MATERIAL MANAGEMENT & INVENTORY CONTROL SYSTEM

A.  MATERIAL  MANAGEMENT   &  INVENTORY   CONTROL   SYSTEM

Material  Management system  should  be  very  simple.   So  that  every  one  can  understand  and  implement. 

I.  MATERIAL  INDENTING  SYSTEM

 While  indenting  a  material  we  should  answer only  three  Questions.

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1.  What   2.  Why.   3.  when

1.  WHAT ”--  Means complete  specification  of  material  required .

2.  WHY ”--   Means what is  the reason we need  this  material;  why we  need  only  this  material  why  not    Any  other  substitute  of  this  material.

3.  WHEN  ”-- Means  when  we  need  this  material.  Any  material  should  reach  to  store  only  when  it  is  required . This  will  help  in  proper  finance  planing ,  proper  storage , &  proper  use  of  that  material.

Important  things  are    that

              1. Who  should  be the  person  responsible  to answer  above  three  questions in  proper way ?

              2. If  responsible  makes  a  mistake than  who  should  cross  check.?

              3. The  peoples  doing  purchases  can  understand  the  things  properly  or  not.  if  not , who

                      Should  trained  & educate  them  to  understand  the  things.?

               4. Who  will  make  sure  proper  record  keeping  is  being  done  or  not  ?.

II.  MATERIAL   RECEIVING   SYSTEM-

               There  is  a  need   of  making  a  system  for  proper  record  keeping  of  incoming  material.

              We  can  divide  all incoming   material  in  three  categories.

        

  1.  MATERIALS   RECEIVED   TO  UTILIZED  IN  SIDE  THE  FACTORY,  AS  A  RAW   MATERIAL  OR

      CONSUMABLE  OR   GOING   TO BECOME     A  CAPITAL / FIXED   ASSET.  ( Non-returnable)

  2.  MATERIALS   RECEIVED  ON  RETURNABLE  BASIS  LIKE  TOOLS  OF  CONTRACTORS

        SAMPLES  FROM  SUPPLIER’S  &  THINGS  REQUIRED  ON  HIRE  BASIS. ( Returnable)

   3.  OUR   RETURNABLE  “OUT  GOING  MATERIAL”  RECEIVED  BACK.. ( Non-returnable)

 Important  things  are    that -

           1.What  should  be  the  roll  of  security  dept.  And  what  should  be  the   record  keeping   system  At

              gate,         Who  should  be  responsible  for  making  a system  and  to make  sure  proper   implementation.?

          2. WHO  should  check  the  quality  of  incoming  material.?

          3.  What  should  be  the  information  system  to  the  indenture  and  others,  &  Who  should  be responsible                    for  that  system.? 

III.   STORAGE  OF  MATERIAL

There  are  three  basic   objectives  of   store --

1. Proper storage .  means  safe  and  systematic  storage  ,quality  of  in  coming  material  should  not got effected, detract  during   storage.

2. Proper  issue  .  Mean   materials  should  be  available easily  when  it  is  required.

3.  Proper  record  keeping .  Mean  record  keeping  of  incoming  and  out  going  material like a bank acc.

 

 WE  CAN  DIVIDE  ALL  ITEMS  IN  THREE  CATEGORIES  A,  B,  & C         

Responsibilities  for  indenting of  material  should  be  de  centralized  and   issuing  should be decentralized based  on  categories, While  issuing  a  nut & bolt,  there  is  no  fun  to  counter  signed  these  things  by  a  Manager or  G.M.,  if  our  system  is  like  that,  it  means  either  bosses  have  no  confidence  on  subordinates or  subordinates  are  note  really  capable.

A,  CATEGORIES  ITEMS-  These  items  are  10% - 15%  of  total  items  but  cost  of  these  items  covers 

35% -40%  of  total  cost,  If  any  items  needs  special  storage  system,  or  special  permit/ license  to  store

or  purchase,  or  is  a  very  long  delivery  item  should  cover  under  A  category.  Very  senior  executives  should

involve  while  indenting,  purchasing,  receiving,  and  even in issuing  of  these  materials.

B. CATEGORIES  ITEM -   These  items  are  30% to 35%  of  total  items  and  cost  of  these  items  covers

                 30% to 35%  of  total  cost  also,  Spares,  Tools,  Raw  materials,  should  cover  under  this  category

                 Involvement  of  Managers / Dy . Managers of  indenture  depts.  should  be  there  while indenting,

                 purchasing, receiving,  and  issuing   of  these  materials  to  make  sure  proper  utilization  of

                  these  items..

C. CATEGORIES  ITEM - These  items  are  50% to 60%  of  total  items  but  cost  of  these  items  covers only

                 25% to 35% of  total  cost,  These  items  are  of  very  low  cost  like  nuts,  bolts,  washers, etc.,.

                 For  indenting  these  items  Engineers  &  shift  officers  should  approach   threw  their  dept.  heads

                 and  can  get  issue  from  stores  when   required  .  

Important  things  are    that

          1. Who  will   make  sure  that  quality  of   material  will  be maintained   during  the  storage.

          2. How  we  can   make  sure  that  material  is  being  issued  to  right  place (not to right person ).

          3.  Who  will  make sure  proper  record  keeping  is  being  done  or  not.

          4. In  our  case  what  is  the  status  of  our  store,  Is  it  a  central  store  ,project  store,  civil  store,  or                 maintenance  store  ,   Should we  operate  all  activity  from  one  store  ?

          5.  Identification  of  items  is  basic  approach  for  storage  system,  All  of our  people in  stores  must

               identify   the  items  properly,  if  not  what  should  be  our  training  program  for  them,  and  who 

               should  be  responsible to arrange  such  type of  training .

INVENTORY  CONTROL  SYSTEM

   Inventory  control  systems  are  required  to  save  money   ,  to  get  proper  quality,  and  to  reduce  storage  cost  .FOR  EXAMPLE  IF  WE  MAY  PLANE  OUR  REQUIREMENTS   IN  SUCH  A  WAY  THAT  WE   RECEIVE   MATERIAL    ONLY  WHEN  WE  REQUIRED  OUR  MONEY  WILL  NOT BLOCK  FOR   A  LONG TIME   AND    WE  NEED  LESS  SPACE  TO  STORE.

There  are  two  systems  to  control  the  inventory. 

  1.     Inventory   in  days .  For example  if  we  require  total  chemical  for  one  year  of  Rs.100,000/-

         Then  our  cost  of  inventory  per  day  is--100,000/ 365 = RS. 273.92

       If  any  day  we  have  total  inventory  of  RS. 30000/-

      we  can  say  we  have  inventory  for    30000/273.92 =109.5 days

      It  means  we  had  invest  for  that  that  item, required  after  109 days

So  our  efforts  should  be  to  reduce  these  days.

Other  view  of  this  concept  is  that  ,   we  declare  that  we  have  a  stock  for  109  days , but  even  after  having  this  we  can  not  run  our  show  for  a  day  with  out  purchasing . 

In  other  words  if  we  required  packing  material  of  RS.4,20,000/-  per  day , and  one  day  we  had  a  problem  in  packing  line  due  to  not  having  a  particular  item  but  that  day  our  packing  material  stock  was  of

RS.  210,00,000/-  ,  “Means  we  had  inventory  for  50  working  days,”  even  after  having  this  we  were  in  trouble  means  inventory  control  system  is  fail  or  we  have  no  inventory  control  system.

 2. IF  we  need  100  items  to run  our  show  and  we  have  126  items  in  stock  ,  out   of  these  126  only  86  are  of  proper  use  then  86/126= 0.6825396  is  the  efficiency  of  our  inventory  control  system.

we  should  try  to  get  this  value  near  one  ,Yes  we  never  get  one  due  human  errors  but  we  should   try.

Best  system  can  be  generated  after  study  the  kitchen  managing  system  of  a  house  wife  of  an average  income  group  family ,  how  she  manage  her  items  needed  for  kitchen .

MATERIAL MANAGEMENT & INVENTORY  CONTROL  SYSTEMS, AND PRACTICAL PROBLEMS IN DYNAMIX.  

1. Identification and coding system :- Coding is necessary for the Items specially for large  size  of store like us , We  have a good program for our store .But system education , training  and encouragement to adopt a system is equally important that having a good system.

Lack of training to the people “involve in operation of store and getting issued from the store” is a measure cause of failure of our inventory control system, and result into the dead inventory, double codes of items and differences in physical stocks.

Solutions :-

To reduce the possibilities of double codes , It is necessary  the powers of  introducing new codes should be reserved .

All the Items should have codes in advance, for which we can forecast  that, “these materials will be purchased in near future.”

For standard  items  manufacturers  product  code may  be used as  item code. For  example  :- we should use standard price list of  Ammonia Valves and fitting from Super ,for our coding purpose , and code should we allotted to the all  items in price list . After coding this way , If  any fitting is being indented, and  requirement is not matching with  exiting codes , It means  specifications given by the indenture  are not god enough to get this material, because Super is manufacturing  max. type of fittings used in ammonia line.

There are many other examples for this exercise,  SKF. For Bearings.  LKM, for S.S. Valves and fittings,  S.S. Pipes , Decora,  M.S./ G.I. Pipes  TATA,  Valves  Aaudco , etc.

We may or may not use  their 100% product rage for our coding purpose , Depends upon the range of our utilization.

 

2. Specifications  of  Items  :- Lack of  knowledge about correct specification of items is a measure cause of dead inventory and  double code problem. For example :-

    Some 2” size Valve are  required  for water line, and indenture indent  “04 no. Ball Valve for water line” . Store people check from their computer there is no valve of same type is available,  they makes a new Item code and forward the intent.

    Same time 03 no. of  Flange type  Ball Valves  with S.S. Ball , C.I. Body and Teflon  seat  in 2” size was available in store ,can be used in water line , But many times such type of indent are being forwarded and results into more code and dead inventory.

    There are possibilities, that purchase people may send  new valves similar to the specifications we already have in store, Than we will have 07 no. similar valves in different item codes.

      Solution of this problem is to fix the specification for the items we use , training and encouragement to adopt  proper specification while intending.

For example one water line Valve of  2” size may have following specifications:-

 a. Basic type:-  Gate Valve, Ball Valve,  Butter Fly Valve , Diaphragm type Valve,  Plug cock,

                             Wheel cock,  etc.

b.  Material of construction of body :- S.S.,   M.S.,  C.I.,  Brass.   G.M.  PVC.,

c.  Material of construction of  seat  :- S.S.,   M.S.,  C.I.,  Brass.   G.M.  Teflon .,

d.  Material of   seal ( If any) :- ,  Brass.   G.M.  Teflon, silicon , nitrile , EPDM, neoprene .

e.  End connections  :-   Threaded,( type of thread ),  Welded,  Flanged( type of flange),

                                     Union (type of union)

f.   Code of construction :-  DIN,  ASME,  ISI,  SJT, AND British St.

g.  Pressure  rating          :-    150#,   300#,  

Based on above  details we can generate more than 500 codes for a single items “2” size water line valve”. Every one of us is free to make an indent of water line Valve, a little variation in writing the specification may cause of  new item code and dead inventory.

3 Limits of Groups and Sub Groups :-  All the Items should be divided in Groups and Sub groups further , It is important on item cover under one Sub - group  should not repeat  in gen. condition.

Example:-

Group	Sub-group	Code	Item	Quantity
Mechanical  Gen.	Nut-bolt ,& Hwd,	Mg,Nbh,M080,050,m	M.S, Nut-Bolt, M8 X 50,	50 Pc.
Mechanical  Gen.	Nut-bolt ,& Hwd,	Mg,Nbh,M080,050,S	S.S, Nut-Bolt, M8 X 50,	50 Pc.
Common Spare	Bearings.	Cs,Ber,6001zz,	Bearing  skf  6001zz	05 Pc.

MS. Nut - Bolt  M8x50, is a very common item used by all dept. Mechanical , Electrical , Instrumentation,  Civil , Utility, & Projects, but considering the  properties, this item is a Gen. Mechanical  item , It should be indented or issued with a single code under “Mech. Gen.” Group even it is required by Civil , Electrical or any other dept. 

Bearing No. 6001, is a very common bearing , may be used either by Electrical ,or  Mechanical dept. But there should be a single code in our  stores for this item. 

 

Measure Groups	Sub- groups	Items.
Equipment, Machines,
Mechanical Gen.	S.S. Raw Material S.S. Pipe and fittings MS. Raw Material, MS. Pipe and fittings. Nuts-Bolts & Hardware , SS. Valves , MS. Valves , Consumables,
Spare Gen.	Bearings, Mechanical Seals, Shaft, Springs, Filters, Wire mesh, Perforated Sheet,
Mechanical Special purpose	IBR, Pipes & fittings. IBR Valves, Ammonia Valves and fittings, S.S PIPE  (Sch.)
Spare Imported