material managenment power point example1

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ELECTRONIC CONTROL OF MATERIAL MANAGEMENT By LaTrenda Belton Novemeber 16, 2011 ISC 310 Matt Campbell University of South Alabama

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Definition Material management involves Planning, Organizing & Controlling the flow of materials from their initial purchase to destination.

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PURPOSE OF MATERIAL MANAGEMENT To gain cost saving in purchasing To fill the demand during period of replacement To store enough stock to avoid a shortage To level variations in consumption To provide great customer services

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Material Management has Five Basic Needs To have plenty of materials on hand when needed To pay the lowest possible prices To reduce the inventory capital To operate economically Assure timely & reliable delivery

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Main Departments of Material Management Materials planning Purchasing Storage Inventory Control

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Inventory control It means having the right number and kind of stores, so that the materials are available whenever and wherever required. Scientific analyzed data of inventory control results in the best balance of products to stock.

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Inventory Control Objectives to meet unpredicted future demand due to changes in forecast and actual figures To average out demand highs and lows due to cyclic variations To meet the customer requirement in a well time , effectively, proficiently, and satisfactorily manner To smoothen the production process of several products in the same facility to gain economy of production or purchase in bulk lots

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Types of Inventory Raw Materials Intermediates Maintenance or repair Finished Goods

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Inventory Counting Systems Cyclical/ Perpetual Inventory System A system that keeps track of removals from inventory continuously, thus monitoring current levels of each item Periodic System A system that physical count of items made at periodic intervals

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Cycle Counting Systems Physically counting a sample of total inventory on a regular basis Used often with ABC classification Items counted most often (daily )

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Advantage of Cycle Counting Eliminates shutdown Eliminates annual inventory adjustments Provides trained to audit the accuracy of inventory Allows the cause of errors to be identified and solved Maintains accurate inventory records

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

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VED ANALYSIS Based on critical value & shortage cost of an item Items are classified into : Vital : Shortage cannot be tolerated . Essential : Shortage can be tolerated for a short period . Desirable : Shortage will not adversely affect, but may be using more resources. These must be strictly Scrutinized

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V E D ITEM COST A AV AE AD CATEGORY 1 10 70% B BV BE BD CATEGORY 2 20 20% C CV CE CD CATEGORY 3 70 10% CATEGORY 1 - NEEDS CLOSE MONITORING & CONTROL CATEGORY 2 - MODERATE CONTROL. CATEGORY 3 - NO NEED FOR CONTROL ABC vs. VED ANALYSIS

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Radio tags placed on syringes Syringes shipped to hospital warehouse. Warehouse unload syringes and place in storeroom Syringes are disperse into different departments. Syringes are use as needed. Syringes are disposed of properly. Manufacturer tracks product through wireless radio communication. 1 5 6 4 2 3 A Circular Process

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Inventory Control Techniques Maximum level Minimum Level Re-order Level Danger Level

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Maximum Level Indicates the level above which the actual stock should not exceed Minimum Level Indicates the level below which the actual stock should not reduce

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Re-Order Level Indicates the level of material stock at which it is necessary to take steps for the purchase of further lots of material Danger Level Indicates the level fixed below the minimum

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Inventory Management Challenges Carrying Too Much Inventory Carrying Too Little Inventory

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Carrying Too Much Inventory Increase overhead costs Increase financial holding costs Increased risk of loss of market value Decreased inventory flexibility Increased inventory shrinkage

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Carrying Too Little Inventory Increase risk of lost sales Increase ordering costs Increase risk of supplier price increases Increase exposure to non delivery Decreased bulk order discounts

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Different Inventory Tracking Systems Throughout History

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LEDGERS A ledger is a journal that keep accounts of all transactions on paper. It is a manual system where data is entered by hand. It is a timely and unproductive way to track and control inventory

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Example of a Ledger

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Punch Cards A team at Harvard University designed the first modern check-out system in the early 1930’s. It used punch cards that corresponded with catalog items. A computer would read the punch cards and pass the information to the storeroom. Because of the automated system, the machines could also generate billing records and manage inventory. The system proved to be too expensive to use, but a version of it is in use today in some places, where cards with product information are selected and scanned to checkout.

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Punch Card and Reader

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Two-Bin Method The two-bin method is one of the simplest methods used for tracking inventory. This method uses two bins for each inventory item. A predetermined quantity of each inventory item is placed in each of the two bins. As production uses the materials or the company sells merchandise to customers, inventory is removed from the first bin. Once the first bin is empty, employees start using the second bin. Purchasing places an order with the vendor for that item for the same quantity necessary to refill the bin. The process repeats whenever a bin empties .

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Two Bins

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Physical Counts (Periodic System) The most basic method of inventory tracking is physical counts. Physical counting is exactly what it sounds like; if you want to know your inventory level, you better take off your shoes so you can count on your toes when your fingers run out.

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Perpetual Tracking A perpetual track is the method of counting is demand driven. Instead of counting how many items are in inventory, you count how many leave inventory. The demand can be tracked by batches of inventory usage, such as demand that is entered once a week, or they can entered in real-time which provides the ability to continuously monitor inventory levels. If you are already in the practice of counting demand, this is a great way to track inventory because it involves little additional effort.

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Barcode Method Barcodes track the movement of inventory throughout a company from the time the company receives new inventory to the time the inventory is used or sold. Warehouse personnel use scanners to read the barcodes of each inventory item as it is stored on the shelf, increasing the quantity available. Employees scan the barcodes of each inventory item when it is moved to the production floor or to the retail shelf, adjusting the quantity stored at each location. Cashiers scan inventory items when consumers purchase them, removing the items from inventory.

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Example of Bar codes

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Telxon Scanner

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Radio Frequency ID Method Radio frequency ID, or RFID, involves attaching a tiny computer chip to each inventory item. The computer chips send an electronic signal which can be read through an antenna at the business office. As production uses materials or the company sells merchandise, the reduction in inventory quantity is recorded via electronic signal. A new RFID computer chip is attached to new inventory items received in the warehouse, allowing the business office to determine the inventory quantity by reading the electronic signals. The business office identifies the quantity of items remaining in inventory and reorders additional materials or merchandise when the quantity drops to a predetermined level.

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RFID Scanner or Reader

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The Future of Wireless Inventory Mangement

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Wireless Tower

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CONCLUSION Material management is an important management tool which will be very useful in getting the right quality & right quantity of supplies at right time, having good inventory control & adopting sound methods of condemnation & disposal will improve the efficiency of the organization & also make the working atmosphere healthy any type of organization, whether it is Private, Government ,Small organization, Big organization and Household. Even a common man must know the basics of material management so that he can get the best of the available resources and make it a habit to adopt the principles of material management in all our daily activities

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