Materials Management and Inventory Control - NPTel - Indian ...
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<strong>Management</strong> Science II Dr.T.T.Narendran<br />
<strong>Indian</strong> Institute of Technology Madras<br />
MODULE 3<br />
<strong>Materials</strong> <strong>Management</strong><br />
<strong>Materials</strong> Requirements Planning (Mrp)<br />
<strong>Materials</strong> Requirements Planning (Mrp)
<strong>Management</strong> Science II Dr.T.T.Narendran<br />
<strong>Indian</strong> Institute of Technology Madras
<strong>Management</strong> Science II Dr.T.T.Narendran<br />
A Typical Mrp<br />
<strong>Indian</strong> Institute of Technology Madras
<strong>Management</strong> Science II Dr.T.T.Narendran<br />
<strong>Indian</strong> Institute of Technology Madras
<strong>Management</strong> Science II Dr.T.T.Narendran<br />
<strong>Indian</strong> Institute of Technology Madras
<strong>Management</strong> Science II Dr.T.T.Narendran<br />
Comparison Of Mrp And Traditional Systems<br />
Dimension MRP Traditional<br />
Dem<strong>and</strong> Dependent Independent<br />
Order Philosophy Requirements Replenishment<br />
Forecast Based on master<br />
schedule<br />
<strong>Control</strong> Concept <strong>Control</strong> on all items ABC<br />
Objectives Meet manufacturing<br />
needs<br />
Lot Sizing Discrete EOQ<br />
Dem<strong>and</strong> Pattern Lumpy but predictable R<strong>and</strong>om<br />
Types of <strong>Inventory</strong> Work-in-process <strong>and</strong><br />
raw materials<br />
<strong>Indian</strong> Institute of Technology Madras<br />
Based on past dem<strong>and</strong><br />
Meet customer needs<br />
Finished goods <strong>and</strong><br />
spare parts
<strong>Management</strong> Science II Dr.T.T.Narendran<br />
Logical Analysis Preceding Mrp<br />
<strong>Indian</strong> Institute of Technology Madras<br />
• When do we want to make how many of each product?<br />
• What components are required?<br />
• How many of each of these is already on h<strong>and</strong>?<br />
• How many have already been ordered? When will they arrive?<br />
• When are more needed <strong>and</strong> how many more?<br />
• When should these be ordered?<br />
Requirements For A Sound Mrp<br />
• A valid master plan<br />
• Accurate bills of materials<br />
• Accurate information on current inventories<br />
• Accurate information on orders already placed.<br />
• Reliable lead times<br />
• An adequate flow of materials<br />
Pre-Requisites Of Mrp<br />
• A time-phased master production schedule in which every item is<br />
described by bill of materials (BOM)<br />
• A unique no. identifying each component <strong>and</strong> the parent in every BOM<br />
• Properly structured, accurate BOM <strong>and</strong> tight control of engineering<br />
changes<br />
• Accurate current inventory balances<br />
• Accurate quantities <strong>and</strong> reliable delivery dates
<strong>Management</strong> Science II Dr.T.T.Narendran<br />
• Reliable lead times<br />
<strong>Indian</strong> Institute of Technology Madras<br />
• Further requirements for practical application<br />
• Computer software <strong>and</strong> hardware to h<strong>and</strong>le huge volume of data<br />
• Timely reporting of issues, receipts, inventory adjustments <strong>and</strong> order<br />
releases<br />
• Discipline in h<strong>and</strong>ling <strong>and</strong> order releases<br />
• Capable people (for h<strong>and</strong>ling <strong>and</strong> deciding)<br />
Reasons For Failure Of Mrp<br />
• It is part of an incomplete system<br />
• Driven by an invalid / mismanaged Master Production Schedule<br />
• Inaccurate data<br />
• Improperly structured BOM<br />
• Under qualified users
<strong>Management</strong> Science II Dr.T.T.Narendran<br />
Manufacturing Resource Planning (Mrp-Ii)<br />
<strong>Indian</strong> Institute of Technology Madras
<strong>Management</strong> Science II Dr.T.T.Narendran<br />
Just In Time (Jit) Manufacturing<br />
<strong>Indian</strong> Institute of Technology Madras
<strong>Management</strong> Science II Dr.T.T.Narendran<br />
Steps To Jit Manufacture<br />
<strong>Indian</strong> Institute of Technology Madras
<strong>Management</strong> Science II Dr.T.T.Narendran<br />
Steps To Jit Manufacture<br />
Jit Vs. Mrp: A Comparison<br />
<strong>Indian</strong> Institute of Technology Madras<br />
JIT MRP<br />
Vendors Part of your team Adversaries<br />
Scrap Eliminate Tolerate<br />
Maintenance Constant care to minimize<br />
breakdowns<br />
Not critical, allow<br />
queues<br />
Lead times Minimize Plan with them<br />
Workers Involve them Impersonal-drive them<br />
<strong>Inventory</strong> Liability, try to eliminate Asset, useful to<br />
absorb fluctuations<br />
JIT VS. MRP: A COMPARISON (CONTD.)<br />
Lot size Bare minimum<br />
(Single piece?)<br />
JIT MRP<br />
To balance set-up<br />
cost & holding cost<br />
Set-ups Cut down the time Plan for them<br />
Queues<br />
(WIP)<br />
Eliminate<br />
PRO-ACTIVE<br />
Necessary<br />
RE-ACTIVE<br />
Suitability High to medium volume Medium to low volume
<strong>Management</strong> Science II Dr.T.T.Narendran<br />
Evolution Of Manufacturing <strong>Control</strong> Systems<br />
Order Point system<br />
Forecast with past data.<br />
<strong>Inventory</strong> control with EOQ <strong>and</strong> ABC analysis.<br />
Mrp<br />
<strong>Indian</strong> Institute of Technology Madras<br />
Based on Master schedule, B.O.M. <strong>and</strong> predicted dem<strong>and</strong>.<br />
Complete inventory control.<br />
Convenient lot-size.<br />
Evolution Of Manufacturing <strong>Control</strong> Systems (Contd.)<br />
Mrp Ii<br />
• Incorporates capacity planning.<br />
• Incorporates feed back.<br />
Jit<br />
• Emphasis on waste reduction.<br />
• Aim for Zero defect.<br />
• Aim for Zero <strong>Inventory</strong>.<br />
• Quick change-overs.<br />
• Small lots.
<strong>Management</strong> Science II Dr.T.T.Narendran<br />
Multi-Skilled Worker<br />
<strong>Indian</strong> Institute of Technology Madras
<strong>Management</strong> Science II Dr.T.T.Narendran<br />
<strong>Indian</strong> Institute of Technology Madras
<strong>Management</strong> Science II Dr.T.T.Narendran<br />
Kanban<br />
<strong>Indian</strong> Institute of Technology Madras
<strong>Management</strong> Science II Dr.T.T.Narendran<br />
<strong>Indian</strong> Institute of Technology Madras
<strong>Management</strong> Science II Dr.T.T.Narendran<br />
<strong>Indian</strong> Institute of Technology Madras
<strong>Management</strong> Science II Dr.T.T.Narendran<br />
<strong>Inventory</strong> <strong>Control</strong><br />
<strong>Inventory</strong> <strong>Control</strong><br />
Costs In <strong>Inventory</strong> <strong>Control</strong><br />
• Item cost or unit cost<br />
• Ordering / set-up cost<br />
• Clerical,<br />
• administrative,<br />
• expediting,<br />
<strong>Indian</strong> Institute of Technology Madras
<strong>Management</strong> Science II Dr.T.T.Narendran<br />
• transportation, etc.,<br />
Costs In <strong>Inventory</strong> <strong>Control</strong><br />
• <strong>Inventory</strong> carrying costs<br />
• Locked-up capital<br />
• storage space<br />
• h<strong>and</strong>ling,<br />
• taxes (?)<br />
• insurance<br />
• obsolescence,<br />
• deterioration,<br />
• maintaining records<br />
• Shortage costs<br />
<strong>Indian</strong> Institute of Technology Madras<br />
• Overtime requirements due to shortage<br />
• special clerical <strong>and</strong> administrative costs, expediting<br />
• loss of goodwill (?)<br />
• special transportation
<strong>Management</strong> Science II Dr.T.T.Narendran<br />
Stock<br />
Level<br />
• lost production time<br />
Classification Of <strong>Inventory</strong> Models<br />
• Static<br />
• Dynamic<br />
• Deterministic<br />
• Probabilistic<br />
• Uncertain<br />
Probabilistic<br />
<strong>Indian</strong> Institute of Technology Madras<br />
Time �
<strong>Management</strong> Science II Dr.T.T.Narendran<br />
<strong>Indian</strong> Institute of Technology Madras
<strong>Management</strong> Science II Dr.T.T.Narendran<br />
A Typical <strong>Inventory</strong> Model<br />
Order quantity<br />
<strong>Indian</strong> Institute of Technology Madras<br />
= Economic Order Quantity (EOQ)<br />
+ Safety (buffer) stock<br />
- inventory on h<strong>and</strong><br />
- units on order<br />
+ average dem<strong>and</strong> over lead time
<strong>Management</strong> Science II Dr.T.T.Narendran<br />
<strong>Indian</strong> Institute of Technology Madras
<strong>Management</strong> Science II Dr.T.T.Narendran<br />
<strong>Indian</strong> Institute of Technology Madras
<strong>Management</strong> Science II Dr.T.T.Narendran<br />
<strong>Indian</strong> Institute of Technology Madras<br />
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