Project Construction & Management - Material & Inventory Management

Flashcards covering key concepts in Material Management, Purchasing, and Inventory Management.

What is Materials Management?

Planning, organizing, and controlling the flow of material from its initial purchase stage, through internal operations, to the distribution of finished goods.

What are major concerns about material management?

Purchasing, Transportation (incoming and outgoing), Control through production and inventory management, Warehousing and distribution

What are the four basic needs of material management?

To have adequate materials on hand when needed; To pay lowest possible prices; To minimize the inventory investment; To operate efficiently

What are the basic principles of material management?

Effective management and supervision; Sound purchasing methods; Skillful and hard poised negotiations; Effective purchase system; Must not increase other costs; Simple inventory control program

What are the basic principles of purchasing?

Buying the right quality, right quantity and right price; Buying from the right source; Buying at the right time and place

What are the fundamental objectives of purchasing?

To maintain continuity of supply; To minimize investment in store and materials inventory; To avoid duplication of purchases, wastes, obsolescence and cost delay; Maintaining proper quality standards; Procuring materials at lowest possible cost; Maintaining company's competitive position

What is the typical purchasing procedure?

Origination of Purchase Requisition (PR); Verification of Authority and Budget; Request for Quotation or Bids; Evaluation of Bids and Selection of Suppliers; Issuing of Purchase Order; Follow-up and expediting the Order; Receiving, inspecting and storing; Closing the Order

What are key considerations for storage?

Ensuring adequate space, storing materials appropriately, arranging items group-wise and alphabetically, following first-in, first-out principle, monitoring expiry dates, avoiding stock-outs, and having reserve stock

What is Inventory Control?

Stocking adequate number and kind of stores, so that the materials are available whenever required and wherever required.

What are the functions of inventory management?

To decouple or separate various parts of the production process; To help the firm from fluctuations in demand; To take advantage of quantity discounts; To protect against inflation; To provide maximum supply service; To provide cushion between forecasted and actual demand

What are the different types of inventory?

Raw material, work-in-process, maintenance/repair/operating (MRO), and finished goods.

What are the three classes of costs to balance in inventory management?

Acquisition costs, carrying costs, and stockout costs

What are problematic reasons for carrying inventory?

Poor demand planning, product theft, poor supplier performance, poor production yields, poor inventory planning and tracking systems, poor inventory counting systems, large-quantity purchases, inattention to obsolete inventory disposition

What are the functional types of inventory?

Cycle stock, in-process stock, safety stock, maintenance, repair, and operations (MRO) inventory, seasonal stock, promotional stock, speculative stock (hedge stock)

What is Cycle Stock?

Inventory that is depleted through normal use or sale

What is In-process stock?

Good being manufactured or in between manufacturing processes

What is Safety Stock?

Held to protect against uncertainties in the supply chain

What is Maintenance, Repair, and Operations (MRO) Inventory?

Parts and materials that exist primarily to ensure a plant or manufacturing facility and its equipment are safe, reliable, and optimally available for production purposes.

What is Seasonal Stock?

Stock held in advance of the season when the firm expects to sell it

What is Promotional Stock?

Stock held to respond quickly to marketing promotions or price incentives

What is Speculative Stock?

Inventory is held to protect against expected and possible price increases or constrained availability.

What are the key areas of responsibility for inventory management?

Demand Planning, Deciding How Much Inventory to Hold, Counting Inventory, Tracking and Controlling Inventory

Why is record accuracy critical in production and inventory systems?

Ensuring accurate records, focusing on what is needed, making precise decisions about ordering, scheduling, and shipping

What is Cycle Counting?

Items are counted and records updated on a periodic basis.

What is Independent Demand inventory?

Finished goods, items that are ready to be sold.

What is Dependent Demand inventory?

Components of finished products.

What are Inventory Models for Independent Demand?

Economic order quantity (EOQ) model, Economic production model, Quantity discount model

What are the important assumptions of the Basic EOQ Model?

Demand is known, constant, and independent; Lead time is known and constant; Receipt of inventory is instantaneous and complete; Quantity discounts are not possible; Stockouts can be completely avoided

What costs are involved in the Basic EOQ Model?

Ordering and setup costs, carrying costs, item/purchase costs, and stock out costs.

What are the assumptions of the Economic Production Quantity (EPQ) Model?

Only one product is involved; Annual demand requirements are known; Usage rate is constant; Usage occurs continually, but production occurs periodically; The production rate is constant; Lead time does not vary; There are no quantity discounts