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You can move a mountain and you canWhatever the mind of man can conceive and believe it can achieve. When you believe “I Can Do It, The How to Do It Develops!!
Suppliers CustomersCompany
Supply Chain Management
Supply Side Demand Side
Supply chain management is a set of approaches used to efficiently integrate suppliers, manufacturers, warehouses, and customers so that merchandise is produced and distributed at the right quantities, to the right locations, and at the right time in order to minimize system wide costs while satisfying service-level requirements.
INBOUND LOGISTICS
- Demand forecasting and planning
- Materials planning and management
- Inventory management and control
- Vendor development & management
- Purchasing and sourcing
OUTBOUND LOGISTICS
- Dispatch planning and scheduling
- Distribution
- Warehouse management
- Order Fulfillment
- Customer Service
MANUFACTURING LOGISTICS
- Capacity planning
- Production planning and scheduling
- Operations
- Manufacturing
Any organisation has several resources these include 4 M’s namely MEN, MONEY, MACHINES, MATERIALS. It is the function of Another ‘M’ namely MANAGEMENT optimally plan & utilise these resources within the framework of 2 T’s namely TIME, TECHNOLOGY & Environmental Forces so as to produce products or services of acceptable quality (for customer satisfaction) and a reasonable amount of profit.
While any two organisations may have identical resources of 4 M’s at their disposal, one may produce good profits and the other may not do as well or even make losses. What is the ingredient that is causing this difference?
Inventory (Raw Materials, Components, Work in Process, Finished Goods, MRO Items) may be defined as “usable but idle resource which has an economic values awaiting for further use or process. It contributes anything between 40%-60% of cost of any product. Inventory carrying cost is very high (27%-33% in the Indian Context).
Inventory Control is a process of deciding what and how much of various items are to be kept in stock. It also determines the time and quantity of various items to be procured.
Why Inventory Control??
1. Minimize financial Investments in Inventory
2. To Facilitate Production Operations
3. To Avoid Losses from Inventory Obsolescence
4. To Improve Customer Service
Purchase Goals
In Right Quantity
At Right Price
At Right Time
Of Right Quality
At Right Place
From Right Source
Buying Materials
MD
Dir Dir Dir COF
Manager (Import & Export)
Accounts Personnel
Production In charge
HOD (Stores & Purchase)
Administrative Staff
Supervisor 1
Supervisor 2
Supervisor 3
Supervisor 4
Storekeeper 1 Storekeeper 2
MD
Dir
HOD (Stores & Purchase)
Storekeeper (Raw Materials)
Storekeeper(Sub Contracting Comp.)
Storekeeper(Consumables & Misc.)
Storekeeper(Bought out Components)
Asst
Asst
Asst
Asst
Asst
Asst
Asst
Asst
Stores & Pur. Plant A
ProductionMaterial Requisition
Supply of Material
SupplierEnquiry
Quotation
Plant BStock Transfer
Component Process
Purchase Order
Follow Up
Accounts H.O.
Payment Advise Copy
Stock Statement
GRN, Invoice
PO Copy
Pa
yme
nt
HO
PlantMaterial Requisition
PO Copy
Domestic Supplier
Enquiry
Quotation
GR
N &
Invo
ice
Fo
llow
Up
Purchase Order
Fo
llow
Up
Overseas Supplier
Follow Up
Purchase Order
Quotation
Enquiry
Pa
yme
nt
Go
od
s A
rriv
al I
nfo
.
Payment
Calculation of Material Requirement of upcoming financial year in advance i.e., first week of January every year based on yearly production schedule.
Release of tentative yearly purchase schedule (blanket order) to the supplier.
Confirmation of monthly requirement, release of purchase orders (taking into consideration the stock lying in store, materials in transit or in process with sub contractor and quantity on order) for upcoming month in view of lead time.
Weekly review of stock at par with production schedule
Daily review of stock level and replenishment
Lead Time
Maximum
Reorder
Minimum
Time (in Days)
Un
its I
n S
tock
Safety Inventory
Average Average Cycle
Inventory
Lot Size Reorder Point Policy
Fixed Order Interval Scheduling Policy
Optional Replenishment Policy
Inventory Related Cost
Ordering Cost Inventory Carrying Cost Stock Out Cost
Economical Ordering Quantity (EOQ Model) to minimize ordering cost and inventory carrying cost
Qty Per Order (Q)
Total Cost
Inventory Carrying Cost
EOQ
Ordering Cost
Cos
t of
Cov
erA
nnua
l Req
uire
men
t o
f an
item
EOQ= 2AS
Ci
Where
Q= Qty per Order
A= Annual Requirement
in Unit
S = Ordering Cost per Order
C = Cost per Unit or Item
i = Inventory carrying Cost
expressed as % of value
Identification and grouping of Items depending upon Value of item (cost per unit) as HML, Criticality as VED, Usage frequency as FSN, Usage Value as ABC, Availability Position as SDE.
100
90
75
10 25 100
A
BC
Cu
mu
lativ
e P
erc
en
t V
alu
e
Cumulative Percent Number
Where are we going wrong??
Vendor Rating Index (Quality) = No. of Lots Rejected
No. of Lots Received
Vendor Rating Index (Delivery) = Delivery On Schedule
Total No. of Deliveries
Rush Order Cost (Index) = Price Paid for Rush Order Material
Price Normally Paid for this Material
Inventory Turnover Ratio = Annual Sales
(Finished Goods) Average Inventory
Out of Stock Index = No. of Times of Out of Stock
No. of Times Requisitioned
The presented Perspective for Year 2010 can only be achieved by TEAM Work!!
End Thought
Together
Everyone
Achieve
More
Sales
Finance
Production
Engg.Design
StoresPurchase
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