introductionto materials management
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Introduction Materials managementTRANSCRIPT
Introduction to Materials Management
Producción I
IITI
MC. Ma. del Pilar C. León Franco
Introduction
The wealth of contry is mesure by its gross national product.
A production function
Usefull productsTransform
Services
Products
Raw materialTransform More Value
Issues
Introduction
To get the most value out of our resources, we must design production processes that make products most efficiently,
OperationPlanning for
Controlling resources Labor
Capital
Material
Introduction
The principal activity of management plans and controls is through the flow of materials.
Flow Materials
Right materials
Right quantities
Right time
Process OK
Operating environment
Operation Management
GovernmentRegulation as environment, safety, product liability
Economy:Influence the demand for a company´s products
CompetitionForeign competitors.
Customer:
-A Fair Price
-Higher quality products and service
-Delivery time
-Better pre-sales and after-sales service
-Product and volume flexibility
Quality:Exceeds the customers´expectations
Operating environment
Order Qualifiers: Customer requirement (price, quality, delivery and so forth)
Order Winners: Competitive characteristics or combination of characteristics, that persuade a company´s customer to choose its products or services .
Manufacturing strategy
A highly market-oriented company will focus on meeting or exceeding customer expectations and on order winnings strategy.
Delivery lead time: Is the time from receipt of an order to the delivery of the product.
Manufacturing strategy
Engineer to order:
Customer´s specifications require unique engineering design or significant customization. Delivery lead time is long because it includes not only purchase lead time, but design lead time as well.
Manufacturing strategy
Make to order: Manufacturer does not start to make the product
until a customer´s order is received.
Assemble to order: Product es made from standard components that
the manufacturer can inventory and assemble according to a customer order. (not design time and inventory is ready for ensambly)
Manufacturing strategy
Make to stock: Supplier manufactures the foods and sells from
finished goods inventory. Delivery lead time is shortest.
Manufacturing strategy
Design ShipAssembleManufacturePurchase
Delivery Lead time
Engineer to order
ShipAssembleManufactureInventory
Delivery Lead time
Make to order
ShipAssembleManufacture Inventory
Delivery Lead time
Make to stock
ShipAssembleManufacture Inventory
Delivery Lead time
Assemble to Order
The supply chain ConceptS
U
P
P
L
I
E
R
ManufacturerDistrubution
System
C
U
S
T
U
M
E
R
Dominate flow of demand and design information
Dominat flow of products and services
Physical Supply
Manufacturing Planning and Control
Physical Distribution
The supply chain Concept
Factors: Includes activities and processes to supply a
product or service to final customer. Any number of companies can be linked in the
supply chain A customer can ve a supplier to another customer
so the total chain can have a number of supplier/customer relationship
The supply chain Concept
Factors: While the distribution system can be direct from
supplier to customer, depending on the products and markets, it can contain a number of intermediaries (distribution) such as wholesalers, warehouses, and retailers.
Product or services usually flow from supplier to customer and design and demand information usually flows from customer to supplier. Rarely is not so.
Supply Chain Concepts
Historical perspective Attention on the issues that were internal to the
companies. 1970 JIT (Mutual analysis for cost reduction, Mutual
product design and reduced inventory in process) 1980 Supply chain Concepts
Explosive forth in computer capability Large growth in global competition Technological capabilities for products and process
Supply Chain Concepts
Historical perspective 1980 Supply chain Concepts
Explosive growth in computer capability Large growth in global competition Technological capabilities for products and process More companies are subcontracting their work to
suppliers,
Supply Chain Concepts
Entire set of activities from raw material production to final customer purchase as linked chain of activity. Flow materials Flow of information , mostly electronically Fund transfers.
Conflicts in Traditional Systems Maximized departmental objectives without
considering the effect they would have on other parts of the system.
The principal objectives: Provide best costumer service Provide lowest production cost Provide lowest inventory investment Provide lowest distribution cost
Conflicted with marketing, production and finance departments because each has different responsible.
Conflicts in Traditional Systems Actions:
Marketing High inventories Interrupt production Extensive and costly distribution system
Finance Reduce inventory Decrease the number of plants and warehouse Produce large quantities using long production runs Manufacture only to customer order
Conflicts in Traditional Systems
Production Make long production runs of relatively few products Maintain high inventories of raw materials and WIP so
productions is not disrupted by shortages.
Conflicts in Traditional SystemsFUNCTION OBJETIVE IMPLICATION
Marketing High Revenues High Custumer
High Product Availability Low Service
ProductionLow Production Cost
Many Disruptions
High Level ProductionFew to production
Long Production Runs
FinanceLow Investment and Costs
High Inventories
Fewer Fixed Costs Low
Low Inventories
Materials Management
Department responsible for the flow of material, from supplier through production to costumer. (some times include distribution planning and control and logistic management).
Objectives: Maximize the use of the firm´s resources. Provide the required level of customer service
Manufacturing Planning and Control MPC is responsible for the planning and
control of the flow of materials through the manufacturing process.
MPC
Implementation
and control
Inventory Management
Production
planning
Manufacturing Planning and Control Production planning
Meet the demand of the marketplace. It must establish correct priorities
Forecasting Master planning Material requirements planning Capacity planning
Manufacturing Planning and Control Implementation and control
These are responsible for putting into action and achieving the plans made by production planning.
Inventory Management: Inventories are material and supplies carried on
hand either for sales or to provide material or supplies to the production process
Manufacturing Planning and Control Inputs to de MPC System
MPC
Process specifications
Time needed to perform operation
Production description
Quantities required
Available
facilities
Inputs to the MPC System
Production description Show how the product will appear at some stage
of production. (Engineering drawings, specifications, Bill of materials)
Describe the components used to make the product
Describes the subassemblies at various stages of manufacture.
Inputs to the MPC System
Process specifications Describe the steps necessary to make the end
product. They are a step-by-step set of instructions
describing how the product is made. Operations required to make the product Sequence of operations. Equipment and accessories required Standard time required to perform each operation
Inputs to the MPC System
Time needed to perform operation Expressed in standard time which is the time
taken by an average operator, working at a normal pace, to perform a task.
Inputs to the MPC System
Available facilities Manufacturing planning and control must know
what plant, equipment, and labor will be available to process work. This information is usually found in the work center file.
Inputs to the MPC System
Quantities required: This information will come from forecasts,
customer orders, orders to replace finished-goods inventory and the material requirements plan.
Physical Supply/Distribution
Physical supply distribution includes all the activities involved in moving goods, from the supplier to the beginning of the production process, and from the end of the production process to the consumer. Transportation Distribution inventory Warehousing Packaging Materials handling Order entry
Physical Supply/Distribution
The objective is to be able to deliver what customer wants, when and where they want it, and so at minimum cost.
To achieve this objective, materials management must make trade-offs between the level of customer service and the cost of providing that service.
Physical Supply/Distribution
The overall concern of materials management is the balance between priority and capacity
Priority and capacity must be planned and controlled to meet customer demand at minimum cost.
Supply Chain Metrics
A metric is a verifiable measure stated in either quantitative or qualitative terms defined with respect to a reference point.
Metrics give us: Control by superiors Reporting of data to superiors and external groups Communication Learning Improvement
Supply Chain Metrics
Metrics communicate expectations, identify problems, direct a course of action and motivate people.
Supply Chain Metrics
Today production control works in a demanding environment shaped by six major challenges: Customer that are never satisfied A supply chain that is large and must be managed A product life cycle that is getting shorter and shorter A vast amount of data An emphasis on profit margins that are more squeezed An increasing number of alternatives.
Supply Chain Metrics
A firm has a corporate strategy that states how it will treat its customers and what services it will supply.
Strategy
CustomerStrategy
Focus
StandardOperationalMetrics
Performance standars: Transforming company policies into objectives and specific goals
Supply Chain Metrics
The necessary steps in implementing such a program are: Establish company goals and objectives Define performance State the measurement to be used Set performance standards Educate the user Make sure the program is consistently applied.
Summary
Manufacturing creates wealth by adding value to goods. To improve productivity and wealth, a company must first design efficient and effective systems for manufacturing. It must the manage these systems to make the best use of labor, capital and material. One of the most effective ways to doing this is through the planning and control of the flow of materials into, through and out of manufacturing.
Summary
There are 3 element to a material flow system: supply, manufacturing planning and control, and physical distribution. They are connected and what happens in one system affects the others.
Traditionally, there are conflict in the objectives of a company and in the objectives of marketing, finance and production. The role of material management is to balance these conflicting objectives by coordinating the flow of materials so costumer service is maintained and the resources of the company are properly used.
Materials Management
Dollars Porcent of Sales
Revenue (sales)
Cost of Goods Sold
Direct Material
Direct Labor
Factory Overhead
Total Cost of Goods Sold
Gross Profit
$1,000
$500
$900
$200
$200
$100
90
100
20
20
50
10
Materials Management
Dollars Porcent of Sales
Revenue (sales)
Cost of Goods Sold
Direct Material
Direct Labor
Factory Overhead
Total Cost of Goods Sold
Gross Profit
$1,000
$450
$840
$200
$190
$160
84
100
20
19
45
16
Reorganized materials managmen department, direct material can be reduce by 10% and direct labor by 5%
Example
Dollars Porcent of Sales
Revenue (sales)
Cost of Goods Sold
Direct Material
Direct Labor
Factory Overhead
Total Cost of Goods Sold
Gross Profit
100 %
60 %
95 %
25 %
10 %
5 %
90 %
100 %
25 %
10 %
55 %
10 %
Example
Profit = Sales – (direct material + direct labor + 0.25)
= Sales – (0.60 sales + 0.1 sales + 0.25)
= Sales – 0.7 sales – 0.25
0.1 = 0.3 sales – 0.25
Sales = 0.35 = 1.17
0.3
Sales must increase 17%.
Example
A)If the cost of direct material is 60%, direct labor is 10%, and overhead is 25% of sales, what will be the improvement in profit if direct material is reduce 5%?
B) How much will sale have to increase to give the same increase in profit? (Remember overhead cost is constant)