PM105:
MATERIALS
TECHNOLOGY
MANAGEMENT
Engr. Paul Richard Cuarez
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
Planning System
Master Scheduling
MATERIALS TECHNOLOGY Capacity Management
MANAGEMENT
Production Activity Control
Purchasing
Physical Inventory and Warehouse
Management Forecasting
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
What Is Materials Management?
Operating Environment
The Supply Chain Concept
Supply Chain Metrics
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
What Is Materials Management?
• The concept of having one department responsible for the flow of
materials, from supplier through production to consumer, is
relatively new. Although many companies have adopted this type
of organization, there are still a number that have not. If
companies wish to minimize total costs in this area and provide a
better level of customer service, they will move in this direction.
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
What Is Materials Management?
• is a coordinating function responsible for planning and
controlling materials flow. Its objectives are as follows:
• Maximize the use of the firm’s resources.
• Provide the required level of customer service.
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
What Is Materials Management?
• is a coordinating function responsible for planning and
controlling materials flow. Its objectives are as follows:
• Maximize the use of the firm’s resources.
• Provide the required level of customer service.
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
What Is Materials Management?
Example:
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
Operating Environment.
• Works in a complex environment affected by many factors.
Among the most important are government regulation, the
economy, competition, customer expectations, and quality.
• Government. Regulation of business by the various levels of
government is extensive. Regulation applies to such areas as the
environment, safety, product liability, and taxation. Government,
or the lack of it, affects the way business is conducted.
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
Operating Environment.
• Economy. General economic conditions influence the demand
for a company’s products or services and the availability of
inputs.
• Competition. Competition is severe today. Manufacturing
companies face competition from throughout the world. They
find foreign competitors selling in their markets even though
they themselves may not be selling in foreign markets.
Companies also are resorting more to worldwide sourcing.
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
Operating Environment.
• Competition. Competition is severe today. Transportation and
the movement of materials are relatively less costly than they
used to be.
• Worldwide communications are fast, effective, and cheap.
Information and data can be moved almost instantly halfway
around the globe. The Internet allows buyers to search out new
sources of supply from anywhere in the world as easily as they
can from local sources.
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
Operating Environment.
• Customers. Both consumers and industrial customers have become
much more demanding, and suppliers have responded by improving the
range of characteristics they offer. Some of the characteristics and
selection customers expect in the products and services they buy are:
• A fair price.
• Higher-(right) quality products and services.
• Delivery lead time.
• Better presale and after-sale service.
• Product and volume flexibility.
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
Operating Environment.
• Quality. Since competition is international and aggressive,
successful companies provide quality that not only meets
customers’ high expectations but exceeds them.
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
Operating Environment.
• Manufacturing Strategy. A highly market-oriented company
will focus on meeting or exceeding customer expectations and
on order winners. In such a company all functions must
contribute toward a winning strategy. Thus, operations must
have a strategy that allows it to supply the needs of the
marketplace and provide fast on-time delivery.
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
Operating Environment.
• Delivery lead time. From the supplier’s perspective, this is the time
from receipt of an order to the delivery of the product. From the
customer’s perspective it may also include time for order
preparation and transmittal. Customers want delivery lead time to
be as short as possible, and manufacturing must design a strategy to
achieve this. There are four basic strategies: engineer-to-order,
make-to-order, assemble-to-order, and make-to-stock. Customer
involvement in the product design, delivery lead time, and inventory
state are influenced by each strategy.
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
Operating Environment.
• Engineer-to-order means that the customer’s specifications
require unique engineering design or significant customization.
Usually the customer is highly involved in the product design
• Make-to-order means that the manufacturer does not start to
make the product until a customer’s order is received. The final
product is usually made from standard items but may include
custom-designed components as well.
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
Operating Environment.
• Assemble-to-order means that the product is made from
standard components that the manufacturer can inventory and
assemble according to a customer order.
• Make-to-stock means that the supplier manufactures the
goods and sells from finished goods inventory.
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
Operating Environment.
Manufacturing
strategy and lead
time.
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
The Supply Chain Concept.
• There are three phases to the flow of materials. Raw materials
flow into a manufacturing company from a physical supply
system, they are processed by manufacturing, and finally
finished goods are distributed to end consumers through a
physical distribution system.
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
The Supply Chain Concept.
Supply-production-distribution
system.
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
The Supply Chain Concept.
• There are a number of important factors in supply chains:
• The supply chain includes all activities and processes to
supply a product or service to a final customer.
• Any number of companies can be linked in the supply chain.
• Customer can be a supplier to another customer so the total
chain can have a number of supplier/customer relationships.
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
The Supply Chain Concept.
• There are a number of important factors in supply chains:
• Although the distribution system can be direct from
supplier to customer, depending on the products and
markets, it can contain a number of intermediaries
(distributors) such as wholesalers, warehouses, and
retailers.
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
The Supply Chain Concept.
• There are a number of important factors in supply chains:
• Product or services usually flow from supplier to
customer and design, and demand information usually
flows from customer to supplier. Rarely is this not so.
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
The Supply Chain Concept.
• In recent years there has been a great deal of attention to the
concept of supply chain management (SCM). It is important to
understand the fundamental issues behind this movement, as
well as the impact on materials management.
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
The Supply Chain Concept.
• The growth of the supply chain concept. As the 1980s gave way to the
1990s, the world continued to change, forcing additional modifications to
the trend:
• There has been explosive growth in computer capability and associated
software applications. Highly effective and integrated systems such as
enterprise resource planning (ERP) and the ability to link companies
electronically (through the Internet, for example) have allowed
companies to share large amounts of information quickly and easily. The
ability to have the information rapidly has become a competitive
necessity for many companies.
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
The Supply Chain Concept.
• The growth of the supply chain concept. As the 1980s gave way to the
1990s, the world continued to change, forcing additional modifications to
the trend:
• There has been a large growth in global competition. Very few companies
can still say they have only local competition, and many of the global
competitors are forcing existing companies to find new ways to be
successful in the marketplace.
• The changes prompted by JIT in the 1980s have continued to mature, so
that by now many companies have new approaches to inter-
organizational relationships as a normal form of business.
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
The Supply Chain Concept.
• The growth of the supply chain concept. As the 1980s gave way to the
1990s, the world continued to change, forcing additional modifications to
the trend:
• There has been a growth in technological capabilities for products and
processes. Product life cycles for many products are shrinking rapidly,
forcing companies to not only become more flexible in design but also to
communicate changes and needs to suppliers and distributors.
• Partially in response to the preceding conditions, more and more
companies are subcontracting more of their work to suppliers, keeping
only their most important core competencies as internal activities.
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
The Supply Chain Concept.
• What is the current supply chain concept? - Companies currently adopting
the supply chain concept view the entire set of activities from raw material
production to final customer purchase to final disposal as a linked chain of
activities. To result in optimal performance for customer service and cost, it
is felt that the supply chain of activities should be managed as an extension
of the partnership. This implies many issues, but three critical ones include:
• 1. Flow of materials.
• 2. Flow of information and sharing of information, mostly through
the Internet.
• 3. Fund transfers.
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
The Supply Chain Concept.
• In addition, a new trend is to manage the recovery, recycling, and reuse of
material. The primary supply chain management approach is a conceptual
one.
• All portions of the material production, from raw materials to final customer,
are considered to be a linked chain. The most efficient and effective way to
manage the activities along the chain is to view each separate organization in
the chain as an extension of one’s own organization.
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
The Supply Chain Concept.
• Take as an example the chain of organizations that represent the flow from
raw silicon used to make computer chips to the delivery and disposal of the
computer itself:
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
The Supply Chain Concept.
• To manage a supply chain, one must not only understand the network of
suppliers and customers along the chain but must also try to efficiently plan
material and information flows along each chain to maximize cost efficiency,
effectiveness, delivery, and flexibility.
• This clearly not only implies taking a different conceptual approach to
suppliers and customers but also implies a highly integrated information
system and a different set of performance measures. Overall, the key to
managing such a concept is with rapid flows of accurate information and
increased organizational flexibility.
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
The Supply Chain Concept.
• Conflicts in Traditional Systems - In the past, supply, production, and
distribution systems were organized into separate functions that reported
to different departments of a company. Often policies and practices of the
different departments maximized departmental objectives without
considering the effect they would have on other parts of the system. For
example, the transportation department would ship in the largest
quantities possible so it could minimize per-unit shipping costs. However,
this increased inventory and resulted in higher inventory-carrying costs.
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
The Supply Chain Concept.
• To get the most profit, a company must have at least four main objectives:
1. Provide best customer service.
2. Provide lowest production costs.
3. Provide lowest inventory investment.
4. Provide lowest distribution costs.
• These objectives create conflict among the marketing, production, and
finance departments because each has different responsibilities in these
areas.
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
The Supply Chain Concept.
• Marketing’s objective is to maintain and increase revenue; therefore, it must
provide the best customer service possible. There are several ways of doing this:
• Maintain high inventories so goods are always available for the customer.
• Interrupt production runs so that a non inventoried item can be
manufactured quickly.
• Create an extensive and costly distribution system so goods can be shipped
to the customer rapidly.
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
The Supply Chain Concept.
• Finance must keep investment and costs low. This can be done in the
following ways:
• Reduce inventory so inventory investment is at a minimum.
• Decrease the number of plants and warehouses.
• Produce large quantities using long production runs.
• Manufacture only to customer order.
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
The Supply Chain Concept.
• Production must keep its operating costs as low as possible. This can be done
in the following ways:
• Make long production runs of relatively few products. Fewer
changeovers will be needed and specialized equipment can be used, thus
reducing the cost of making the product.
• Maintain high inventories of raw materials and work-in-process so
production is not disrupted by shortages.
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
The Supply Chain Concept.
• These conflicts among marketing, finance, and production center on
customer service, disruption of production flow, and inventory levels.
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
The Supply Chain Concept.
Conflicting
Objectives
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
The Supply Chain Concept.
Inputs to the manufacturing planning and control system. There are five
basic inputs to the manufacturing planning and control system:
1. The product description shows how the product will appear at some stage
of production. Engineering drawings and specifications are methods of
describing the product. Another method, and the most important for
manufacturing planning and control, is the bill of material. As used in
materials management, this document does two things:
• Describes the components used to make the product.
• Describes the subassemblies at various stages of manufacture.
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
The Supply Chain Concept.
2. 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. This information is usually recorded on a route sheet or in a
routing file. These are documents or computer files that give information
such as the following on the manufacture of a product:
• Operations required to make the product.
• Sequence of operations.
• Equipment and accessories required.
• Standard time required to perform each operation
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
The Supply Chain Concept.
3. The time needed to perform operations is usually expressed in standard time
which is the time taken by an average operator, working at a normal pace, to
perform a task. It is needed to schedule work through the plant, load the plant,
make delivery promises, and cost the product. Usually, standard times for operations
are obtained from the routing file.
4. 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.
5. Quantities required. This information will come from forecasts, customer orders,
orders to replace finished-goods inventory, and the material requirements plan.
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
The Supply Chain Concept.
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.
The activities involved are as follows:
• Transportation.
• Distribution inventory.
• Warehousing.
• Packaging.
• Materials handling.
• Order entry.
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
The Supply Chain Concept.
Materials management is a balancing act. The objective is to be able to
deliver what customers want, when and where they want it, and do 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. As a rule, costs rise as the service level increases,
and materials management must find that combination of inputs to
maximize service and minimize cost.
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
The Supply Chain Metrics.
A metric is a verifiable measure stated in either quantitative or qualitative
terms defined with respect to a reference point. Without metrics, no firm
could expect to function effectively or efficiently on a daily basis. Metrics
give us:
1. Control by superiors.
2. Reporting of data to superiors and external groups.
3. Communication.
4. Learning.
5. Improvement.
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
The Supply Chain Metrics.
Metrics Context
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
The Supply Chain Metrics.
Metrics communicate expectations, identify problems, direct a course of
action, and motivate people. Building the right metrics is vital to a
company. Problems must be anticipated and corrective action taken before
they become severe. Thus, companies cannot risk waiting to react until the
order cycle is completed and feedback from customers is received.
Today production control works in a demanding environment shaped by six
major challenges:
1. Customers that are never satisfied.
2. A supply chain that is large and must be managed.
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
The Supply Chain Metrics.
Today production control works in a demanding environment shaped by six
major challenges:
3. A product life cycle that is getting shorter and shorter.
4. A vast amount of data.
5. An emphasis on profit margins that are more squeezed.
6. An increasing number of alternatives.
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
The Supply Chain Metrics.
There is a difference between measurement and standards. A
performance measure must be both quantified and objective and contain
at least two parameters. For example, the number of orders per day
consists of both a quantity and a time measurement.
Transforming company policies into objectives and specific goals creates
performance standards. Each goal should have target values.
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
The Supply Chain Metrics.
Many companies do not realize the potential benefits of performance measurement, nor do
they know how to measure performance. It can be used without performance standards.
This might occur when the concept of performance measurement and standards is new.
When standards are put into use, management can begin to monitor the company. The old
saying, “What you do not measure, you cannot control,” is as valid today as it was when first
stated. The necessary steps in implementing such a program are:
1. Establish company goals and objectives.
2. Define performance.
3. State the measurement to be used.
4. Set performance standards.
5. Educate the user.
6. Make sure the program is consistently applied.
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
The Supply Chain Metrics.
Many companies do not realize the potential benefits of performance measurement, nor do
they know how to measure performance. It can be used without performance standards.
This might occur when the concept of performance measurement and standards is new.
When standards are put into use, management can begin to monitor the company. The old
saying, “What you do not measure, you cannot control,” is as valid today as it was when first
stated. The necessary steps in implementing such a program are:
1. Establish company goals and objectives.
2. Define performance.
3. State the measurement to be used.
4. Set performance standards.
5. Educate the user.
6. Make sure the program is consistently applied.
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
The Supply Chain Metrics.
Although financial performance has traditionally been the
measure of success in most companies, today the focus is on
continuous improvement and, with this, an increase in standards.
Emphasis should not be placed on a “one-shot” improvement but
on such things as the rate of improvement in quality, cost,
reliability, innovation, effectiveness, and productivity.
PM105:
MATERIALS TECHNOLOGY MANAGEMENT
Introduction to Materials Management
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 then manage these systems to make the best use of labor, capital, and material.
One of the most effective ways of doing this is through the planning and control of the
flow of materials into, through, and out of manufacturing. There are three elements 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 conflicts in the objectives of a company and in the objectives of
marketing, finance, and production. The role of materials management is to balance
these conflicting objectives by coordinating the flow of materials so customer service is
maintained and the resources of the company are properly used.
