I am Ananth, doing Masters in Business Management course. The ideas expressed here are my own, and so, please correct me if I am wrong.
Regarding Materials Management:
MM can be explained in simple terms as the " right materials at right quality and quantity and at right time "...The activities of MM includes inventory control, purchasing, transportation, warehousing, order processing, etc.
Yes, the efficiency of any company can be increased by improving the MM function. for eg: By having better control over inventory, the company can improve the inventory turnover which results in better working capital management. The materials can be procured at the required time, so that storage of more materials is eliminated there by a large amount of money is prevented from getting locked in stores...
Inventory control primarily targets at the items which are held for very large period in stores. first step in inventory control is getting the direct materials list. then purchase details of these items for last 6 months has to be collected. the ending stock of these items for the last 7 months has to be collected. with these details we could find out the average consumption of all the materials. then we could find out the items which are held more than, say one month stock.. we can analyse the excess holding for all these items and the top 20% items can be considered for furthur analysis. these top items can be rated on various parameters like criticality of the item, lead time of the supplier, fast/slow/non moving items etc...with all these items we can classify the items into A,B and C class items ...then a scheduling pattern based on the category of the items has to be drawn and the procurement should be strictly based on the revised scheduling...by this process inventory can be controlled...
16th July 2006
This is reply for Nitin's query,
Yes the statement is correct as "An Ideally laid out plant goes a long way in reducing manufacturing costs through reduced material handling , reduced personnel's and equipment requirements and reduced in process inventory"
Take for example a cement plant... or any plant in general. A proper plant layout of any plant during the initial stages of commissioning and erection can greatly reduce cost related to Manpower, Material transportation, Production etc. It reduces the cost related to extra machinery to be installed like conveyor belts for Material transportation and Labour costs.
A proper and well organised Plant setup and layout helps organization to reduce Production losses, Process Inventory cost, Labour related costs, Material Transportation (Both Raw material as well as Finished materials) along with the Cost related moving goods from centralised stores to various departments and places with in plants.
Hope this suggestion was quite a help for you....
Aneesh Kumar C
5th May 2008 From India , Madras
Manufacturing Cost can be reduced by reducing "7 Wastes".Waste is anything which does not add value to a product or service, in any office or manufacturing activity, eg : sitting in storage, being moved around, queuing awaiting processing, being inspected, etc.
The 7 Wastes
Taiichi Ohno, the former Chief Engineer at Toyota who popularized the Toyota Production System, is responsible for identifying the seven wastes in manufacturing. As he observed activity on the shop floor, he identified the following wastes:
- Transport : Movement of materials is a waste. Minimise the amount of movement by arranging processes in close proximity to each other. Factory layouts can often be the fundamental cause of excess transportation. When appropriate, re-laying out the machines within a factory from a functional to a cellular layout has been found by many companies to help not just reduce transportation waste but also reduce WIP and waiting. Items being moved unnecessarily incur a cost
- Inventory : Many companies produce above what is required to fulfil the order, this may be due to quality problems along the production process or the often mistaken belief that is saves money by manufacturing larger quantities.. Too little inventory can lose sales, too much inventory can hide problems.
- Motion :. Generally, this waste applies to production personnel having to move out of their work area to locate tools, materials, etc. Remove unnecessary motion of the operations and improve the ergonomics of the workplace. People moving unnecessarily also incur a cost.
- Waiting : Minimise waiting time (operators waiting for machines or products waiting around in factories either as finished goods or work in progress) Aim for a smooth flow.
- Overproduction : Always aim to make exactly what the customer orders, just in time, to the correct quality standard. On the shop floor, this generally occurs because changeover times are high, equipment is unreliable, the process is unreliable (causes defects), and standard cost accounting metrics are used. However, probably the biggest reason for overproduction is poor information flow (communication) between facilities.
- OverProcessing : Use machines which are of an appropriate capacity and capable of achieving the required quality standard. This usually refers to using larger scale equipment than necessary; it also refers to building in rework to a process. It can also refer to using the wrong suppliers and/or the wrong process
- Defects : Reducing the number of defects directly reduces the amount of waste. Aim for zero defects.
22nd September 2008 From India , Madras
One must understand the manufacturing cost of a product , this may include direct cost of inputs and indirect. Analyse the direct cost and identify the pareto cost component for example materials or power may be the pareto cost ,
Once you know the major cost constituent, identify the type of waste that is predominent in the cost component
Use the appropriate tool to eliminate the waste for example if materials is the pareto cost , you should aim for highest yields , if energy is the pareto cost Energy management should be your first choice ,
the success in reducung your manufacturing cost lies in identifying the pareto costs, Pareto wastages and optimising them
23rd September 2008 From India , Mumbai
Main Important picture comes here is while finalising project for the manufacturing plant, we need to make a correct analysis of all those points mentioned by you right at this stage.
Good plant layouts always develop from the general to the specific, never the other way around. If you begin the process of designing your layout from a department adjacency perspective rather than from an individual department, your chances for success will increase.
I have come across a training in which Focus was only on QCSPC-Quality cost safety people & consumer.The consumer can be internal or external depends upon sector to sector....
One point which i do not agree is reducing the cost through reduced material...Cost overheads can be compensated by cutting down the quantity or size of the product but not through reduced material.
You can also think of substitution of certain raw materials as part of cost reduction.
24th September 2008 From India , Delhi