flow sheet and laid out.
The cost of construction can be minimized by adopting a layout that gives shortest run of connecting pipes between equipment, and adopting the least amount of structural steel work. However, this will not necessarily be the best arrangement for operation and maintenance. 2) PROCESS REQUIREMENT:
All the required equipments have to be placed properly within process. Even the installation of the auxiliaries should be done in such a way that it will occupy the least space. 3) OPERATION
Equipment that needs to have frequent operation should be located convenient to the control room. Valves, sample points, and instruments should be located at convenient position and height. Sufficient working space and headroom must be provided to allow easy access to equipment. 4) MAINTENANCE
Heat exchangers need to be sited so that the tube bundles can be easily withdrawn for cleaning and tube replacement. Vessels that require frequent replacement of catalyst or packing should be located on the outside of buildings. Equipment that requires dismantling for maintenance, such as compressors and large pumps, should be placed under cover. 5) SAFETY
Blast walls may be needed to isolate potentially hazardous equipment, and confine the effects of an explosion. At least two escape routes for operator must be provided from each level in the process building. 6) PLANT EXPANSION
Equipment should be located so that it can be conveniently tied in with any future expansion of the process. Space should be left on pipe alleys for future needs, service pipes oversized to allow for future requirements. 7) MODULAR CONSTRUCTION:
In recent years, there has been a move to assemble sections of the plant at the manufacturer site. These modules will include the equipment, structural steel, piping and instrumentation. The modules then transported to the plant site, by road or sea.
(1) Process layout
(2) Product layout (3) Static product layout or Project layout (4) Cellular layout
It is also called functional layout. All machines performing similar type of operations are grouped at one location in the process layout e.g. all lathes, milling machines, cutting machines etc in the engineering shop will be clustered in their like groups. Thus all forging will be done in one area and all the lathes will be placed in another area. In this layout, several products may share a machine to make its full use. The sequential arrangement of the machine group is generally, but not necessarily made on the basis of labor operations. In this type of layout the process rather than the product has a dominating role. The product is given secondary consideration and is moved for the purpose of operations to the process section with like machines stationed at a particular point. This type of process is more suitable to job order type of production. In such production the operation differs from product to product. So, it is desirable to arrange the machines on the basis of process rather than on the products. * The typical arrangement of the machines in the process layout will be as under: * Product ‘A’ and Product ‘B’ with their differential sequence will be routed for the processing in the manner.
Advantages: The process layout avails of the following advantages:
1) Like product layout it eliminates the duplication of machines an enables the optimum use of installed capacity.
2) It facilitates the flexibility in production. It is more flexible than a line layout. Different products can be made without the changes in the arrangement of machine. The production capacity is not arranged in rigid sequence and fixed rated capacity with line balancing.
3) Like product layout, the break down of one machine does not interrupt the entire production flow.
4) Specialization in supervision becomes possible.
5) Individual incentive schemes can be developed.
Disadvantages: The following are the main disadvantages of the process layout: 1) Due to lack of straight line sequence of production, it is impossible to maintain the line balancing in production. So the problems of bottleneck and waiting and idle capacity arise.
2) The cost of material handling increases due to long routing and back tracking between the processes.
3) The processing time is prolonged which reduces the inventory turnover and increase the investments in inventories.
4) The inspection cost increases. Due to frequent changes in the machine set-up inspection is required at each stage of the process.
5) The cost of supervision increase due to specialist supervisors and more number of supervisors are required at each process unit.
6) The production planning and control becomes difficult due to complexities arising in routing, scheduling, dispatching and follow up.
7) It is not possible to implement the group inventive schemes on the basis of quantity of the products manufacturing
8) More space is required for internal storing, reservoir of materials and provision for the expansion of the particular process section

In this type of layout, the machines are arranged in the sequence as required by the particular product. All machines as required to balance the particular product the product line layout. In this layout, one product goes through all the machines lined up, in the order required by its manufacture. The best known example of this type of layout is seen in motor car production. To make this layout successful, the work load on the various machines must be balanced. The process of getting even loading at each stage of production is called line balancing.
In this type of layout, the product is dominating over the process, in the sense that the product is given the primary importance and the process machine must remain present at a point where the product needs its services. Thus, unlike the process layout, the process is given secondary importance in relation to the product. Product layout suitable for continuous flow production with few items of production: It does not require frequent changes in machine set up. The typical arrangement of the machines in the product with the separate independent product lines for the Product ‘A’ and Product ‘B’ will be as shown.
Advantages: The product layout is advantageous as under: 1) Reduced material handling cost due to straight line production flow.
2) Mechanization of material handling is possible due to handling between fixed points.
3) Line balancing may eliminate bottlenecks an idle capacity.
4) Shorter operating cycle due to shorter and speedier movement of materials.
5) Maximum utilization of machine and labor capacity through developing proper balance between them.
6) Effective control over production with reduced supervision by generalist supervisors. By reducing the manufacturing to simple steps we can often use less skilled labor.
7) Effective quality control with reduced inspection points. It does not require frequent changes in machine set-up.
8) Effective production planning and control. Unlike process layout, the routing, scheduling, dispatching and follow up are relatively easier.
9) Maximum use of space due to straight production flow and reduced need of interim storing.
10) It facilitates the implementation of the group inventive schemes for the workers.
11) It is relatively easy to control

Fixed position layout involves the movement of men& machines to the product which remains stationary. In this type of layout, the materials or major components remains in a fixed location, &tools, machinery & men as well as other pieces of material are brought to this location. The movement of men & machines is advisable as the cost of moving them would be lesser. This is fallowed in manufacturing of bulky & heavy products, such as, construction of buildings , locomotives, ships, boilers, aircraft & generators

Advantages * Men & machines can be used for a wide variety of operations producing different types of products. * The investment on layout is very small * The worker identifies himself with the products & takes pride in it when the work is complete. * The high cost of & difficulty in transporting a bulky product is avoided

CELLULR MANUFACTURING (CM)LAYOUT In CM, machines are grouped in to a cells &cells function somewhat like product layout within a larger shop or process layout. Each cell in the CM layout is formed to produce a single part family- a few parts all with a common characteristics , which usually means that they require the same machines& have similar machine settings
•Lower WIP inventories
•Reduced materials handling cost.
•Shorter flow times in production .
•Simplified production planning (Material and labor).
•Increased operators responsibilities.
• Improved visual control & fewer tooling changes , therefore facilitating quicker set ups.
•Overall performance often increases by lowering production costs & improving on time delivery.
•Quality also tends to improve

DISADVANTAGES of CELLULR MANUFACTURING (CM)LAYOUT Reduced manufacturing flexibility &potentially increased machine- down time( since machines are contained to cells & may not be used all the time) & finally duplicate pieces of equipment may be needed so that parts need not be transported b/w cells


The movement of materials (raw materials, scrap, semi finished, and finished) to, through, and from productive processes; in warehouses and storage; and in receiving and shipping areas
Short distance movement of goods or materials within a storage area, involving loading, unloading, palletizing, de-palletizing, etc The essential requirements of a good materials handling system may be summarized as:

(i) Efficient and safe movement of materials to the desired place.
(ii) Timely movement of the materials when needed.
(iii) Supply of materials at the desired rate.
(iv) Storing of materials utilizing minimum space.
(v) Lowest cost solution to the materials handling activities.

(i) Bulk materials as well as unit materials handing. Bulk handling is particularly relevant in the processing, mining and construction industries. Unit materials handling covers handling of formed materials in the initial, intermediate and final stages of manufacture.
(ii) Industrial packaging of in-process materials, semi finished or finished goods, primarily from the point of view of ease and safety of handling, storage and transportation. However, consumer packaging is not directly related to materials handling.
(iii) Handling of materials for storage or warehousing from raw materials to finished product stage.

A well designed materials handling system attempts to achieve the following:
(i) Improve efficiency of a production system by ensuring the right quantity of materials delivered at the right place at the right time most economically.
(ii) Cut down indirect labour cost.
(iii) Reduce damage of materials during storage and movement.
(iv) Maximise space utilization by proper storage of materials and thereby reduce storage and handling cost. (v) Minimise accident during materials handling.
(vi) Reduce overall cost by improving materials handling.
(vii) Improve customer services by supplying materials in a manner convenient for handlings.

Basic classification of material is made on the basis of forms, which are (i) Gases,
(ii) Liquids,
(iii) Semi Liquids and
(iv) Solids.

Types of material handling equipment 1. Wheel barrows , Hand trucks and trolleys
Hand / Wheel barrows , hand trucks and trolleys are manual handling equipment which are generally used in small scale industries where labourers bring materials (semi , finished good ) , singly or in unit loads for the operator and carry the semi-finished goods / finished goods after the operation . Most commonly used handling under this classification are :- 1 hand barrow 2 Wheel barrow 3 two wheel truck

2. Conveyors – fix type of material handling system used for moving material either continuously or intermittently between two fixed point
Characteristic of conveyors 1) Conveyors create relatively a fixed route 2) They occupy space continuously except when they are of portable 3) They reduce handling and therefore are safer in operation

3. Industrial Truck Industrial trucks are the vehicles ( with hand operator or power operated ) with a precision to carry and move materials by transportation of the vehicle itself . They represent the second major category of material handling equipment .
Industrial truck are suitable where:- 1) The material require to be picked up and move intermittently over different routes . 2) The distances and moderate . Unlike conveyors , there is no restriction on the distance over which material may be moved 3) Material can be put into containers . packed or stacked to form unit loads

4. Hoists and cranes :-
Hoists are used for loading and uploading of heavy or long objects. Hoists are of following types 1) Chain Hoists ( manual) 2) Pneumatis hoists 3) Electric Hoist
Factor to be consider for selecting hoist are 1) Weight of the component to be handled 2) Lifting height i. E overall dimensions of working area 5. Ropeway :- Ropeway are used for overhead transport of materials over greater distance 6. Lift :- Lift are employed in multi storey plants to transport materials from one floor to another . Buckets or trays mounted on en ended chain running from the grouped floor to the top floor are generally used in construction industry to move material from the ground floor to the top floor 7. Tractors and trailers – Tractors are used to transport material over long distances

To reduce the material handling cost | To reduce the manufacturing cycle time | Controlling the movement of materials | Helping in better working environment&Protection of material movement | Reducing the rejection problemsAt the minimum level.Storage capacity is increased |

A. Indicators of Low Material Productivity 1. Excessive inventory or low inventory turnover ratio. 2. Long and uncertain replenishment lead time. 3. Large proportion of non moving (dead) in stock. 4. Excessive material handling / transportation cost. 5. Spoilage, scrap or waste of material. 6. Delays in meeting requirement. 7. Long retrieval and issue time in store. 8. Poor storage methods. 9. Buying from wrong source.
10. Excessive purchasing bill.
11. Too much variety of parts, lack of standardization.
12. Lack of material codification.
13. Long and inefficient purchase procedure.
14. Poor records keeping.
15. Quality problems for incoming materials, Inventory turnover ratio can be a good indicator of materials management’s effectiveness and to control inventory we have to look at total system cost-both visible and hidden.
B. Possible Reasons for Low Material Production 1. Lack of integrated system approach – different functional managers tends to look at materials related decisions from their own narrow segmented sub system view point. For instance, production manager may want to minimize stock out while finance manager may like to minimize inventories. Many material management problems may be due to designers prescribing costlier material with too much variety and non standard dimensions.

S.O.S. – Surplus Obsolete and Scrap material. Every time handling is not good, it may affect the cost.

Long retrieval – Poor storage functions as lot of items deal in Storage that is location problem due to unable to locate the item. There is no standard code cut down waiting for improving the system.

2. In decision making related to materials, ignoring invisible (hidden) cost in preference to visible costs. 3. Uncertain supply / demand environment. Just in case environment. Source of uncertainty could be demand lead time, inflation, non availability, quality problems etc. just in case environment a dependable source of supply can be a great asset to Materials Management function. 4. Lack of scientific decision making – Using models of inventory planning and control.
C. Overhauling Your Heavy Industrial Equipment
You can find industrial material handling equipment in warehouses, on loading docks, and on construction sites, where you'll see forklifts, industrial ramps, and loading equipment, carrying heavy loads of materials as it loads and unloads trucks, or moves equipment from one point to another. Material handling equipment permits workers to complete tough jobs quickly and effectively, without putting themselves at risk of injury.
D. Helping to Define Customer Satisfaction

Possibly the best source of information on how a company can operate more efficiently is its employees. However, this is often the most overlooked management tool. When companies ask their employees for their input, the employee has a sense of worth and the information they provide the company is 95 percent effective. E. Buying Labels online is Easy and Economical

A great way to find and purchase custom labels for your home business is through an online retailer that specializes in labels. One of the best ways to find these retailers is by conducting an Internet search using an online search engine. This search should give you a large list to choose from, so you should have no trouble finding exactly what you are looking for.

F. ID, Badge, Clips and Supplies
One of the main goals of businesses today is keeping their employees, visitors and assets safe from harm. One of the best methods for doing this is to implement an ID badge system in your business procedures. If used correctly, the ID badge system will not only help control access to your building, but it can also help promote good customer service by tracking visitors and their reasons for coming to your building.
G. Saving Money with a medical Billing Company
You can save significantly by using a medical billing coding service. Find a company with reasonable rates and weigh their rates against what you will save by using them. For example, if you use a medical billing service, you will need fewer staff members. This will save thousands in salaries, bonuses, benefits, taxes, and ongoing training. You will also save by not having to purchase, maintain, repair, support, and upgrade the hardware and complex software used in medical billing. You won't have the expense of buying paper supplies and postage for mailing bills or telephone and electronic charges for following up on overdue accounts. By using a cost-efficient billing service, you can eliminate the expenses of in-house billing. You can save a lot of money, focus on the practice of medicine, feel confident that your billing is being done correctly, obtain reports, and have a resource to field your patients' billing questions, leaving your office phone free for appointments and medical questions.

H. GPS scan before personal or Business Use
You can use a GPS tracking device or fleet management services for personal or business purposes. Maybe you don't need to track an entire fleet of vehicles, but you would like to keep track of where your kids are going and how fast they are driving. These systems can do this for you. Although, be prepared for a substantial bill at the end of each month. You can find cheaper systems that do not track the vehicle in real time, but rather you have to download the information. This method is good if you just want to check on where they were.

I. Handling today’s Changes with the Right Project Software
Efficient project management is essential to effectively handle today's changes in the business world. Traditional forms of management cannot contend with the modern dynamic economic, social, and business environment. With the right project management software tools, managers can assist their companies to achieve their profit goals as well as assist individual employees to improve their work performance and productivity.
Many businesses would like to use a project management service and take away the headache of doing it themselves. Of course, if you wish to do it yourself, you can find many resources available. Project management resources include books, articles, business models, and internet learning courses as well as project management software. Project leaders are directed to learn the vital steps in project management as well as use all possible resources to guarantee project success. The Internet is a wonderful source for project management resources, such as articles.

J. Developing Criteria for Data Entry

Companies develop criteria for data entry and all too often only make changes to their criteria when forced by circumstances to do so. Few companies review their data entry procedures and processes periodically. The result is that the output is likely to decrease in accuracy and consequently in usefulness over time. If the data entry format is regularly reviewed, procedures and processes can be updated and efficiency greatly enhanced.
Outsourcing data entry companies offer a wide range of services to support your specific data entry focus. Research each company online to help you learn more about their background. Most companies should be able to help you with just about anything, from special projects to simple data entry. Some online data entry services specialize in industry-specific contracts. Others offer services for different types of businesses but have specialists on staff with expertise in multiple fields.

K. Bar codes are used when items are labeled with information

The Universal Product Code is a set of lines at varying widths that represent product or package information and can then be read by an optical scanner. Bar codes and radio frequency identification (RFID) devices are used when items are labeled with information that has to be processed by computer. Instead of typing the data manually into a computer, the information is entered automatically when the barcode is scanned. In baggage routing at airports, barcodes contain information on the passenger and destination.

L. Large amounts of products and the need to control it

In a manufacturing company of a reasonable size, the number of inventory items often runs into the hundreds or more. Monitoring each one of these items is extremely difficult. Analysis enables management to concentrate its attention on a smaller number of items that account for a high percentage of the annual usage of all items in inventory. Many companies will use an inventory management software program to help control the flow

M. Raw material management

When you have an automated warehouse you need material handling software to manage the storage, retrieval and transportation of products. Other key functions that are often handled by material handling software include put away, routing instructions, and key picking.

There is several different materials software handling packages on the market today that are very good. If you want to efficiently manage automated material handling equipment such as automated guided vehicles (AGV), Robotic Palletizes and Depalletizers, and as conveyor and sortation systems (MHE) a good product to look at is the SwiftWCS material handling software.

MAINTENANCE maintenance is a set of organised activities that are carried out in order to keep an item in its best operational condition with minimum cost acquired.

Maintenance Activities
Activities of maintenance function could be either repair or replacement activities, which are necessary for an item to reach its acceptable productivity condition and these activities, should be carried out with a minimum possible cost

Maintenance Objectives
Maintenance objectives should be consistent with and subordinate to production goals. The relation between maintenance objectives and production goals is reflected in the action of keeping production machines and facilities in the best possible condition.

* Maximising production or increasing facilities availability at the lowest cost and at the highest quality and safety standards. * Reducing breakdowns and emergency shutdowns. * Optimising resources utilisation. * Reducing downtime. * Improving spares stock control


* Run to Failure Maintenance (RTF) * Preventive Maintenance (PM) * Corrective Maintenance (CM) * Improvement Maintenance (IM) * Predictive Maintenance (PDM)

1) Run to Failure Maintenance (RTF * The required repair, replacement, or restore action performed on a machine or a facility after the occurrence of a failure in order to bring this machine or facility to at least its minimum acceptable condition. * It is the oldest type of maintenance. * It is subdivided into two types: * Emergency maintenance: it is carried out as fast as possible in order to bring a failed machine or facility to a safe and operationally efficient condition. * Breakdown maintenance: it is performed after the occurrence of an advanced considered failure for which advanced provision has been made in the form of repair method, spares, materials, labour and equipment. * Disadvantages: 1. Its activities are expensive in terms of both direct and indirect cost. 2. Using this type of maintenance, the occurrence of a failure in a component can cause failures in other components in the same equipment, which leads to low production availability.
Its activities are very difficult to plan and schedule in advance 2) Preventive Maintenance (PM)

It is a set of activities that are performed on plant equipment, machinery, and systems before the occurrence of a failure in order to protect them and to prevent or eliminate any degradation in their operating conditions.

The advantage of applying preventive maintenance activities is to satisfy most of maintenance objectives.

The factors that affect the efficiency of this type of maintenance:

The need for an adequate number of staff in the maintenance department in order to perform this type of maintenance. 1. The right choice of production equipment and machinery that is suitable for the working environment and that can tolerate the workload of this environment. 2. The required staff qualifications and skills, which can be gained through training. 3. The support and commitment from executive management to the PM programme. 4. The proper planning and scheduling of PM programme. 5. The ability to properly apply the PM programme 6. It is good for those machines and facilities which their failure would cause serious production losses. 7. Its aim is to maintain machines and facilities in such a condition that breakdowns and emergency repairs are minimised. 8. Its activities include replacements, adjustments, major overhauls, inspections and lubrications

Researchers subdivided preventive maintenance into different kinds according to the nature of its activities: * Routine maintenance which includes those maintenance activities that are repetitive and periodic in nature such as lubrication, cleaning, and small adjustment. * Running maintenance which includes those maintenance activities that are carried out while the machine or equipment is running and they represent those activities that are performed before the actual preventive maintenance activities take place.

* Opportunity maintenance which is a set of maintenance activities that are performed on a machine or a facility when an unplanned opportunity exists during the period of performing planned maintenance activities to other machines or facilities. * Window maintenance which is a set of activities that are carried out when a machine or equipment is not required for a definite period of time. * Shutdown preventive maintenance, which is a set of preventive maintenance activities that are carried out when the production line is in total stoppage situation.

3) Corrective Maintenance (CM)
In this type, actions such as repair, replacement, or restore will be carried out after the occurrence of a failure in order to eliminate the source of this failure or reduce the frequency of its occurrence

This type of maintenance is subdivided into three types: 1. Remedial maintenance, which is a set of activities that are performed to eliminate the source of failure without interrupting the continuity of the production process. 2. Deferred maintenance, which is a set of corrective maintenance activities that are not immediately initiated after the occurrence of a failure but are delayed in such a way that will not affect the production process. 3. Shutdown corrective maintenance, which is a set of corrective maintenance activities that are performed when the production line is in total stoppage situation

The main objectives of corrective maintenance are the maximisation of the effectiveness of all critical plant systems, the elimination of breakdowns, the elimination of unnecessary repair, and the reduction of the deviations from optimum operating conditions.

The difference between corrective maintenance and preventive maintenance is that for the corrective maintenance, the failure should occur before any corrective action is taken.

Corrective maintenance is different from run to failure maintenance in that its activities are planned and regularly taken out to keep plant’s machines and equipment in optimum operating condition.

The way to perform corrective maintenance activities is by conducting four important steps: 1. Fault detection. 2. Fault isolation. 3. Fault elimination. 4. Verification of fault elimination. In the fault elimination step several actions could be taken such as adjusting, aligning, calibrating, reworking, removing, replacing or renovation

Corrective maintenance has several prerequisites in order to be carried out effectively: 1. Accurate identification of incipient problems. 2. Effective planning which depends on the skills of the planners, the availability of well developed maintenance database about standard time to repair, a complete repair procedures, and the required labour skills, specific tools, parts and equipment. 3. Proper repair procedures. 4. Adequate time to repair. 5. Verification of repair. 4) Improvement Maintenance (IM)

It aims at reducing or eliminating entirely the need for maintenance.

This type of maintenance is subdivided into three types as follows: 1. Design-out maintenance which is a set of activities that are used to eliminate the cause of maintenance, simplify maintenance tasks, or raise machine performance from the maintenance point of view by redesigning those machines and facilities which are vulnerable to frequent occurrence of failure and their long term repair or replacement cost is very expensive
2. Engineering services which includes construction and construction modification, removal and installation, and rearrangement of facilities. 3. Shutdown improvement maintenance, which is a set of improvement maintenance activities that are performed while the production line is in a complete stoppage situation

5) Predictive Maintenance (PDM)

Predictive maintenance is a set of activities that detect changes in the physical condition of equipment (signs of failure) in order to carry out the appropriate maintenance work for maximising the service life of equipment without increasing the risk of failure.

It is classified into two kinds according to the methods of detecting the signs of failure: * Condition-based predictive maintenance * Statistical-based predictive maintenance

* Condition-based predictive maintenance depends on continuous or periodic condition monitoring equipment to detect the signs of failure. * Statistical-based predictive maintenance depends on statistical data from the meticulous recording of the stoppages of the in-plant items and components in order to develop models for predicting failures.

* The drawback of predictive maintenance is that it depends heavily on information and the correct interpretation of the information. * Some researchers classified predictive maintenance as a type of preventive maintenance. * The main difference between preventive maintenance and predictive maintenance is that predictive maintenance uses monitoring the condition of machines or equipment to determine the actual mean time to failure whereas preventive maintenance depends on industrial average life statistics.


Production Planning is concerned with the determination, acquisition and arrangement of all facilities necessary for future operations

objectives of Production Planning

The need, main functions or objectives of production planning are as follows: * Effective utilization of resources. * Steady flow of production. * Estimate the resources. * Ensures optimum inventory. * Co-ordinates activities of departments. * Minimize wastage of raw materials. * Improves the labour productivity. * Helps to capture the market. * Provides a better work environment. * Facilitates quality improvement. * Results in consumer satisfaction. * Reduces the production costs. * Now let's discuss each objective of production planning one by one.

1. Effective utilization of resources

Production planning results in effective utilization of resources, plant capacity and equipments. This results in low-cost and high returns for the organization.

2. Steady flow of production

Production planning ensures a regular and steady flow of production. Here, all the machines are put to maximum use. This results in a regular production, which helps to give a routine supply to customers.

3. Estimate the resources

Production planning helps to estimate the resources like men, materials, etc. The estimate is made based on sales forecast. So production is planned to meet sales requirements.

4. Ensures optimum inventory

Production planning ensures optimum inventory. It prevents over-stocking and under-stocking. Necessary stocks are maintained. Stock of raw material is maintained at a proper level in order to meet the production demands. Stock of finished goods is also maintained to meet regular demands from customers.

5. Co-ordinates activities of departments

Production planning helps to co-ordinate the activities of different departments. For e.g. the marketing department co-ordinates with production department to sell the goods. This results in profit to the organization.

6. Minimize wastage of raw materials

Production planning minimizes wastage of raw materials. It ensures proper inventory of raw materials and materials handling. This helps to minimize wastages of raw material. It also ensures production of quality goods. This results in a minimum rejects. So proper production planning and control results in minimum wastage.

7. Improves the labour productivity

Production planning improves the labour productivity. Here, there is maximum utilization of manpower. Training is provided to the workers. The profits are shared with the workers in form of increased wages and other incentives. Workers are motivated to perform their best. This results in improved labour efficiency.

8. Helps to capture the market

Production planning helps to give delivery of goods to customers in time. This is because of regular flow of quality production. So the company can face competition effectively, and it can capture the market.
9. Provides a better work environment

Production planning provides a better work environment to the workers. Workers get improved working conditions, proper working hours, leave and holidays, increased wages and other incentives. This is because the company is working very efficiently.

10. Facilitates quality improvement

Production planning facilitates quality improvement because the production is checked regularly. Quality consciousness is developed among the employees through training, suggestion schemes, quality circles, etc.

11. Results in consumer satisfaction

Production planning helps to give a regular supply of goods and services to the consumers at far prices. It results in consumer satisfaction.

12. Reduces the production costs

Production planning makes optimum utilization of resources, and it minimizes wastage. It also maintains optimum size of inventories. All this reduces the production costs.


Planning and controlling are two separate factions of management, yet they are closely related. The scope of activities if both are overlapping to each other. Without the basis of planning, controlling activities becomes baseless and without controlling, planning becomes a meaningless exercise. In absence of controlling, no purpose can be served by. Therefore, planning and controlling reinforce each other. According to Billy Goetz, " Relationship between the two can be summarized in the following points * Planning precedes controlling and controlling succeeds planning. * Planning and controlling are in separable functions of management. * Activities are put on rails by planning and they are kept at right place through controlling. * The process of planning and controlling works on Systems Approach which is as follows : Planning → Results → Corrective Action Planning and controlling are integral parts of an organization as both are important for smooth running of an enterprise. * Planning and controlling reinforce each other. Each drives the other function of management.

Chap -3

Materials management is the branch of logistics that deals with the tangible components of a supply chain. Specifically, this covers the acquisition of spare parts and replacements, quality control of purchasing and ordering such parts, and the standards involved in ordering, shipping, and warehousing the said parts.
It is the planning, directing, controlling and coordinating those activities which are concerned with materials and inventory requirements, from the point of their inception to their introduction into the manufacturing process. It begins with the determination of materials quality and quantity and ends with its issuance to production to meet the customer’s demand as per the schedule and at the lowest cost.

Material management is an approach for planning, organizing, and controlling all those activities principally concerned with the flow of materials into an organization.

A. Materials Management: Some Definition 1. Materials Management is connected with maintaining adequate supply of something (raw material, spares, and components, operating supplies (utilities) to meet anticipated demands economically. 2. The function of Material Management is to ensure supply of materials at right time, place, in right quantity, of right quality, from right sources and at right price. 3. Materials Management is concerned with the management of material flow into, through and out of system. 4. Materials Management is confederacy of traditional material activities bounded by a common idea – the idea of an integrated management approach to planning acquisitions, conversion, flow and distribution of production materials from raw material state to finished product state. 5. Materials Management is decision making with respect to design, procurement, storage, issue, packing and handling and accounting of materials to get most out of every amount invested in materials.

B. Concept of Productivity

Productivity is nothing but the reduction in wastage of resources or it is connected with optimal utilization of inputs like men, machine, material, energy, space, time and building etc. for producing goods or services. Productivity of a production system may be defined as ratio between output and input which means the resources utilized.
Quantity of Productivity = Output/Input
C. Difference between Production and Productivity

Production of any commodity or service is the volume of output irrespective of the quantity and quality of resources employed to achieve the level of output. Once we put an element of efficiency with which resources are used we enter the area of productivity. Thus production may improve without the corresponding improvement in the productivity and vice-versa. If the input remains the same and the production output increases, there is an improvement in productivity. Production therefore means the output in terms of money whereas productivity is the efficiency of the system used production.
D. Role of Materials Managements

1. Material planning and selection. 2. Purchasing of materials. 3. Inventory storage and stores control. 4. Standardization, simplification and value analysis.

E. Techniques in Improving Productivity Management
The various techniques to improve the productivity of a system are as under: 1. Task based techniques. 2. Product based techniques. 3. Technology based techniques. 4. Material based techniques. 5. Employees based techniques.

i. Task Based Techniques

1. Work measurement techniques (time study). 2. Motion study/work simplification (method study). 3. Job analysis. 4. Job evaluation and merit rating. 5. Ergonomics related with human factors. 6. Production scheduling.

ii. Product Based Techniques

1. Product classification and coding. 2. Research and development. 3. Reliability and improvement in product design. 4. Product standardization. 5. Product diversification. 6. Product specialization.

iii. Technology Based Techniques

1. Computer aided design. 2. Computer aided resource planning. 3. Computer aided manufacturing. 4. Computer integrated manufacturing. 5. Computer aided inspection. 6. Group technology. 7. Robotics and just in time. 8. Maintenance management.

iv. Material Based Techniques

1. Material requirement planning. 2. Inventory control. 3. Just in time concept of inventory management. 4. Materials management and quality control. 5. Materials handling systems.

v. Employee Based Techniques

1. Incentive schemes for individual employees. 2. Incentive schemes for group of employees. 3. Management by objectives. 4. Fringe benefits for employees. 5. Total quality management. 6. Zero defect benefits for employees.

A large component of materials management is ensuring that parts and materials used in the supply chain meet minimum requirements by performing quality assurance (QA). While most of the writing and discussion about materials management is on acquisition and standards, much of the day to day work conducted in materials management deals with QA issues. Parts and material are tested, both before purchase orders are placed and during use, to ensure there are no short or long term issues that would disrupt the supply chain. This aspect of material management is most important heavily automated industries, since failure rates due to faulty parts can slow or even stop production lines, throwing off timetables for production goals. 2) Standards
The other major component of materials management is standards compliance. There are standards that are followed in supply chain management that are critical to a supply chain's function. For example, a supply chain that uses just-in-time or lean replenishment requires absolute perfection in the shipping of parts and material from purchasing agent to warehouse to place of destination. Systems reliant on vendor-managed inventories must have up-to-date computerized inventories and robust ordering systems for outlying vendors to place orders on. Materials management typically insures that the warehousing and shipping of such components as are needed follows the standards required to avoid problems. This component of materials management is the fastest changing part, due to recent innovations in SCM and in logistics in general, including outsourced management of warehousing, mobile computing, and real-time logistical inventories. 3) Materials Management Week
Each year, an entire week is dedicated to celebrating resource and materials management professionals for their outstanding contributions to healthcare and the overall success of the supply chain. Sponsored by the Association for Healthcare Resource & Materials Management (AHRMM), National Healthcare Resource & Materials Management Week (MM Week) provides an opportunity to recognize the integral role materials management professionals play in delivering high-quality patient care throughout the health care industry.

THE KEY OBJECTIVES OF MM ARE : * To buy at the lowest price , consistent with desired quality and service * To maintain a high inventory turnover , by reducing excess storage , carrying costs and inventory losses occurring due to deteriorations , obsolescence and pilferage * To maintain continuity of supply , preventing interruption of the flow of materials and services to users * To maintain the specified material quality level and a consistency of quality which permits efficient and effective operation

* To develop reliable alternate sources of supply to promote a competitive atmosphere in performance and pricing * To minimize the overall cost of acquisition by improving the efficiency of operations and procedures * To hire, develop, motivate and train personnel and to provide a reservoir of talent * To develop and maintain good supplier relationships in order to create a supplier attitude and desire furnish the organization with new ideas , products, and better prices and service * To achieve a high degree of cooperation and coordination with user departments * To maintain good records and controls that provide an audit trail and ensure efficiency and honesty * To participate in Make or Buy decisions


* To gain economy in purchasing * To satisfy the demand during period of replenishment * To carry reserve stock to avoid stock out * To stabilize fluctuations in consumption * To provide reasonable level of client services

Primary | Secondary | Right price | Forecasting | High turnover | Inter-departmental harmony | Low procurement | Product improvement | & storage cost | Standardization | Continuity of supply | Make or buy decision | Consistency in quality | New Materials & products | Good supplier relations | Favorable reciprocal relationships | Development of personnel | | Good information system | |


1. Material Planning 2. Purchasing 3. Receiving 4. Stores 5. Inventory control 6. Waste management

A. Material Purchase Planning
It consists of following steps –
i. Processing the requisition
The departments of co. communicate to the purchase dept. their requirements for various items by requisition form which contains the details of quality and other necessary info. About items and is to be signed by competent authority. It is prepared in duplicate and original copy is sent to the purchase dept. ii. Location and Choice of suppliers
Potential vendors are contacted by authorized representatives, their sample of items are inspected and examined. On the basis of findings from inspection, suppliers are approved for placing orders. iii. Criterion for Choice of Vendor- * Reliability of vendor * Assurance of timely delivery * After sale service 1. Placing the orders – Purchase dept. try to purchase required items at most advantageous terms, all purchase must be made by purchase order in a specified form duly signed by authorized person. It must contain detail about supplier, description of items, their prices and amounts. 2. Follow up – Late deliveries can close the company so it is necessary to review the outstanding orders at regular intervals. 3. Invoices received from suppliers are checked with order specifications.
B. Inventory Management * Inventory means stock of raw material; semi finished and finished good maintained by company. * Inventory control-the tool of maintaining the size of inventory at some desired level keeping in view the best economic interest of organization.
C. Inventory Control
It means stocking adequate number and kind of stores, so that the materials are available whenever required and wherever required. Scientific inventory control results in optimal balance.
A scientific system which indicates: * What to order * When to order * How much to order * How much stock

D. Categorization and Codification * Time consuming; very helpful in long run * Makes stock taking easier * Helps keeping track of movements of goods * Design registers according to requirements and volume of turnover

E. Distribution * From store to user * An intricate process * Right item at right time at right place * 2 methods: requisition: as and when required, Par level: Periodic replenishing to a certain fixed level

V. Computerization * Makes life easy * Have security against data tempering


The scope is vast. Its sub functions include Materials planning and control, Purchasing, Stores and Inventory Management besides others.

Basically, under its scope are : * emphasis on the acquisition aspect * inventory control and stores management * material logistics, movement control and handling aspect * purchasing, supply , transportation , materials handling etc * supply management or logistics management * all the interrelated activities concerned with materials


Purchasing is a procuring of materials , tools , stores and services required for the manufacturing of a product , maintenance of the machines and un – interrupted running of the manufacturing plant in a manner that guarantees the marketing of the company’s product in the quantities desired , at the time promised and at the competitive price consistent with quality desired OBJECTIVE OF PURCHASING

1) To procure at a competitive price the needed material , supplies , tool and services of the right quality , in the right quantity and at the right time 2) To maintain continuity of supply to ensure production schedule at minimum inventory investment 3) To ensure the production of goods of better quality at the competitive price by procuring materials which best suit the product and the purpose for which they are intended 4) To suggest better substitutes to materials which are currently being used with a view to lower cost and maintain quality of the product 5) To render assistance in standardization , verity reduction , value analysis and other cost reduction programmers 6) To create goodwill and enhance the company reputation for fairness and integrity through dealing with the suppliers


1) Selecting and developing qualified sources of supply 2) Processing quotation , conducting negotiation and releasing purchase order 3) Endorsing suppliers invoice for payment 4) Arranging discussion meeting between suppliers representative and company’s officials 5) Advising management as regards to new material new product forward buying etc

5 R’s of Buying

1) Right quality -> quality of product is measured in term of its design , materials , chemical composition , heat treatment , manufacturing process etc
Different method of providing quality specifications are : brand or trade name , commercial standards , performance standard etc 2) Right quantity -> right quantity is yet another importance parameter in buying quantity decision are influenced by “ replenishment method “ and buying method
“ replenishment method means reorder method Buying methods followed by the buyer too has an influence on order quantity , for Example * Hand to mouth buying - is too small * Scheduled buying – can be either economic order quantity , or smaller then EOQ * Forward buying – is generally very large covering a long period of consumption 3) Right Price –Right price does not means the lowest price but the price which minimum the overall cost . the technique of : * Negotiation -> is used when there are limited vendors and /or time available to make purchase is short and /or items belong to fixed price category * Tender system is flowed in public sector organization to identify the lowest potential bidder

4) Right time – Right time impulse that time at which the goods requested should be receive while lead time refer to the time that elapses between the communication of the need for the item by indentor to purchase till the item is actually received and is made available for consumption

5) Right source- Only the right source can give quality of materials in the right quantities , at the right price and at right time . Right source aspect required decision as to what items should be purchased directly from the manufacturers , which items from dealers and which items from open market . Right sources also required the analysis of transportation costs along with the basic price to make selection between a distant supplier and a local supplier .



Inventory management is the process of efficiently overseeing the constant flow of units into and out of an existing inventory. This process usually involves controlling the transfer in of units in order to prevent the inventory from becoming too high, or dwindling to levels that could put the operation of the company into jeopardy. Competent inventory management also seeks to control the costs associated with the inventory, both from the perspective of the total value of the goods included and the tax burden generated by the cumulative value of the inventory.

Objective of inventory management

1) Service to the customer –sufficient stock of finished product should be maintained to match reasonable requirement of the customer to ensure prompt execution of their order 2) Continuity of production operation – every attempt should be made to ensure the continuity of productive operation by ensuring uniform floe of material and by eliminating the possibility of stock outs 3) Effective use of capital – the system should enable the management to make an effective use of its capital i.e capital lock up should be barest minimum 4) Economy in buying – The system should enable the management to gain economy in purchasing through quality buying and take advantage of favorable market 5) Reduction of risk of loss – The possibility of the risk of loss on account of obsolescence and deterioration should be minimized . Inbuilt check in the system should enable the management to weed out obsolete and non moving items periodically and automatically 6) Administrative simplicity – The system should be simple , easy to operate and devoid of tedious calculations

Selective treatment

Selective control means variation in method of control from item to item based on selective basis. The criterion used for the purpose may be cost of the item , criticality , lead time , etc. various classification are employed to render selective treatment to different types of material , each classification emphasizes on a particular aspect . For example ABC analysis emphasize usage value , VED analysis considers criticality

ABC Analysis | Usage value | HML analysis | Unit price | VED analysis | Criticality of the item | SDE analysis | Procurement difficulties | GOLF analysis | Source of Procurement | SOS Analysis | Seasonality | FSN analysis | Issues from stores | XYZ analysis | Inventory investment |

ABC Analysis

(ABC=Always Better Control)

This is based on cost criteria.
It helps to exercise selective control when confronted with large number of items it rationalizes the number of orders, number of items & reduce the inventory.

About 10% of materials consumer 70% of resources
About 20% of materials consumer 20% of resources
About 70% of materials consumer 10% of resources

“A” Item

Small in number, but consume large amount of resources must have: * Tight control * Rigid estimate of requirements * Strict & closer watch * Low safety stocks * Managed by top management

“C” Item

Larger in number, but consume lesser amount of resources must have: * Ordinary control measures * Purchase based on usage estimates * High safety stocks
ABC analysis does not stress on items those are less costly but may be vital.

“B” Item

Intermediate must have: * Moderate control * Purchase based on rigid requirements * Reasonably strict watch & control * Moderate safety stocks * Managed by middle level management
Conducting ABC Analysis 1) Prepare the list of the items and estimate their annual consumption 2) Determine unit price of each item 3) Multiply each annual consumption by its unit price to obtain its annual consumption in rupees 4) Arrange item in the descending order of their annual usage starting with in the highest annual usage down to the smallest usage 5) Calculate cumulative annual usage and express the same as cumulative usage percentages 6) Graph cumulative usage percentages against cumulative item percentages and segregate the item in to A , B and C categories

2) VED analysis

This analysis represents the classification of items based on the criticality. The analysis classified the items in 3 groups called vital, essential, and desirable. 1.Vital items are those items that unavailability of which will stop the production. 2. Essential items are those items whose stocks out cots are very high. 3. Desirable items will not cause any immediate production stoppage and their stocks out costs are nominal.
So this analysis is mainly carried out to identify critical items.

* Based on critical value & shortage cost of an item – It is a subjective analysis. * Items are classified into:
* Shortage cannot be tolerated.

Essential: * Shortage can be tolerated for a short period.

Desirable: * Shortage will not adversely affect, but may be using more recourse. These must be strictly scrutinized.

| V | E | D | | ITEM | COST | A | AV | AD | AD | CATEGORY 1 | 10 | 70% | B | BV | | BD | CATEGORY 2 | 20 | 20% | C | CV | | CD | CATEGORY 3 | 70 | 10% |

CATEGORY 1 – Needs close monitoring & control
CATEGORY 2 – Moderate control
CATEGORY 3 – No need for control

3) FSN Analysis FSN analysis is Based on utilization. Fast moving. -.F Slow moving. - S Non-moving. -N Non-moving items must be periodically reviewed to prevent Expiry & obsolescence Such an analysis help to identify : 1) Active item which required to be reviewed regularly 2) Surplus item whose stock are higher than their rate of consumption 3) Non moving item which are not begin consumed

4) HML Analysis

Based on cost per unit Highest Medium Low

This is used to keep control over consumption at departmental level for deciding the frequency of physical verification.
HML analysis help to 1) Assess storage and security requirements 2) To keep control over consumption at the department head level 3) Determine the frequency of stock verification . e.g higher priced item are checked more frequently then low priced item

5)GOLF analysis

GOLF analysis base on the nature of the suppliers which determine quality , lead time , term of payment . the analysis classifies the items into four groups namely GOLF G group covers items procured from “Government “ suppliers such as STS , the MMTC . Transaction with this category of supplier involves long lead time and payment in advance
O group comprises of items procured from non- government suppliers . Transaction with this category of suppliers involves moderate delivery time and available of credit .
L group contains items bought from Local suppliers . The item brought form local suppliers are those which are cash purchase

F group contain those items which purchase from Foreign suppliers . The transaction with such suppliers 1) Necessitate search of foreign suppliers 2) Require making of arrangement for shipping and port clearance.

6)SOS analysis

SOS analysis is based on seasonality of the items and it classifies the item in to two category
S(seasonal) Os (Off seasonal ). The analysis identifies items which are 1) Seasonal and are available only for a limited period e.g agriculture product like raw mango are available for limited time . and therefore such item are procured to last the full year 2) Seasonal but are available throughout year . 3) Non seasonal item whose quantity is decided on different consideration

Objectives of Inventory Control
i. Objectives of Inventory Control * Protection against fluctuation in demand * Better use of 5 M’s * Protection against fluctuation in output * Control of stock volume * Protecting against quality problems * To ensure reliable delivery to customers * Smoothing production flows * Reducing input cost (purchase in advance of price increase) ii. Inventory Costs * Costs associated with ordering too much (represented by carrying costs) * Costs associated with ordering too little (represented by ordering costs) * These costs are opposing costs, i.e., as one increases the other decreases * The sum of the two costs is the total stocking cost (TSC) * Carrying (or holding) costs: sum of all costs that are proportional to the amount of inventory physically on hand at any point in time * Cost of capital (opportunity cost) * Breakage, spoilage, deterioration, obsolescence, loss, insurance etc. * Physical storage, handling, book-keeping, refrigeration, utility etc. * Ordering cost: sum of all costs related to the amount of inventory that is ordered for replenishment * Fixed cost: incurred independently of the size of the order as long as it is not zero, e.g. book-keeping and paper work, mailing, etc., associated with the order * Variable cost: incurred on a per unit basis * Penalty cost (or stock out of shortage costs): cost of not having sufficient stock on hand to meet demand when it occurs * Loss of goodwill * Loss of profit * Extra costs of emergency measures * Delay cost (including book-keeping) in case of backorder * Set-up Costs –
When the part or component is being made in-house these may be called set-up costs which refer to the cost of preparing the production order, and any other costs associated with obtaining the materials, changing the production process or setting up equipment.
Model I: Basic EOQ 1. Typical assumptions made a. Annual demand (D), carrying cost (C) and Ordering cost (S) can be estimated b. Average inventory level is the fixed order quantity (Q) divided by 2 which implies i. No safety stock ii. Orders are received all at once iii. Demand occurs at a uniform rate iv. No inventory when an order arrives 2. Assumptions c. Stock out, customer responsiveness, and other costs are inconsequential d. Acquisition cost is fixed, i.e., no quantity discounts 3. Annual carrying cost = Average inventory level X carrying cost = (Q/1)C 4. Annual ordering cost = Average number of orders per year X ordering cost = (D/Q)S 5. Total annual stocking cost (TSC) = annual carrying cost + annual ordering cost = (Q/2)C + (D/Q)S 6. The order quantity where the TSC is at a minimum (EOQ) can be found using calculus (take the first derivative, set it equal to zero and solve for Q)
iii. Inventory Decisions
ABC (Always Better Control) Analysis – * Class A – constitutes 10% of total items and accounts for 75% of total money spend on inventories. * Class B – constitute 15% of total items and accounts for 15% of total money spend on inventories. * Class C – constitute 75% of total items and accounts for 10% of total money spend on inventories Rule is called a PARETO’s law –
States that a few high usage value items constitute a major pat of the capital invested in inventories where as bulk of inventories having low usage value constitute insignificant part of capital.

| Chap -4DEFINITION OF 'WAREHOUSING'1. A procedure whereby a company gradually builds up a holding of shares in a company it wishes to takeover in the future.

2. The process of storing goods within a storage facility. |

There are different kinds of warehouses and the classification of warehouses can be made from the following viewpoints: * On the basis of structure. * On the basis of ownership. * On the basis of service rendered. I) ON THE BASIS OF STRUCTURE
Warehouse are built in different ways to meet the special requirement for storage. Different warehouses are constructed for specific goods. While selecting the types of warehouse, one has to take into consideration the factors like the nature of goods, the quality and the climatic condition. From the point of view of structure, the following types of warehouses are found:
i. Classical warehouse: It is a big hall of single storey building divided into various big or small rooms to store of general nature. ii. Silo: It is a vertical structure room equipped with mechanical devices. The loading and unloading functions are effected through mechanical devices. iii. These are generally in the shape of big tanks or bunkers. iv. Bins: Bins are small cylindrical cabins of different sizes meant to store varieties of products. These are manually operated and provide bulk storage facility.
v. Elevator: Elevator is a big vertical premise and are of craned types. These are used for lifting and de-lifting of products. From the elevator goods are directly discharged from wagons. vi. Portable warehouse: It is a type of temporary warehouse which can be removed or set in a short time. These warehouses have enough capacity to withstand rains and winds. II) ON THE BASIS OF OWNERSHIP
From ownership point of views, there are different types of warehouses:
i. Private warehouses: Private warehouses are owned by big business houses like producers, wholesalers ad big retailers. These big business houses store their goods in these warehouses. These are not given to outsiders on hire. These warehouses are found in rural and sub-urban areas. ii. Public warehouses: Public warehouses are used by general businessmen on payment of a rent or charges. These warehouse obtain license from the government and follow the specific rules of the government for its maintenance. iii. Household warehouses: These warehouses provides storage facility for household equipments like furniture, rugs, furs and paintings. These warehouses are found in western countries. iv. Co-operative warehouse: These warehouses are organized on co-operative basis and run on joint efforts of the people. These are made in rural areas for storage of agricultural goods. The best example of a co-operative warehouse is cold storage.
v. Bonded warehouse: Bonded warehouses are maintained by port trust and custom authorities. These are meant to store imported goods from the foreign countries.
From the point of view of service rendered, there are different types of warehouses like:
i. Specific Commodity warehouses: These warehouses are meant to store specific goods like cotton, petroleum products and wool. These warehouses are specially constructed to accommodate the above articles. ii. Cold Storage: These are meant to store agricultural products of perishable nature. Perishable goods like fruits, vegetables, eggs and butter are stored in these warehouses. iii. Bank warehouses: These warehouses are maintained by banks to keep goods as securities. The goods received by banks against credits or loans are kept in these warehouses. iv. General Merchandise warehouse: Goods which do not require any special storage facility are stored in these warehouses.


A decentralized store is that type of store which receives materials for and issues them to only one department and not to the whole company. The decentralized store may be in many numbers in the company, as each department has its own such store. Purchasing and handling of materials are undertaken by each and every department separately. If the volume of material activities is large, this type of store is suitable because each and every branch has their own store for facilitating smooth operations of their production activities.

Advantages Of Decentralized Stores

1. Controlling a and storing function can be accomplished easily.
2. Delay in material handling will be eliminated.
3. Minimizes the chances of loss by fire.
4. No need of internal transportation costs.
5. Specific needs of individual departments can be easily fulfilled.
6. Saving in material handling cost.

Disadvantages Of Decentralized Stores

1. Higher cost of supervision.
2. More space is required for individual departments.
3. Higher amount of investment is required.
4. More time for stock taking and taking.
5. Higher cost of staff and stationary.
6. Improved technique is less possible for controlling of materials.

A centralized store is that store which receives materials for and issues them to all departments, divisions and production floors of the company. Such a store is only one in the company which receives materials for and issues to all who need them. The materials required for all the departments and branches are stored and issued by only one store.

Advantages Of Centralized Stores

The followings are the main advantages of centralized stores.
1. A better supervision of store is possible because the store is located under a single supervision.
2. A better layout of store and its control are possible.
3. Less space is occupied.
4. Investment in stock is minimized.
5. It is economical for storing materials.
6. Safety of materials is possible according to the nature of materials.
7. Trained and specialized persons can be appointed.
8. Wastage of materials can be minimized.

Disadvantages Of Centralized Store

The followings are the main disadvantages of centralized stores.
1. Delay in sending materials to the departments and branches.
2. Increase in material handling cost.
3. Greater risk of loss by fire.
4. Not suitable for a large company.


Stock verification is a process of physically counting and checking inventory in the unit , against its book balance at least once in a year.

Stock verification defined as the physical counting, weighing, or measuring the stock materials held and making a record of these figures. Mostly it is an annual exercise coincides with the closing of accounts.The warehouse in charge is responsible for the safe custody of the largest current asset of the balance sheet. They are raw materials, machinery spares, finished and semi finished goods. In order to avoid discrepancy in stocks, constant review of stocks, up to date posting, reconcile the physical and book balances are of prime importance. The main objective of the verification process is to identify the weaknesses in the operations of the warehousing system. To ensure the input, output and stock on hand accounted for accurately. Ensure proper placement of materials. It also helps to identify slow, non-moving and obsolete items.
The chances of collusion amongst the various staff members may be to detect. The purpose is to set up records as the basis for control and secondly to pass on accountability from one department to another.

Science there is always a pressure to complete stock verification exercise quickly; this may be ineffective and nullify the advantages. To overcome this drawback, we require adopting continuous monitoring or perpetual inventory taking. In this case, materials verified throughout the year, a few items daily. It will be advantageous to have the high value items verified more often. Arrange verification of the high value items at the time of issue or receipt of these items in order to avoid accumulation of errors.

The primary purpose is to assure that inputs, outputs and the stock on hand have been accounted for accurately. A careful planning, well organized and executed stock verification will give tremendous advantages to the organization. Take care to avoid double counting and omitting some items.

The stock of goods which must be carried out in order to meet the demand of materials in production and to ensure smooth and efficient running of affairs of a business. The smooth and efficient production is possible by keeping sufficient materials in store called inventory and controlling the amount of this in order to economise the cost of ordering, storing and issuing these inventories at appropriate time is called Inventory Control. The recent concept of Just in Time manufacturing is not to store any material as inventory by ordering the exact materials required for production, delivered and received at the production facility just at the start of production operation without any delay. To achieve this type of Inventory Control, availability of all the type of materials and perfect delivery schedules must be followed. This technique is successful in countries like Japan. It is difficult to adopt in Indian industries because of several factors which may not be controllable. The various uncertainties exists in demand and supply of materials therefore the efficient inventory control methods will only be used to overcome the various inventory problems and uncertainties. The proper quantity of materials required for production must be available as inventory of items. Which materials should be available and how much at what time is the main criterion of selecting the proper inventory control system by the materials management of any organisation. These systems of inventory control are discussed below.

The various types of inventory control systems used to order and replenish the inventories are(1)Two-bin system(2)Maximum-minimum system(3)Economic order quantity (EOQ) system(4)Fixed order quantity and variable cycle or Q system(5)Fixed cycle and variable quantity or P system(6)Replenishment system or S,s policy(7)Ordering with quantity discounts All these systems are discussed below

(1) Two-bin System

This is a simple system in which two bins are used to store and issue the materials. Initially both the bins are filled with the material is issued from the second bin. The order is placed when first bin is empty. The order will arrive at the time just before the second in is empty. This process will be repeated. It is a deterministic system where rate of consumption is known and the time of ordering is also known.

(2) Maximum-Minimum System

In this system-maximum and minimum level of inventory stored are fixed. The order is placed when the inventory level touches a particular quantity. Re-ordering is done after a period of review. If maximum amount in the store is 500 units and 50 units is safety stock. The order is placed when inventory level reaches 50 units. The disadvantages of the system are(
I )If the stock consumption fluctuates rapidly, the change in the maximum and minimum level is difficult.( ii)If periodic review can not be done, the shortages or overstock may be there.( iii )The control is necessary to keep records of inventories and maximum and minimum levels which can be altered based on demand changes and rate of consumption.

(3) Economic Order Quantity (EOQ) System

The economic order quantity is the amount of materials which is ordered or produced so that the cost of ordering and carrying in inventory should be minimum. This system is used to economise the cost of inventory control. The minimum cost is obtained when ordering and carrying cost are equal. In this system, inventory is zero when order is received. Order is placed such that all the materials ordered as EOQ is consumed. This method of inventory control is normally used to store valuable and essential items in the store.

(4) Fixed Order Quantity and Variable Cycle System (Q System)

When this system is used the quantity ordered every time is fixed and the number of cycle for which orders are placed and cycle time may vary. It is also called reorder point or Q system
. The fixed order quantity (Q) depends on, price, usage rate and maximum and minimum quantity kept in inventory. The advantages of this system are
i)Every item can be purchased at most economic price and necessary amount.( ii )The items are purchased as per need and consumption rate.( iii )When the demand changes, rapidly the reorder point reduces or cycle time is reduced and number of orders placed are increased as the order quantity Q is fixed. What amount of order and when to order are two main problems in this system of inventory control to solve. Order quantity Q is decided in such a way so as to minimize the total cost of procurement (production), storage, handling, distribution and other changes of inventory. The safety stock is always present in this system. (5) Fixed Cycle and Variable Quantity (P) System

This is also called Periodic Review System. In this time bound system, period of review is fixed as three, six or twelve months. In this system, period of review is fixed and quantity ordered change as per demand or rate of consumption. The period of review P is decided such that the order quantity is economical to purchase the items. (6) Replenishment System or S,s policy

This is a major system of inventory control, which is called optional replenishment system of S,s policy. When the supplier puts the restriction on minimum order quantity, the variable order quantity is decided based on S,s policy i.e., maximum level of inventory is Sand minimum safety stock is s. The replenishment level is in between S and s values. Order quantity is decided as. Order quantity = Qr = Q1 – I, where Q1 is replenishment level and I is inventory on hand. This system has advantage of combined fixed order or reorder point systems. To decide the amount of order, Qr to be placed the accurate information of inventory levels and rate of consumption must be available before the orders are placed.

(7) Ordering when Quantity are Available

When the materials are purchased in bulk, the supplier offer purchase discount in price of the materials purchased, if the quantity purchased is more than a particular value. Different discounts are offered on different purchase quantities and frequency of purchase. This is called quantity discount
. For this type of ordering, the inventory control model which is used is further discussed in various types of inventory models


In every inventory control situations whatever system is followed to replenish the quantity in the store the consumption of materials or demand always fluctuates. In the economic order quantity system, the demand for a particular period say one year is assumed to remain constant and the value of EOQ which has minimum cost is obtained. This quantity is ordered and will be received when inventory level or stock is zero. This is the ideal situation. Practically in order to avoid shortages because of uncertainties in supply uncertain situations. This amount of stock which always remains in the store as inventory is called Safety Stock or Buffer Stock. To place the replenishment order, the quantity and time to receive it will be decided before the inventory reaches this safety stock. In deciding the type of inventory control system which is to be used in the organization by materials management, there are several parameters which are to be considered. The safety stock, uncertainly in demand and lead time variations are some of the very important parameters of inventory control system.


There is always variations in sales of product and demand for materials. These variations may be of following three types:(1)Demand fluctuations will be deterministic or probabilistic, the lead time may be constant.(2)Lead time varies and demand remains constant.(3)Both demand and lead time fluctuates. The fluctuations may be certain or uncertain. In case of certainty the planning of inventory and production becomes easy but if uncertainty exists in these variations there is always risk exists in inventory control about ordering quantity. There are several probabilistic


Kaizen is a combination of two japanese words “ Kai” and “Zen” , Kai means : TO change or modify “ and Zen means “ To improve or make better “

Kaizen is a management supported employee driven process where employees seek development of their own capabilities by challenging existing system and finding improvement in them

Benefits of Kaizen 1) Kaizen stimulates companywide continuous improvements. It provides a scientific approach to improve productivity by eliminating waste arising from inconsistency, inadequacy 2) Kaizen generates process oriented thinking 3) Kaizen emphasizes implementation of ideas and not merely generation of ideas 4) Kaizen foster better understanding between the worker and management 5) Kaizen stimulates creativity among the company’s employee

Kaizen Principal

1) Focus on customer 2) Challenge the “status quo” 3) Surface problem 4) Blame the process and not the person 5) Foster on environment of openness , honesty and frankness 6) Manage project cross functionally 7) Nature supportive relationship in the organization 8) Avoid being perfectionist

Characteristic of good kaizen 1) A good kaizen


"Push type" means Make to Stock in which the production is not based on actual demand. "Pull type" means Make To Order in which the production is based on actual demand. In supply chain management, it is important to carry out processes halfway between push type and pull type or by a combination of push type and pull type.

Supply Chain Management (SCM) is to create a solution i.e. "supply" for a goal or issue, i.e. "demand". Supply chain models of "Push type" and "Pull type" are opposite in terms of a demand and supply relationship. "Push type" is represented by "Make to Stock" (MTS) in which the production is not based on actual demand and "Pull type" is represented by "Make To Order" (MTO) in which the production is based on actual demand.

One of the major reasons why supply chain management currently receives so much attention is that information technology enables the shifting of a production and sales business model from "Push type" to "Pull type". Pull-type supply chain management is based on the demand side such as Just-in-Time (JIT) and CRP (Continuous Replenishment Program) or actual demand assigned to later processes. Therefore, unlike the Push-type method it is not Make to Stock, which is based on demand forecast. While inventory is kept to a minimum, products can be supplied with short lead times and at high speed. At the point where "Pull type" starts to supply operations triggered by actual demand, it is like an elevator. An elevator starts when a button is pressed even if there is only one passenger. On the other hand, the "Push type" can be considered as an escalator. An escalator continues to supply (push) regardless of whether there is actual demand (passenger). In addition, "Push type" corresponds to a model for trains, buses, and airplanes for which supply (push) is based on demand forecast by time period and route. There may be various forms between "Push type" and "Pull type" depending on inventory forms of materials, work in progress (WIP), and finished items and how to deal with the actual demand in supply chain management

“PUSH” AND “PULL” PRODUCTION METHODS Push | Pull | Work-pieces manufactured by “previous process” are transferred to “next process” irrespective of itsreadiness to receive and process them. | Next process “orders” from previous process “just” what, when and in the quantity it needs. | Flow of Information and Flow of Materials are different. Tools. The required tools are: Volume Planning –Material Requirement Planning (MRP1) – Manufacturing Resources Planning (MRP2) – or the more modern ERP (Enterprise Resource Planning). | Flow of Information and Flow of Material are“parallel”. Nothing takes place upstream unless something is taking/has taken place downstream. | “Independent Process Production” (each Processing Station follows its own schedule, independently of all other Processing Stations. | Next-Process Dependent Production. | Not flexible at all to changes in production schedules. | Extremely flexible to changes in productionschedules. |

Kanban Method

The Kanban Method is a Pull-style re-ordering system by which a downstream process requests goods from an upstream process. The request is by means of a re-ordering Tag (called, in Japanese, kanban). The method may be extended to the entire manufacturing process or only to part of it. It is normally applied to repetitive operations, both in Catalogue Manufacturing and in Contract Manufacturing.

Benefit of Kanban Method 1) Stock and WIP can be accurately measured and known at a glance. This is intrinsic in the kanban system. Having assessed and based our production on base-quantities, at any moment in time stock and wip can only be so much: we don’t even need to count full containers (even if we do it for good practice). The only inaccuracy can derive from a production schedule that has not been completed at a certain processing station (the “midway- through” situation). Apart from that, stock is simply known! This is a remarkable benefit, extremely hard to achieve in a PUSH/MRP type of production system (in which we often need to take a full inventory in order to know where we stand…..)

2) Overproduction is eliminated - or at least controlled. Overproduction is evil in a
PUSH/MRP system: not being based primarily on market demand, it may lead (because of mistaken forecasts on demand) to excessive stocks lying everywhere in the factory (or in the finished product warehouse) and even to obsolescence! This should not happen in a well-orchestrated Kanban system, based on “in-real-time” market demand. Yet, it may happen. Excessive base-quantities may lead to overproduction. Sudden variation in market demand may also lead to un-justified stock and wip. Obsolescence may still take place. But all these negative phenomena can be kept under control in a much easier way.

3) Production Planning based on the Kanban Method is easier. Because of its nature: in the perfect Kanban system (utopia!!!!) all is based on customers’ orders “on hand”. Orders received trigger production planning at the most downstream processing station and simultaneously at all other upstream stations concerned. If the system is well conceived, production schedules are produced in a ziff. This is purely theorethical, though. As soon as the range of products is rather large, and the number of components/parts for each product is also considerable – AND, if there are common parts/components for several products
(like the grey base-plate in my example above), production planning becomes tougher.
Moreover: sudden variations in demand, or conflicting priorities on despatches of finished products, may lead to some havoc and even chaos. However, compared to a traditional
PUSH/MRP system, Kanban production planning is always much, much easier!


Keeping track of inventory is vitally important for any successful retail enterprise. Inventory systems let you know when it is time to stock up on items that are running low and can also prevent you from overselling products and then having to inform customers that their items are either unavailable or must be backordered. Inventory systems can provide insight into which products are selling well and which products are selling poorly.
. Keeping the inventory levels synchronized to the product catalog required a great deal of effort and custom software development. Many custom solutions require the product catalog schema to be extended so that it can accommodate inventory information and modifications to the basket pipeline to check the inventory levels of the product added to the basket. This in and of itself is a challenge; more complex tasks, such as configuring items as back-orderable or pre-orderable, are levels of magnitude more complex to develop. Fortunately, the Inventory System available in Commerce Server is specifically designed to integrate with the Catalog System, and provides an excellent solution for all the stake holders of your Web site, including customers, business users, Web site administrators, and software developers. Customers benefit from a much richer integration into the product catalog, allowing them to know if items are in stock, pre-orderable, or backorderable. Customers can also filter products by those in stock, allowing them to ignore items that are currently unavailable (assuming you have developed this capability through the Inventory APIs). Business users benefit by having a far more robust and reliable method of coupling the inventory and product catalogs, as well as gaining insight into inventory levels and trends. Web site administrators benefit by easy import and export functionality

Economic order quantity
Economic order quantity (EOQ) is that size of the order which gives maximum economy in purchasing any material and ultimately contributes towards maintaining the materials at the optimum level and at the minimum cost.
In other words, the economic order quantity (EOQ) is the amount of inventory to be ordered at one time for purposes of minimizing annual inventory cost.
The quantity to order at a given time must be determined by balancing two factors: (1) the cost of possessing or carrying materials and (2) the cost of acquiring or ordering materials. Purchasing larger quantities may decrease the unit cost of acquisition, but this saving may not be more than offset by the cost of carrying materials in stock for a longer period of time.
The carrying cost of inventory may include: * Interest on investment of working capital * Property tax and insurance * Storage cost, handling cost * Deterioration and shrinkage of stocks * Obsolescence of stocks.
Thus, the EOQ analysis provides answers to the following order quantity problems: 1. How much of inventory should be bought in an order on each replenishment? 2. Should the quantity be purchased be large or small? 3. Should the requirement of materials during a given period of time be purchased in one lot or should it be purchased in instalments?
Assumptions of EOQ model: 1. Demand is known with certainty and is constant during the period. 2. Depletion of stock is linear and constant. 3. The time interval between placing an order and receiving delivery (lead time), is constant. 4. The orders placed to replenish inventory stocks are received at exactly that point in time when inventories reach zero.
EOQ Formula:

EOQ = √2SP / C Where: | S | = | Annual usage in units | | P | = | Ordering cost per order | | C | = | Carrying cost per unit |

Limitations of EOQ Model: 1. The assumption of constant usage and the instantaneous or immediate replenishment of inventories are not always practical. 2. Safety stock is always required because deliveries from suppliers may be delayed for reasons beyond control. Also because there may be an unexpected demand for stocks. 3. EOQ assumes that the demand is constant and known with certainty which always is not the case. Demand may rise and fall depending upon various factors leaving a certain degree of uncertainty behind it. 4. Computational problems may arise and hence the number of orders to be placed may not be always 100% accurate if fractions or decimals are involved.

Formula of Economic Order Quantity (EOQ):
The different formulas have been developed for the calculation of economic order quantity (EOQ). The following formula is usually used for the calculation of EOQ.

* A = Demand for the year * Cp = Cost to place a single order * Ch = Cost to hold one unit inventory for a year |

Statistica1 quality control
Statistica1 quality control (SQC) is the term used to describe the set of statistical tools used by quality professionals. Statistical quality control can be divided into three broad categories:
1. Descriptive statistics are used to describe quality characteristics and relationships.
Included are statistics such as the mean, standard deviation, the range, and a measure of the distribution of data
2. Statistical process control (SPC) involves inspecting a random sample of the output from a process and deciding whether the process is producing products with characteristics that fall within a predetermined range. SPC answers the question of whether the process is functioning properly or not.
3. Acceptance sampling is the process of randomly inspecting a sample of goods and deciding whether to accept the entire lot based on the results. Acceptance sampling determines whether a batch of goods should be accepted or rejected


Control charts for variables monitor characteristics that can be measured and have a continuous scale, such as height, weight, volume, or width. When an item is inspected, the variable being monitored is measured and recorded. For example, if we were producing candles, height might be an important variable.We could take samples of candles and measure their heights. Two of the most commonly used control charts for variables monitor both the central tendency of the data (the mean) and the variability of the data (either the standard deviation or the range). Note that each chart monitors a different type of information. When observed values go outside the control limits, the process is assumed not to be in control. Production is stopped, and employees attempt to identify the cause of the problem and correct it.Next we look at how these charts are developed

What are the types of Control Charts?
There are two main categories of Control Charts, those that display attribute data, and those that display variables data.
1) Attribute Data: This category of Control Chart displays data that result from counting the number of occurrences or items in a single category of similar items or occurrences. These “count” data may be expressed as pass/fail, yes/no, or presence/absence of a defect.
2) Variables Data: This category of Control Chart displays values resulting from the measurement of a continuous variable. Examples of variables data are elapsed time, temperature, and radiation dose. While these two categories encompass a number of different types of Control Charts there are three types that will work for the majority of the data analysis cases you will encounter. In this module, we will study the construction and application in these three types of Control Charts:

1) X-Bar and R Chart
2) Individual X and Moving Range Chart for Variables Data
3) Individual X and Moving Range Chart for Attribute Data

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