Materials Management...

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It contains details on the topic Reciprocity.........

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N This is about The Learning Curve................

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Obsolete, surplus and scrap management.

Obsolete items are good in all respect but have no useful role in the company due to changes that have occurred in the course of time. They have economic worth in the market.
Surplus items are those that have accumulated due to faulty planning, forecasting and purchasing. Hence a usage value is associated with these items.
Scrap is wastage generated due to processes like turning, boring drilling etc. and also due to bad manufacturing. it is said that in India nearly Rs. 2500 crores are tied up as obsolete, surplus and scrap items.
Causes for their generation
· Changes in product design – obsoletion
· Rationalization – initiative for variety reduction leads to surplus or obsolete items
· Cannibalization – parts of one idle machine are fitted on another machine needed urgently during maintenance, results into obsoletion of parts and at times even scrap
· Faulty planning and forecasting – leads to excess procurement, surplus generation.
· Faulty purchase practices – sub-optimization in buying to utilize available discounts and transportation economy, surplus and obsolete stocks are generated.
· Other causes – parts kept aside for insurance claims, bad storage system, bad material handling, bad manufacturing and badly maintained machines are other causes for spoilage and scrap.
HOW TO PREVENT GENERATION OF Obsolete, surplus and scrap ITEMS?
DISPOSAL SYSTWMS?

Benefits of ABC Analysis:
1. Identification significant 15% to 20%items responsible for 80% of value for close management control – selective management control
2. Effective management of inventory – results in short span of time
3. Allocation of management resources to significant items, reduction in clerical work and time.
4. Helps in selection of appropriate inventory control models or systems. E.g. ‘Q’ model or ‘P’?
5. Helps in formulation of inventory policy

SELECTIVE MANAGEMENT CONTROL
SENSITIVITY ANALYSIS

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ABC INVENTORY CLASSIFICATION (SELECTIVE INVENTORY
CONTROL-SIC)

This is a popular inventory control technique, which is an adaptation of Pareto's Law. In a study of the distribution of wealth and income in Italy, Vilfredo Pareto, an Italian Economist, observed in 1897 that a very large percentage of the total national income and wealth was concentrated in the hands of a small percentage of the population. Believing that this reflected a universal principle, he formulated the axiom that the significant items in a given group normally constitute a small portion of the total items in the group and that majority of the items in the total will, in the aggregate, be of minor significance. Pareto expressed this empirical relationship mathematically. But, the rough pattern is 80 per cent of the distribution is accounted for by 20 per cent of the group membership.

The 80-20 pattern holds true in most inventory situations, where it can be shown that approximately 20 per cent of the items account for 80 per cent of total cost (unit cost times usage quantity). In the typical ABC-Classification, these are designated as A-items, and the remaining 80 per cent of the items become B's and C's, representing the 30 per cent that account for 15 per cent of cost, and the bottom 50 per cent that account for 5 per cent of cost. The idea behind ABC-Classification is to apply the bulk of the limited planning and control resources to the A-items, "where the money is", while, the expenses on the other classes that have demonstrably much less effect on the overall inventory investment, is kept to a minimum. The ABC control concept is implemented by controlling A-items "more tightly" than B and C items, in descending order.

Today, the principle of graduated control stringency may be somewhat difficult to comprehend, But, in pre-computer days the degree of control was equated with the frequency of reviews of a given inventory item's record. Controlling 'tightly' meant reviewing frequently. The frequency of review, in turn, tended to determine the order quantity. A-items would be reviewed frequently and ordered in small quantities, in order to keep inventory investment low. A typical ABC-classification, which is an acronym for "Always Better Control", is graphically represented below.

The rationale of ABC-classification is the impracticality of giving an equally high degree of attention to the record of every inventory item, due to limited information-processing capacity.

With computers now available, this limitation has disappeared and the ABC concept tends to become more or less irrelevant. Equal treatment

gaurav1987

Hey guys finally the notes are complete.... so now these are a complete package of notes on materials management....All the files uploaded would help u out in exams...so guys best of luck....n n'joy...