Aim of an efficient material management

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Objective of an efficient
materials management
The objective of an efficient materials
management is to provide
• the right materials (tools, work tools, spare parts,
supplies)
• at the right time
• at the right place
• in the right amount
• and the right quality.
Measure of effectiveness
The materials management must subordinate all acts to economic efficiency!
Measure of efficiency
The stages on the way to efficient materials
management
Aim
4. Measurement of performance
3. Choice of methods and instruments
2. Specification of requirements
1. Precise definition of objectives
Starting point
Specification of requirements
Concrete order
requisition
Organization
Storage strategies
Defined
availability
Minimal
costs
Storage locations
Storage quantity
Specified quality
requirement
Procurement strategies
Influencing factors
Technology
Market
Regulations
determine
Maintenance requirements
determines
Maintenance
strategy
determines
Requirements for the maintenance
materials management
Clarification of requirements and definition of
the design
• Implementation of an plant structuration
• - with identification of risks
• - and determination of reaction times
What is needed where and how fast do i need it?
• Determination of value and consumption frequency
• Determination of procurement opportunities
How is it most favourable to provide?
The principal issues of an efficient materials
management
•
•
•
•
•
Stock storage or order if required?
Where is to be stored?
What are the safety stocks?
When is the order initiation?
How big should be the procurement quantities?
Determinants of storage strategy
Procurement
costs
Contribution
margins
Reaction times
Store or order
if required?
Storage
possibilities
Procurement
market
Buffer capacities
Storage costs
Standards
Consumption
pattern
Assessment of production losses
Prerequisites:
• No personal injury, no environmental- or product damage and no damage
to the system caused by the loss of production
• Assessment of risk of customer loss
Which contribution
margins can escape us?
- Revenues minus variable
costs, taking into acount
existing buffer capacities
-
What storage costs
we save?
-Cost of storage bins and
warehouse management
- Imputed Interest
-Possibly calculatory
depreciation
+
Decisions by comparison of contribution
margins and inventory costs
Storage locations
Central warehouse
Decentralized storage
-Low administrative costs
-Lower storage amount
-Higher inventory turnover
-Higher utilization
-Short transport routes
-Short transportation times
• In any case a central warehouse management system
• Fundamentally a central warehouse due to lower costs
• For material with low value for regularly recurring activities
(usually operating materials and working aids) hand bearings
close by the respective point of use are justifiable
Importance of stock materials
Determination of the importance of stock materials based on
the ABC-analysis
Procedure
1. Determination of the annual consumption value (the product of
value and consumption frequency) of the stock materials
2. Sorting of the material in descending order by annual consumption
value
3. Determination of the cumulative annual consumption values
4. Drawing of reasonable limits
10-15% of the materials
70-80% of the value
A-materials
30-40% of the materials
15-20% of the value
B-materials
50-60% of the materials
5-10% of the value
C-materials
Concentration of effort on A-materials, referring to optimal
inventory levels and inventory tracking
Example of an ABC-analysis
Material Consumption
value
Cumulated share of the Cumulated share of
Classific
number of materials[%] consumption value[%] ation
4
580
10,0
48,54
A
7
250
20,0
69,46
A
2
160
30,0
82,85
B
10
100
40,0
91,21
B
6
30
50,0
93,72
C
8
25
60,0
95,82
C
5
20
70,0
97,49
C
9
15
80,0
98,74
C
1
10
90,0
99,58
C
3
5
100,0
100,00
C
100
10
Cumulated share of consumption value
90
6
8
5
9
1
3
50
60
70
80
90
100
2
80
7
70
60
4
50
40
30
20
10
0
0
10
20
30
40
Cumulated share of the number of materials
Determination of ordering times
stock
Regular Consumption
consumption curve
incoming goods
order
Reorder
point
Safety
stock
level
Replenishment
time
t
Buffer
Sporadic consumption
- Predictable time of need
Order at the time of need
- Random time of need
Storage strategy in consideration of efficiency
Order quantity
Large quantities…
• …offer price advantages through high discounts
• …mean lower specific transport costs
• …lead to low specific ordering costs
• …lead to high storage costs
• …represent a high capital commitment (and high imputed
interest on the average stock)
• …increse the risk of technical obsolescence of inverntories
because of the low stock turnover
Small quantities…
• …behave exactly reverse
Determination of the optimal order quantity
Example
-Value per piece 100 €
-Annual requirement 100 pieces
-Constant consumption
-Order costs 30 €
-Transport costs 100 €
-Storage space 100 € / year
-Imputed interest rate 10 %
Order
Order
quantity value
Order costs Transport
Storage
Capital
Total costs
/ year
costs / year costs / year costs / year / year
1
100
3000
10000
50
5
13055
3
300
1000
3333
150
15
4498
5
500
600
2000
250
25
2875
10
1000
300
1000
500
50
1850
15
1500
200
667
750
75
1692
25
2500
120
400
1250
125
1895
50
5000
60
200
2500
250
3010
100
10000 30
100
5000
500
5630
Economic order quantity
Graphical determination of the optimal order quantity
3500
Total costs / year
3000
Order- and transport
costs
Storage- and capital costs
costs
2500
2000
Optimum
1500
1000
500
0
5
6
7
8
9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
order quantity
Potentials to reduce costs in materials management
• Check requirements to maintenance due to market
requirements periodically and orientate the materials
management towards the requirements
• Check online-order opportunities with fixed delivery promises
• Conduct regular inventory analysis with professional
warehouse management systems
• Consider potentials from the standardization already at the
construction of new plants
Conclusion
An efficient design of materials management in maintenance is
possible only under the following principles:
 The assessment of efficiency is possible only under definition and
considerations of the objectives
 The objectives result from the requirements of the primary process
(Production). Market, technology and regulations determine the
maintenance strategy
 The maintenance strategy determines the requirements to the materials
management. Without knowledge or specification of the strategy no
efficient materials management!
 As market conditions change dynamically, the materials management
must be reviewed regularly in terms of their effectiveness and efficiency
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