CHAPTER 7

Managing Materials Flow

 Materials Management Activities 7-2

• Anticipating materials requirements

• Sourcing and obtaining materials
• Introducing materials into the
organization
• Monitoring the status of materials as a
current asset

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 7-3
Objectives of Integrated Materials
Management

• Low costs
• High level of service
• Quality assurance
• Low level of tied-up capital
• Support of other functions

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 7-4
Differences Between Inbound and
Outbound Transportation
• Market demand that generates the need for
outbound movement is more uncertain and
fluctuating
• Inbound transportation tends to involve
bulk raw materials, supplies, or parts
• Firms exercise less control over inbound
transportation due to total delivered pricing
programs

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
 7-5
Types of Forecasts

• Demand forecast • Long-term

• Supply forecast • Midrange
• Price forecast • Short-term

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 7-6
Total Quality Management (TQM)

the application of quantitative and

human resources to improve the material
services supplied to an organization, all
the processes within the organization, and
the degree to which the needs of customers
are met - now and in the future.

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 7-7
Administration and
Control of Materials Flow
• Kanban/Just-in-time systems
» Kanban (Toyota Production System)
» JIT & JIT II
• MRP systems
» Materials requirements planning (MRP I)
» Manufacturing resource planning (MRP II)
• DRP systems
» Distribution requirements planning (DRP I)
» Distribution resource planning (DRP II)

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 7-8
Benefits Resulting from Implementing
Just-in-Time

• Improved inventory • Reduced transportation

turns.
• Improved customer
service.
• Decreased warehouse
space.
• Improved response time.
• Reduced logistics costs.
costs.
• Improved quality of
vendor products.
• Reduced number of
vendors.
• Reduced number of
transportation carriers.

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 7-9
Elements of an MRP I System
Customers’
Inventory Forecasts Engineering
orders
transactions changes

Inventory status Master production

file (finished items, schedule (which Bill-of-materials file
work in progress, products to produce, in (product structure
planned orders) what quantity, and when) and routing)

MRP I
system

Planned schedules
and various
other reports
Source: MCB University Press Ltd., Amrik Sohal, and Keith Howard, "Trends in Materials Management,"
McGraw-Hill/Irwin International Journal ofCopyright © 2001 by
Physical Distribution andThe McGraw-Hill
Materials Companies,
Management Inc. p.11.
17, no. 5 (1987), All rights reserved.
 7-10
Elements of an MRP II System
Order Order Inventory
(production plan) (production plan) records

Materials
requirements
planning
(MRP)

Capacity
requirements
planning
(CRP)

No
Realistic
?
Yes
Execute
capacity plans

Execute
material plans

McGraw-Hill/Irwin Source:Karl Copyright © 2001

A. Hatt, ‘What’s by Deal
the Big The about
McGraw-Hill Companies,
MRP II?” Winning Inc. All5,rights
Manufacturing reserved.
no. 2 (1994), p. 2.
 7-11a
Elements of a DRP II System 7-11

Customers

Distribution Distribution Distribution Distribution

center center center center

Distribution Distribution
center center

Regional Regional
warehouse warehouse
Distribution
resource Plant
planning warehouse

Source: “How DRP Helps Warehouses Smooth Distribution,” Mondern Materials Handling 39, no. 6 (April 9, 1984), p. 53.
McGraw-Hill/Irwin Copyright
Modern Materials Handling, copyright 1984©by
2001 by The
Cahners McGraw-Hill
Publishing Company,Companies, Inc.Holdings.
Division of Reed All rights reserved.
 7-12b
7-11
Elements of a DRP II System (cont.)
Plant
warehouse

Material Final assembly

requirements (manufacturing)
planning

Subassembly B Part C Subassembly C

Subassembly A Part C Part D Part E

Part A Part B

Raw materials

Source: “How DRP Helps Warehouses Smooth Distribution,” Mondern Materials Handling 39, no. 6 (April 9, 1984), p. 53.
McGraw-Hill/Irwin Copyright
Modern Materials Handling, copyright 1984 ©
by 2001 byPublishing
Cahners The McGraw-Hill Companies,
Company, Division of ReedInc. All rights reserved.
Holdings.