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Handbook of
MATERIALS MANAGEMENT
SECOND EDITION
P. GOPALAKRISHNAN
Ex. U.N. Advisor on Materials ManagementFormer Professor of Materials Management
Administrative Staff College of India Hyderabad
(Consultant J.N. Materials Management)
ABID HALEEM
Professor
Department of Mechanical EngineeringFaculty of Engineering and Technology
Jamia Millia Islamia
New Delhi
PHI Learning PpowgjO© toofe^Delhi-110092
2015
Contents
Preface xxvii
Preface to the First Edition xxxi
Acknowledgements xxxiii
Section I
MATERIALS MANAGEMENT CONCEPTS
1. Integrated Materials Management 3-8
Scope of Materials Management 3
Materials Management—Some Aspects 3
Objectives of Materials Management 6
Approach and Organisatoin Chart 6
Organisational Interfaces 8
2. Supply Chain Management 9-15
Supply Chain Management and Materials Management—A to Z Aspects 9
Concept of SCM 9
Effectiveness of SCM 10
SCM and Vendor Managed Inventory Issues 10
Global SCM 11
Benefits of Outsourcing in SCM 11
Challenges of Outsourcing in SCM 12
Concerns of Supply Chain Managers 12
SCM Details 13
Enterprise Resource Planning (ERP) Parameters 13
SCM—Training A to Z 14
iii
IV Contents
3. Business Logistics 16-25
Concept of Logistics 16
Physical Distribution 16
Logistics—Steps and Techniques 17
Logistics—Relevance 18
Road Mode 18
Rail Mode Traffic 20
Air Mode and Role of ATC 21
Training in Business Logistics 21
Shipping—A to Z Issues 22
Containerisation 24
Logistics Crisis Management 24
4. Role of Top Management and Materials Management 26-27
Corporate Goals 26
SWOT Analysis 26
5. User Interface of Materials Management 28-33
Role of Materials Management 28
Organisation of Materials Management 28
Decentralised Organisation—A to Z 29
Materials Management—Interfaces with other Departments 30
Materials Management User Exchanges—A to Z 31
User—Materials Management—A to Z Issues 32
6. Financial Interface of Materials Management 34-37
Role of Finance—A to Z Role 34
Inflation and Materials Management 36
Materials Budget 36
Budgetary Control 36
7. Forecasting and Materials Management 38-54
Uses of Forecasts 38
Accuracy of Forecasts 39
7S Approach and SWOT 39
Forecasting—A to Z 39
Time Series and Trend 41
Moving Average 42
Exponential Smoothing 42
Input-Output Index 43
Correlation-Regression 43
Regression Examples 45
Forecasting by Trend 46
Exponential Smoothing 47
Contents V
Uncertainties 50
Dynamic ProgrammingBull Whip Effect 553
50
8. Materials Intelligence 55-61
Introduction 55
Materials Intelligence Concept 56
Materials Intelligence Objectives—A to Z 56
Internal Information—A to Z Aspects 57
External Information—A to Z Aspects 58
Intelligence Techniques—A to Z 60
9. Materials Management—Planning and Budgeting 62-67
Decision Making and Budgeting 62
Decision 62
Programmed and Non-programmed Decisions 62
Bill of Materials (BOM) 63
BOM—Guidelines 64
Budgeting Forum 65
Budgetary Control—Concepts A to Z 66
Performance Budget 67
10. Production Planning and Control (PPC) 68-79
Production Planning and Control and Materials Management 68
Scheduling A to Z 69
Flow Charts 70
Optimum Lot Size 71
Job Production 73
Techniques of PPC 73
Line of Balance (LOB) and Gant Chart 74
Bill of Material (BOM) Material Resource Planning Schedule (MRPS) 75
Level Scheduling 75
Process Planning: What/Why/How 76
Process Type Plant Layout 76
Computer Aided Process Planning (CAPP) 78
11. Manufacturing Strategies and Materials Management 80-86
Manufacturing Strategies 80
Strategic Decision Making Aspects 80
Strategic Reorientation 81
Technological Innovation 82
Design and Development 82
Process Engineering 83
Technology and Labour Unions 83
VI Contents
Reconditioning Strategy 84
Repair and Replacement 85
Insulation Monitoring 85
Level Monitoring 86
Speed Monitoring 86
Temperature Monitoring 86
Section II
IDENTIFICATION OF MATERIALS
12. Identification by Codification 89-96
Advantages of Codification 89
Variety Reduction 90
Brisch and Kodak Systems 91
Check Digit for Cataloguing 91
Codification—Methodology Properties 92
Benefits of Codes 93
National and International Codification 94
Design of Codification Digits 94
Codification Structure 95
Significance of Digits 95
Problem Areas 96
13. Bar Code Technology 97-105
Bar Codes Aspects—A to Z 97
Bar Code Terminology—A to Z 98
Types of Scanners Readers 100
Non-Contact Readers 103
Bar Code Applications 103
14. Standardisation /Variety Reduction 106-117
A to Z Benefits of Standardisation 106
Simplification and Standardisation 107
Process of Standardisation 108
Items to be Standardisation 108
Methods of Standardisation 109
Road Blocks 109
Standardisation in India 109
Concept of Standardisation 110
Preferred Number Series 111
Variety Reduction Examples 112
Standardisation and A to Z Benefits 113
Standards and Quality 154
Professional Approach 114
Guidelines and Controls of Standards—A to Z 115
Contents VII
15. Radio Frequency Identification (RFID) 118-123
Introduction 118
RFID v/s Barcoding 119
Major Benefits of RFID Technologies 119
Transformation of Supply Chain through RFID—Major Issues 120
Tracking Management 121
Warehouse Management 122
Yard Management 122
Section III
INVENTORY MANAGEMENT
16. Inventory Fundamentals 127-134
Significance of Inventory 127
Inventory Goals—A to Z 127
Transaction Motive 130
Precaution 130
Speculative Motive 131
Decoupling Concept 131
Organisation of Inventory 131
Concept of Operating Cycle 132
Levels of Inventory 132
17. ABC Analysis—The I StepWhat is ABC Analysis 135
A to Z Benefits of ABC Analysis 135
ABC Example 139
Limitations of ABC Analysis 141
135-141
18. Multi Unit Selective Inventory Control—Three Dimension (MUSIC-3D) 142-147
80/20 Rule Examples 142
Limitations of ABC Analysis 142
XYZ Analysis 143
HML Analysis 143
FSN Movement Analysis 144
VEIN/VED Criticality Criteria 144
GOLF/SDE/SOS Availability 144
Cost Criticality Availability—A to Z Benefits 145
MUSIC-3D—Cost Reduction 145
MUSIC-3D—A to Z Benefits 147
19. RBI Guidelines on Inventories
Tandon Committee—A to Z Issues
Implications to Users 151
148
148-151
Vlfi Contents
20. Economic Order Quantity (EOQ) 152-159
Classification of Inventory—A to Z 152
Arriving Optimum Inventory 154
Assumptions for EOQ 755
Derivation of EOQ 156
Inventory versus Sales 156
Sensitivity and Staggering 757
Inputs for EOQ 757
Implementing EOQ 759
21. Practical P&Q Inventory Models 160-163
Practical Systems—A to Z Aspects 160
Periodic Review System/(Desired Inventory Level) DIL 762
Comparison of Q and P Systems 163
System/Optional Replenishment System 163
22. Materials Management Planning (MRP) 164-170
Material Requirement Planning 164
MRP Inputs and Outputs—A to Z 164
Production Planning 166
Bill of Materials (BOM) 166
Gozinto Matrix 167
Advantages of Bill of Materials (BOM) 167
Use of Past Consumption Data 7<57
Gantt Chart 168
Line of Balance Technique (LOB) 168
Theory of Constraints 170
23. Inventory under Uncertainty 171-175
Classification of Inventory Problems 777
Uncertainty in Inventory 777
Rationality Principle 173
Minimax Principle 173
Maximax Principle 174
Principle of Optimum 174
Regret Principle 174
24. Just-in-Time (JIT) 176-197
JIT Principles 176
Zero Inventory/ZIN System 777
The Philosophy of JIT 777
JIT Basic Tenets—A to Z 779
Vendor-Managed Inventory (VMI) 182
JIT's Key Elements 182
Kanban Control 184
Contents IX
Benefits of JIT 186
JIT Implementation Design 187
JIT in Practice 188
JIT in Service Industry 189
Limitations of JIT—A to Z 190
Environmental Concerns 194
Just-in-Time Inventory has Downside 194
Mitigating Risks Related to JIT 195
Hoarding vs JIT 196
25. Work in Progress (WIP) Inventory 198-201
Concept of WIP 198
Problems in WIP 198
Production Planning and Control 199
Gantt Charts 199
Line of Balance 199
Tips to Reduce WIP 200
26. Finished Goods Inventory 202-205
Finished Goods Control 202
Objectives of Finished Goods Inventory—A to Z Issues 202
Multiple Warehouses 204
Physical Distribution Management 205
Multi-Echelon Channels of Distribution System 205
27. Seasonal Inventory 206-211
Problems of Seasonality 206
Seasonality—Some Issues 206
Dynamic Programming 208
Assumptions in Seasonal Buying 209
Buying in Stages 210
28. Project Inventory 212-223
Concept of Project Inventory 212
Project—Major Features 212
PERT and CPM 214
PERT/CPM Major Aspects 214
Problems of Project Inventory 217
Construction Project 218
Network Construction 218
Three Time Estimates in PERT 219
Crashing of Activities 219
Coordination of Supplies 220
Forward and Backward Pass 222
Critical Path and Resource Planning 222
X Contents
29. Spare Parts Inventory 224-229
Spares Distinguishing—A to Z Features 224
Categorisation of Spares 227
Overhauling of Spares 227
Rotable Spares 227
Insurance Spares 228
Maintenance Spare Parts 228
30. Surplus Obsolete Scrap (SOS) Inventory 230-237
Examples of Obsolescence 230
Surplus Items 230
Definition of Obsolete Items 231
Obsolescence—A to Z Reasons 231
Challenge of Obsolescence 233
Issues on Obsolescence 233
Remedial Measures 235
Movement Analysis 235
Disposal Action 236
Costs of Holding Dormant Items 236
31. Inventory Simulation 238-250
Concept of Simulation 238
Need for Simulation 238
Examples of Simulation 238
Business Game 238
Application of Simulation 239
Mathematical Optimum 243
Game Theory 243
Using Simulation in Inventory 244
Dynamic Programming 246
Finished Goods Application 249
Section IV
PROCUREMENT OF MATERIALS
32. Purchasing Strategies.. 253-256
Salient Features of Buying 253
Profit Leverage and Procurement 253
Parameters of Procurement 255
Procurement Objectives 255
33. Purchase Cycles and Buying Systems 257-262
Purchase Cycle 257
Procurement Cycle 257
Indenting 258
Contents XI
Placing of Orders 259
Chasing and Follow-Up 259
Logistics and Shipping 259
Inspection, Acceptance and Rejection 260
Settlement of Bills 260
Lead-Time 261
Documentation 261
34. Ordering Systems 263-270
Forward Buying 263
Hedging 264
Speculative Buying 264
Stockless Purchasing 264
Blanket Order 265
Systems Contract 265
Rate and Running Contracts 266
Cash/Bazaar Purchases 266
Tender Procurement 267
Sub-contracting 268
Reciprocity 268
Disposals 268
Ordering—A to Z Systems 269
Indent Control 270
Concept of Lead Time 271
Lead Time Control 271
Administrative Lead Time 272
Manufacturing and Transit Lead Time 272
Tips for Follow-up 273
Fluctuations in Lead Time 274
Right Place of Delivery 274
Right Quantity 274
Steps in Pricing 275
Price Information 276
A to Z—Influencing Factors 276
Price Setting 277
Market Skimming Strategy 277
Open End Pricing 277
Cost Plus Pricing 278
Price Modifications 278
Break Even Analysis 279
A to Z—Aspects of Pricing Strategy 280
35. Lead Time 271-274
36. Pricing 275-281
XII Contents
37. Quality and Total Quality Management (TQM) 282-291
Responsibility for Quality 282
Quality Issues in Six Sigma 282
TQM Philosophy 283
Quality Assurance 285
TQM's Components 286
Quality Circles 287
Tools of TQM 288
Reliability Engineering and TQM 289
TQM and Supply Chain 290
38. Inspection and Sampling 292-298
Objectives of Inspection 292
Acceptance Sampling 292
Quality Specifications 293
Sample Size 293
Consumer Risk and Producer Risk 293
Operating Characteristic Curve 294
Acceptance/Rejection/Rectification 294
Military Standard 105 D Plans 295
Dodge and Roming Plans 295
Bowker and Goode Plans 295
Quality Circles 296
Yield Loss 296
Input-Processing Output 296
39. Materials Handling 299-306
. Handling Costs 299
Handling—A to Z Issues 299
Concept of Materials Handling 300
Manual Handling 300
Problems Encountered in Materials Handling 301
A to Z Tips for Reducting the Handling Cost 302
Management Role 303
Handling Rules—A to Z 303
A to Z Ideas on Handling Cost Control 305
40. Mechanised HandlingNeed for Mechanisation 307
A to Z Choice of Equipment 307
Cost-Benefit Analysis—A to Z AspectsHandling Precautions 308
Handling Dangerous Substances 311
307-316
308
Contents XIII
Handle Equipment 312
Fixed Path Equipment 313
Variable Path Equipment 313
Elevating Devices 313
Role of Pallets 314
Containerisation 314
Transporting Equipment 315
Forklifts 315
Conveyor Systems 315
Automatic Warehousing 316
41. Seasonal Buying 317-325
Seasonality—A to Z Issues 317
Dynamic Programming 317
Optimal Buying—A to Z Strategy 320
42. Governmental Buying 326-330
Role of DGS & D 326
Features of Public Buying 327
Tender Process 328
Inspection 329
Limitations in Public Buying 330
Equality of Vendors 330
43. Foreign Purchases 331-341
Objective of Import Control 331
Items Covered in Imports 333
Categories of Importers 333
Sponsoring Authority 333
Licensing Authority 334
Documentation for Importing 334
Import Procedure 335
Problems of International Buying 336
Trade Reforms 337
Documentation Issues—A to Z 338
44. Indigenisation 342-345
Relevance of Import Substitution 342
A to Z Benefits of Indigenisation 342
Problems in Indigenisation—A to Z 343
Intellectual Property Rights Trips 344
Strategy of Technology 345
R&D and Technology 345
XIV Contents
45. Source of Supply 346-353
Right Source Concept 346
Source Location 346
Supplier Selection—A to Z Parameters 347
Developing Resource 348
Number of Sources 348
Monopoly Situations 349
Ancillary Development 349
Problems of Ancillary Units 349
Global Instability and Sourcing 350
Key to Strategic Sourcing 352
Sharing Information 352
46. Buyer-Seller Relations 354-358
Need for Cordial Relations 354
Buyer's Role in Improving Relations 354
Basic Requirements 355
Role of Buyer/SCM 355
A to Z of Seller's Frustrations 356
A to Z of Buyer's Problems 357
47. Vendor Rating 359-364
Objectives of Supplier Rating 359
Four Stages of Supplier's Evaluation 359
A to Z Issues on Rating 361
Rating Methods 361
Vendor Managed Inventories 363
48. Subcontract Management 365-374
Subcontractor Management 365
Total Cost Approach—A to Z 365
Advantages Over Engaging Specialised Agency 366
Supplier Evaluation/Registration in Approved List 367
Evaluation at Post Supply Stage 367
49. Negotiations 375-388
Why Negotiate 375
Definition of Negotiation 375
Negotiation Parameters 376
Situations to Negotiate 376
Important Aspects of Preparation 377
A to Z Approach to Negotiation 378
A to Z Qualities of Negotiator 379
GST and Negotiations 380
Contents XV
Business Negotiations 381
Price Negotiations 382
Preparations for Negotiation 383
Negotiation Techniques 384
Theory of Bargaining 384
Learning Curve 385
Negotiation Checklist Improve Your Results 386
A to Z Negotiations 387
50. Legal Aspects of Procurement 389-397
Logical Needs 389
A to Z of Purchase Order 389
Bid Evaluation Criteria 390
Term of Purchase 391
INCO Terms 391
Law of Agency 392
Negligence 393
Major Stipulations 394
Inspection and Acceptance 394
Warranties 395
Breach of Contract and Damages 395
Works Contract 395
Special Clauses 395
Arbitration and Sales Tax Laws 396
Octroi 396
Excise Formalities 397
51. Contract Management 398-414
Meaning of Contract 398
Various Aspects of Contract 399
Offer/Acceptance/Consideration 399
Fraud and Misrepresentation 400
Liquidated Damages 400
Penalty and Bonus 400
Performance 401
Inspection 401
Contract Packaging 401
Breach of Contract 401
Disputes 402
Termination 402
Warranties 402
Types of Contract 403
Settlement of Bills 404
Contract—A to Z Concepts 404
XVI Contents
Contingency and Agency 407
Revocation of Authority 409
Effect of Agency on Contracts and with Third Persons 411
A to Z Right Contract 412
Subcontracting 414
FIDIC (International Federation of Consulting Engineers) 414
52. Make-Buy Decisions 415-419
Important Considerations 415
Reasons for Manufacturing 416
Preference for Buying—A to Z 417
Illustration on Make-Buy with Costs 418
Constant Review of Make-or-Buy Decisions 419
Section V
WAREHOUSING AND LOGISTICS MANAGEMENT
53. Logistics Management 423-434
Introduction to Logistics Managment 423
"Push" and "Pull" Logistics 424
Mission of Logistics 424
Activities in Logistics 424
Integrated Logistics 425
Five Operating Objectives of Logistics 426
Logistics Performance Cycles 426
Communication Systems in Logistics 427
Various Aspects of Logistics System Design Logistics Strategy 428
Logistics Process Design 429
Warehouseing 431
Logistics: Performance Measurement and Reporting 432
Desirable Characteristics of a Performance Measure 433
Strategic Performance Metrics 433
Order Planning Metrics 434
Supplier Performance Measures 434
Delivery Performance Measures 434
54. Transportation 435-450
Macro Level Decisions 435
A to Z Parameters on Choice of Transport 436
Indian Railways 437
Freight Forward Scheme 437
Road Transport 438
International Shipping 439
Incoterms 439
Transport Costs 440
Contents XVII
Sea Transport 440
Air Transportation 442
Using Inland Waterways for Freight Transportation 443
Relevant Issues 445
Reverse Logistics 446
Air Mode Clearance 448
55. Integrated Transport Planning 451-453
Transportation Infrastructure 451
Principles of Transport Functionality 452
Transportation Service 452
Transport Service Providers 452
Economic Drivers of Transportatoin Cost 453
56. Packaging 454-461
Buyer's Role in Packaging 454
Important Aspects of Packaging 454
Railway Packing Conditions 455
Containerisation 455
Labelling and Packing 456
Tips for Protection 457
Packing—A to Z Requirements 458
Cartoning 460
Packing Material 460
Economics of Packaging 461
57. Insurance Management.. 462-473
Risk Analysis 462
Risk Avoidance 462
Insurance Contract 463
Fire and Natural Calamities 463
Erection All Risks (EAR) Insurance 464
Marine-cum-Erection (MCE) Policy 465
Contractors All Risk (CAR) Policy 466
Contractors Plant and Machinery Policy 466
Machinery Breakdown Policy 467
Boiler Explosion Insurance 467
Electronic Equipment Insurance 468
A to Z of Insurance Policies 469
Loss Minimisation 469
Indemnification 470
Fire Insurance 470
Consequential Loss Policy 471
Marine under Insurance 477
Transit/Motor/Burglary 472
Storage-cum-Erection Insurance 473
XViH Contents
58. Importance of Stores 474-484
Relevance of Storage 474
Profit Centre Potential and Return on Investment (ROI) 475
Need for Warehousing 476
Demand for Warehouses 476
Warehousing as a Business 478
Central Warehousing Corporation 478
Services by Warehouses 478
Public Distribution System 479
Super Markets 479
Warehouse Management Systems (WMS) 480
Improvements in Warehouse 482
Future of Warehousing 483
59. Organising the Warehouse 485-491
Concept of Custodian 485
Duties of a Warehouse Manager 485
Objectives of Warehousing 486
Interface Problems 486
Corporate Social Responsibility 486
Principles of Stores Organisation 487
Organisational Factors 487
Why Store At All? 489
Need for Storage 489
Objective for Storage 490
Manpower Requirements 490
Responsibilities of Store Manager 491
60. Location and Layout 492-505
Location Considerations 492
Raw Material Storage 492
Finished Goods Warehouse 492
Centralisation and Decentralisation 493
Layout Considerations 493
Layout Procedure 494
Aspects of Security and Safety 495
Classification of Materials 496
Level of Operations 497
Layout Valuation 497
Cost of Storage 499
Quantities to be Stored 499
Location 501
Multiple Warehouses 502
Location and Layout 503
Contents XIX
61. Physical Aspects of Stores
Physical Aspects 506
Layout and Construction 509
Storage Equipment 510
Safety Measures 577
506-511
62. Firefighting and Preservations 512-520
Fire Hazards 572
Storage Preservatives 513
Special Items Preservative 576
Application of Preservatives Guidelines 577
Pilferage Protection 575
Storage Precautions 579
Metal and Spare Parts 579
Machinery Spares 520
63. Stores Operating Systems 521-529
Factors in Stores System 527
A to Z Types of Materials 527
Consumables/Machinery Spares/Tool Cribs 523
Work in Progress 523
Finished Goods/Bonded Warehouse 524
Organisational Factors 525
Inventory Problems 525
64. Management of Receipts 530-545
Criticality of Receipt Management 530
Receipt Determination 557
Purchase Requisitions 531
Receiving Process/Sources 532
Inspection Infrastructure 533
Goods Receipt Note 533
Rejected Materials 534
Shortages and Excesses 534
Endorsement of Bills 535
Requirement Determination 535
Receiving Process 537
Physical Receipt 537
General Inspection 538
Quality Assessment 538
Sampling Plans 539
Role of GRN 540
Bill Endorsement 547
XX Contents
65. Management of Outputs/Issues 546-555
Importance of Output Management 546
Item Issue Systems 546
Physical Issue Difficulties 548
FIFO Issue System 549
Emergency Issues 549
Return to Stores 549
Management of Outputs 550
Procedure for Issue 550
Physical Management of Issue 552
Consumption Control 554
Costing the Issues 554
Pack and Despatch 554
66. Warehousing Costs 556-560
Storage Costs—A to Z 556
Overstocking Cost 558
Stockout Cost 558
Order Processing Charges—A to Z Issues 558
Service Level 560
Verification Theme 561
Reasons of Discrepancies 561
Verification Agency 562
Role of Warehouse Personnel 563
Verification Process 564
68. Issue Pricing and Valuation 566-574
Importance of Valuation 566
Valuation Strategy 566
Stock Valuation 570
Example of Valuation 571
FIFO vs. LIFO Accounting 573
Standard Cost Accounting 573
Financial Accounting 573
Distressed Accounting 574
69. Legal Aspects of Storage 575-578
Legal Issues 575
Customs Duties 575
Procedure of Clearance 576
Excise Formalities 577
Removal of Goods 577
67. Stock Verification 561-565
Contents XXI
MODVAT Scheme
Procedure for Credit
Sales Tax Formalities
Octroi Formalities
578
578
577
578
70. Recent Trends of Automation in Warehousing 579-590
Automation 579
Other Automations 581
The Past 581
Automation in Control 582
Future Trend 583
Lesson for Indian Companies 583
Lease vs Ownership 584
Moving Up the Value Chain 585
Bonded/Coldstorage 585
Rail Warehousing 586
Hub and Spoke Model 587
Challenges Facing Developers 587
Essential Features in WMS 588
Retailing and Warehousing 589
Bharati-Walmart 589
Problem Areas 590
Private Brands 590
71. Hazardous and Radioactive Materials 591-596
Introduction 591
Issues in Logistics of Hazardous Materials 592
Managing Radioactive Material Logistics 593
Issues in Logistics of Radioactive Materials 594
Significance of Safety 597
Safety Principles and Guidelines 599
Accident vs. Incident 599
Simulators for Training 599
Handling Mistakes and Failures 599
Responsibility for Safety 600
How Work Safety Permit 600
Fault Tree Analysis 603
Nuclear Safety 605
Accident Prevention 605
House Keeping and Safety 608
Fire Prevention and Precautions 609
Electrical Safety Precautions 610
72. Safety Management 597-611
XXII Contents
73. Waste and Scrap Control 612-618
Concept of Waste 612
Limited Resources 613
Aspects of Sorting of Scrap 614
Wastes in Warehousing 614
Control of Off-cuts 614
Technical and Managerial Research 615
Disposal of Scrap and Waste 615
Waste Reduction Tips 616
Section VI
FINANCIAL ISSUES IN MATERIALS MANAGEMENT
74. Basics of Finance for Materials Management 621-629
Financial Issues in MM 621
Balance Sheet Structures 622
Depreciation and Depletion 624
Depletion 626
Use and Abuse of Balance Sheet 628
Issues of Balance Sheet 628
75. Cost Control Systems 630-636
Cost Control 630
Cost Reduction Kit 631
Cost Concepts 632
Marginal Cost 634
Standard Costing 635
Marginal Costing in Materials Management 635
76. Value Analysis 637-645
Concept of Value 637
Scope of Value Analysis 637
Cost, Price and Value 638
Types of Value 638
Value Management 639
Items for Value Analysis 639
Key Questions of Value Analysis 640
Techniques of Value Analysis 640
Problem Areas 642
Why Value Analysis 643
Organisation for Value Analysis 644
Steps for Value Analysis 645
Contents XXIII
77. Leasing of Equipment 646-651
Concept of Leasing 646
Types of Leases 647
Advantages in Leasing 647
Problems in Leasing 649
Future of Leasing in India 651
78. Life Cycle Costing 652-656
Introduction 652
LCC Concept 653
LCC Elements 654
A to Z of LCC 654
79. Capital Equipment Buying 657-664
Need for Investments 657
Macro Factors and Investment 658
Capital Equipment Buying vs Conventional Purchasing 659
Economic Appraisal 660
Investment Analysis Example 662
MAPI Investment Method 663
Replacement of Equipment 664
Second-hand Equipment 664
80. Working Capital Inventory 665-673
Issues on Working Capital 665
MIS for Working Capital 668
Concepts on Working Capital (WCM) 670
RBI Guidelines on Working Capital 670
Working Capital Cycle 671
Creditor's Management 672
Cash Management 672
Debtors Management 672
81. Audit and Materials Management 674-682
Why Audit 674
Types of Audits 674
CAG Audit 675
Operations Audit 676
Management Audit 676
Management Audit—Appraisals 677
EDP Audit 678
Social Audit 679
Top Management and Boston 7S Approach 679
Materials Audit 680
Audit Professionals 681
Japanese 5S and Audit 681
XXIV Contents
Section VII
ORGANISATIONAL AND ETHICAL ISSUES
IN MATERIALS MANAGEMENT
82. Professional Ethics 685-691
Ethical Scenario 685
Corporate Double Standards 685
Significance of Ethics 686
Professionalisation 686
A to Z Tips of Ethics Improvement 687
Buyer Beware 688
Philosophy of Ethics 688
Professional Process 690
Ethical Process 691
83. Human Resource and Training—Vital Aspects of HRD...
Vital Aspects of HRD 692
A to Z Issues of HRD 693
A to Z of Repetitive Act in Material Management 694
A to Z of Non-repetitive Jobs in Materials Management
A to Z Role of Training 697
84. Leadership and Materials Management 700-706
A to Z Leadership Qualities 700
Decision-Making Conduct 702
Leadership Tasks—A to Z 703
A to Z Innovation and Creativity 705
Winners and Losers 706
692-699
695
Section VIII
IT INTEGRATION AND PERFORMANCE REPORTING
IN MATERIALS MANAGEMENT
85. Inevitable Computer 709-720
Invasion by Computer 709
MIS (Management Information System) 710
Hardware 710
Software 712
Information Storage 713
A to Z Disadvantages 713
A to Z of Computer Advantages 715
Computers and Materials Management 716
Mechatronics 779
Contents XXV
86. Role of IT in Materials Management 721-729
Introduction 727
Objectives of IT in Material Management 722
IT as an Enabler of Material Management 722
Existing Information Technology Tools and Applications in Material Management 723
Emerging and New Information Technology Solutions for Material Management 726
Benefits of IT in Material Management 729
Challenges in Implementing IT in Material Management 729
87. Communication in Materials Management 730-735
Benefits of Communication 730
Communication Barriers and Media 730
A to Z of Internal Communication 731
A to Z of External Communication 732
A to Z Tips for Improved Communication 723
Role of Communication 734
88. Reporting 736-740
Use of Reports 736
Monitoring Records 736
Systems Design 737
Source Documents 737
Exception Reporting 737
A to Z Contents of Reports 738
Computer Reports 739
Office Automation 739
Reporting and Communication 740
89. Evaluation of Materials Management 741-753
Need for Evaluation 741
Internal and External Agencies 741
Methods of Evaluation 742
A to Z Ratio Analysis 742
Note on Ratio Analysis 745
A to Z of Financial Ratios 746
Additional Ratios 747
Bibliography 755-756
Questions 757-777
Index 779-790
