Lecture Principle of inventory and material management - Lecture 2: Introduction to Materials Management

The wealth of a country is measured by its gross national product—the output of goods and services produced by the nation in a given time. Goods are physical objects, something we can touch, feel, or see. Services are the performance of some useful function such as banking, medical care, restaurants, clothing stores, or social services. But what is the source of wealth? It is measured by the amount of goods and services produced, but where does it come from? Lecture 2 - Introduction to Materials Management.

Introduction to Materials Management

Books

• Introduction to Materials Management, Sixth Edition, J. R. Tony Arnold, P.E., CFPIM, CIRM, Fleming  College, Emeritus, Stephen N. Chapman, Ph.D., CFPIM, North Carolina State University, Lloyd M.  Clive, P.E., CFPIM, Fleming College

• Operations Management for Competitive Advantage, 11th Edition, by Chase, Jacobs, and Aquilano, 2005,  N.Y.: McGraw­Hill/Irwin.

• Is there any conflict in the objectives of best 

customer service, lowest production costs, and  lowest inventory investment? Why?

• How can the conflicts be managed?

w Use long

production runs

w Manufacture to

customer order

Production

w Make long

production runs

w Maintain high

inventories of raw materials and WIP

The grouping of management functions 

supporting the complete cycle of material  flow, from the purchase and internal 

control of production materials to the 

planning and control of work in process to  the warehousing, shipping, and distribution 

of the finished product

APICS Dictionary, 8th Edition

• product improvements may be  difficulty because it is a sideline

subassemblies at  various stages of  manufacturer

3 Packaging

3  Materials Handling

3  Order Entry

The actual increase of utility from the viewpoint of 

the customer as a part is transformed from raw material to finished inventory. It is the 

contribution made by an operation or a plant to the final usefulness and value of a product, as seen by the customer. The objective is to 

eliminate all non­value­added activities in 

producing and providing a good or service

APICS Dictionary, 8th Edition

Supply

Manufacturing Planning and Control

Physical Distribution

All of the competitive dimensions are important…

why not try to excel along every one?

Strategy Operations Strategy

Examples

• Southwest Operations – low cost

– Point­to­point between midsize cities & secondary airports in large cities

Material

Output

or   

   Captial

Output

or   

   LaborOutput 

Example:  Consider the following case.  A bank has net 

output (income) of $500,000.  The bank employs 40,000 people

The partial labor productivity is  500,000 / 40,000  =  12.5

What does this tell you?

Examples

• Walmart – low cost

– High investment into IT to manage inventory, analyze point of sales data, track shipments, etc

– Management by data

– Scale

– Negotiation power with suppliers

End of Lecture 2