Dec 2010 [MATERIAL CONTROL]

A project by students of First Year MIM Name Harshad Parulekar Vijay Adavkar Harshal Amrutkar Damodar Nair Roll No. 215 181 183 211

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Acknowledgement I am very grateful to the Mr. Suresh and the entire purchase team of Aditya Birla Retail Ltd for providing me an opportunity to complete my project on Material Management with their expertise. I avail this opportunity to give my thanks to Mr. Jitesh Rajput, Manager to IT team of More; for guiding me at every stage in my project. In spite of their busy schedule they took out the time to answer my queries patiently and helped me throughout the project. I am proudly indebted to Mr. Sandeep Chopde for all the guidance regarding fundamentals of procurement and material management.

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Index
Sr. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 Topic Introduction Functions of Material Mgt. Integrated Material Mgt. Definition and scope Concept of Centralization & Decentralization Inventory Management EOQ ABC Analysis VED Analysis FSN Analysis Case Study Conclusion Bibliography Page No. 4 5 7 12 15 17 19 26 27 29 30 37 38

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MATERIALS MANAGEMENT
Introduction: Importance of materials management:Materials input is very important as excess material as inventory causes costs to the company and shortage of material results into stoppage of conversion process and subsequently shortage of finished goods leading to customer dissatisfaction. Out of 5Ms, that are inputs to a conversion process, material is substantial in terms of its contribution to product cost, and current assets. 3. 51.1% of product cost is on account of materials. Hence the largest contributor to product cost. This marks out materials function as the largest potential avenue for productivity improvement. Materials account for 70% to 80% of working capital. Effective and efficient management of materials can reduce substantial burden on the finances of company. Accounts payable are mostly to materials suppliers. Quality of the Input and product quality: When the companies become leaner and leaner, it is crucial that inputs should remain in the plant only as long as the Through Put Time Demands and the output product should be Right First Time. The qualities of inputs play a vital role in this situation. Management of materials is crucial in a Just in Time Company. Production process needs very strong materials management support to gear up to face challenges of current market. Materials management provides information about availability of new products
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and services in the market which leads to cost efficient changes in the process

Functions of Materials Management:[What is a function? Every person , organization or a distinct part of an organization has to perform a set of tasks in order to deliver customer expectations satisfactorily. These sets of tasks are called functions of that particular entity.]

Materials Planning & Control

This is the primary function of Materials Management. The market forecast is converted into production schedules by production planning and control. Materials management prepares the materials plan to meet the production schedule. The plan is then implemented and controlled.

1.

Procurement
Procurement function begins with sourcing the supply after short listing suppliers. An effective method is to rate the vendors on the basis of performance and choose the best. Purchase order is placed on the source and the material is procured from the source. Procurement activity includes preparation placement of purchase order, follow up, transportation and handling.

2.

Handling

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The material which reaches the company premise is to be unloaded, moved and positioned as per the storage plan.

3. Storage & Preservation

The procured material is to be stored and preserved against internal and external deterioration and theft. Against the authorized demand the material from the store is retrieved and issued.

4. Inventory control
Inventory control function controls the inventory levels to ensure shortage free and excess free stock to check the costs and ensure customer satisfaction

5.

Vendor development
The company makes the chosen vendors effective and efficient by providing necessary inputs of training and information. The suppliers systems are audited to ensure adherence. A good vendor is an asset as he makes his customer more effective and efficient

6.

Vendor rating
Vendor rating is used as a tool for narrowing down the supplier base for productive management of materials function. The same system is used continuously to assess strengths and weaknesses of short listed vendors for their effective development.
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7.

Waste control
Procuring standard material and continuously trying to improve yield is waste reduction and control function. When a product is processed two types of wastes are generated. One type of waste is called as standard scrap. This is accepted as unavoidable. Product that is not right first time is scrap and thereby wastes. Non moving obsolete material is another waste that cripples organization. Material management should address these wastes and not only should control but reduce the wastes.

Value Analysis
Continuously trying to improve the value of the product mainly by material substitution is a function of the materials management.

Integrated Materials Management: As we have seen earlier, materials management performs various functions to reach their well-set objectives. These functions are performed by business organizations since a very long time as trade and business have been taking place much before scientific management was thought of.

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MATERIAL MANAGEMENT Traditional Approach Traditionally the organizations performed their functions aiming to achieve excellence in respective areas. Every function tried to sub-optimize their individual function. This approach created some excellent buyers, some excellent movement managers, and some very good storekeepers, but often this functional excellence was at the cost of each other. Impact of excellence of one area on other functions was not taken into account. Performance of this kind did not bring cost benefits to the parent organizations that continued to suffer cost burden. Organizations wondered why they struggle under the cost burden in spite of such talented managers being their employees, like some times we wonder why our rivals win the Cricket World Cup when we have such great individual performers!

Integrated Approach -

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This approach ties all functions together, like a compeers baton, orchestrated to achieve company goals. Various functions now come under one control, focus always being on the final outcome. Initiatives for individual excellence are undertaken only after ascertaining their favorable impact on final outcome. The big picture should never be lost sight of, while trying to solve the jigsaw puzzle. The common thread that binds various functions into a winning combination is the focus on the big picture or the organizations gain. Unity of command balances conflicting interests of individual functions under integrated approach to materials management.

Profit Center Approach When every integrated function of management works like a profit center in an organization, entire becomes a strong integrated whole forging ahead in business, maximizing the profits rapidly. We easily understand concept of profit and its driving force in business when a product is sold for a price higher than the cost. One should remember the universal equation, Price = Cost + Profit. But when sale does not occur, visualizing profit may become a bit difficult. Keeping the above equation in mind, as price is controlled by market, any saving in the cost results into profit. Every competitor closely follows the above equation
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and identifies the resultant cost after keeping the profit needs of the company intact. This cost is called target cost for competitor. Any successful attempt to reduce this cost without harming the QCD objectives of the company results into profit. Now split the target cost of the product into its components developing a fishbone diagram for product cost. A certain cost package gets attached to every individual integrated function and any reduction in this package results into profit for the company. Fix the identified cost package to materials management and make materials management accountable for reduction by a percentage. This is the profit that materials management is responsible for. Make them earn this profit for justifying their existence in the organization. Like a business has to earn profit to justify existence in competition. This approach makes individual functions accountable for every cost and drives them to develop ideas to add value continuously as the competition pushes the price to new lower levels, thereby making the company stronger organization.

Illustration:A company with a turnover of Rs.100 crores, makes a profit of Rs.10 crores [10%] Cost of materials is Rs.60 crores,

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Other expenses are Rs.30 crores. How can you increase profit by 30%? [Rs.3crores]? To increase the profit by 10% one has to raise the sales by 30%. The company will have to make and sell 30 crores worth products in a tough market like the one which exists today. But keeping the profit center approach in mind, if we reduce the materials cost [Rs.60 crores] by just 5% same objective can be achieved. Return on Investment: an approach to measure profitability ROI= Profit/Sales Sales/[capital assets + current assets]

As materials managers if we consciously reduce current assets companys profits will raise which will be indicated by the ROI. We should always remember that inventory forms 80% of current assets of the company.

Benefits of Integration:1.

Better Accountability
Accountability for materials is now specifically fixed to one position. No mans lands of cost between various functions are now addressed effectively by integrated materials management function.

2.

Coordination Page 11

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Various functions are now streamlined. The interdepartmental conflicts are balanced. As a result various functions work like a team under the control of Materials Manager.

3.

Better performance
Performance of Materials management improves on account of the first two results of integration. Accountability reduces costs and teamwork improves productive performance

4. Adaptability to EDP
Computerization requires preparatory work that calls for integrated efforts where there is no scope for conflicts. Internal conflicts make computerization untenable

5. Other advantages Present & Future: At present industry in our country is passing through the transition from traditional systems to just in time like production. Just In Time needs dependable procurement systems. Only an integrated materials management function can provide such support to operations

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Definition and scope :

Definition
Coordination and planning of all functions for controlling materials in an optimum manner to meet customer expectations at minimum cost.

Scope Materials management works closely with Production, Finance, Engineering and Quality control in the process of performing the functions to meet the objectives of customer satisfaction.

Materials management and Production

As we saw earlier JIT system needs very reliable procurement and delivery systems for inputs and outputs. Production department is the internal customer for Materials
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management. Hence very close interaction with production department is primary to meet internal customer expectations and customer delight. Only this ensures unfailing satisfaction and delight of the external customer. Scope of materials management function decisions includes suppliers, subcontractors, production support warehouses, transportation service providers and internal departments subordinate to the function.

Materials management and Finance

Timely payment to suppliers is important for the smooth working of the supply chain which is fundamental for strong and dependable delivery system. Close interaction with finance function is needed to ensure the above.

Materials management and Engineering

Materials Management in the course of discharge of their functions plan activities involving change in material inputs. This obviously has an impact on design of the product and process of manufacturing. Hence a close working is necessary between Materials management and Engineering.

Materials management and Quality control

For the same reasons that as above, close working is necessary between Materials management and Quality control.

Organization & control

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Materials Management is growing in stature on account of changes in management thought process. Materials function has moved into board rooms which is an evidence of its importance in corporate structures.

Materials Management & Corporate Organization structure

A materials director is usually on the board to give overall directions to the material function in corporate bodies. This provides unity of command and thereby uniform direction.

Materials Management & Other functions of Management

Materials Management function is in par with other functions of corporate management so that it can effectively interact with other functions for organizational effectiveness. Some of the conventional structures of materials organization are discussed below:-

Internal Organization of Materials Management

Internal organization is structured on the need of the organization keeping in mind the strengths and weaknesses of individual structures.

Internal Organization based on Commodities An organization needs number of inputs[commodities] for running the conversion process. Materials organization can be structured internally with focus on the individual commodities. A sub function can be created for dealing in an individual commodity in order to provide adequate focus.
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Internal Organization based on Location

An organization with multi plant locations structures its

materials organization with focus on plant level. Every plant will have a materials function that receives overall direction from the top management. The materials function in the plant coordinates materials sub functions of that plant.

Internal Organization based on Function

At the corporate level, materials function is set up with respective sub functions. These individual functions coordinate their respective sub functions in various plants or divisions providing function wise expertise to the entire organization.

Concept of Centralization & De centralization As we were discussing earlier it is the need of the organization triggered by product, process and market that ultimately decides how the control should be exercised on the material function. The control may be centralized or decentralized fully or in parts keeping in mind overall need. Management education can provide knowledge about available options in practice but the choice rests with the corporate management. New options can be developed to satisfy specific needs conceptually combining various available options.

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Centralized control keeps most of the decision making at headquarters level delegating only routine level decision making. Decentralized control delegates decision making to unit level enabling the units to respond to their respective environment.

Advantages of Centralization 1. Combining the requirements of all units to buy in bulk and gain benefits of bulk buying. 2. Interplant transfer of material to deal with emergencies in individual plants. And interplant transfer to utilize surplus material available at some plant and thereby reduce overall inventory cost for the company. 3. Benefit of specialized skills of one individual at the corporate level to all the units or plants. Buying needs specialized skills specific to the commodity in market specially buying is in large quantities. Knowledge of the market is essential to anticipate market trends in terms of price and availability. 4. Benefits of unity of command. 5. Centralized material research resulting in savings for the company

Advantages of Decentralization 1. Decentralization overcomes problems posed by significant physical separation between Plants and Central Office. These

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problems can occur due to information flow. They may occur due to lack of sensitivity to environment due to physical separation 2. Uniqueness of product line requirement of each Plant: When individual plants are engaged in production of different products, their requirement is product specific and thereby unique. Decentralized control can deal with the requirements effectively, independently. 3. Better coordination with production & other functions of the plant: Production is the internal customer of material management function. Decentralized control enjoys the benefit of being close to the customer. There is also the need to interact with various other functions in the plant. Decentralized control can take decisions based on these interactions effectively. 4. Supportive to the concept of Profit Center: the concept of profit center as discussed earlier is applicable to each plant and the management functions within. A decentralized material management function can effectively work as a profit center and support the plant as a profit center within the corporate body.

INVENTORY MANAGEMENT:-

What is Inventory? 1. Inventory is an unused asset, which lies in stock without participating in value adding process. 2. Unused equipment, raw material, WIP and Finished goods, consumables, spare parts, bought out parts, tools and tackles, gauge and fixtures etc.
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3. In India 9 to 12 months of sales quantity lies in the form of Inventory [R/M, WIP, Bought out parts and Finished goods] as against a few days in Japan and a month in the US and Europe 4.Huge amount of NPAs in our country, Banks, PSUs 5. If we look around in our facilities we find stocks lying unused for years catching dust and rust in the form of plant and equipment, raw material, WIP and Finished goods. 6.In our country inventory is always viewed as asset [working capital], in fact, though it is called an asset, it is a big liability 7.Reluctance to scrap useless inventory in time is one of the reasons why we carry huge stocks 8.Inventory is biggest source of waste 9. Japanese companies focused their attention on Inventory through now well known concept of 5S.

TYPES OF INVENTORY:1. Manufacturing: R/M, components, WIP, F/G. 2. MRO: Maintenance, repairs and operating supplies. 3. Tools and fixtures 4. Inspection gauges and instruments 5. Location inventory: inventory at a fixed location

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6. In transit inventory: inventory in the process of transfer or under going transportation and waiting to be transported. This is also known as pipeline inventory

FUNCTIONS OF INVENTORY :1. Inventory overcomes obstacles due to geographical separation between suppliers and customers. Manufacturing facilities are located at places that make manufacturing economical. This fact geographically separates manufacturing and market. 2. De coupling from uncertainties of market 3. Overcomes obstacles due to poor infrastructure 4. Balancing supply and demand: seasonal production and year round consumption [agricultural products], seasonal consumption and production during some other season [woolen garments and umbrellas]. 5. Buffer uncertainties of lead time and demand 6. De couples internal processes. Two machines running sequentially are separated by inventory to make them independent of each other.

Costs of carrying inventories 1.Capital cost 2.Taxes, insurance 3.Obsolescence

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4.Storage: handling, space, maintenance, security 5.Opportunity cost 6.Cost of bad quality

INVENTORY CALCULATIONS :

Economic order quantity

What Does Economic Order Quantity - EOQ Mean? An inventory-related equation that determines the optimum order quantity that a company should hold in its inventory given a set cost of production, demand rate and other variables. This is done to minimize variable inventory costs.

Economic Order Quantity - EOQ The EOQ formula can be modified to determine production levels or order interval lengths, and is used by large corporations around the world, especially those with large supply chains and high variable costs per unit of production. Despite the equation's relative simplicity by today's standards, it is still a core algorithm in the software packages that are sold to the largest companies in the world. Economic order quantity is the level of inventory that minimizes the total inventory holding costs and ordering costs. It is one of the oldest classical production scheduling models. The framework used to determine this order quantity is also known as Wilson EOQ Model or Wilson Formula. The model was developed by F. W. Harris in 1913, but R. H. Wilson, a consultant who applied it extensively, is given credit for his early in-depth analysis of it Overview EOQ only applies where the demand for a product is constant over the year and that each new order is delivered in full when the
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inventory reaches zero. There is a fixed cost charged for each order placed, regardless of the number of units ordered. There is also a holding or storage cost for each unit held in storage (sometimes expressed as a percentage of the purchase cost of the item). We want to determine the optimal number of units of the product to order so that we minimize the total cost associated with the purchase, delivery and storage of the product The required parameters to the solution are the total demand for the year, the purchase cost for each item, the fixed cost to place the order and the storage cost for each item per year. Note that the number of times an order is placed will also affect the total cost, however, this number can be determined from the other parameters Underlying assumptions The ordering cost is constant. The rate of demand is constant

The

lead time is fixed

The purchase price of the item is constant i.e no discount is available The replenishment is made instantaneously; the whole batch is delivered at once. EOQ is the quantity to order, so that ordering cost + carrying cost finds its minimum. (A common misunderstanding is that the formula tries to find when these are equal.)

Variables

Q = order quantity Q
*

= optimal order quantity

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D = annual demand quantity of the product P = purchase cost per unit S = fixed cost per order (not per unit, in addition to unit cost) H = annual holding cost per unit (also known as carrying cost or
storage cost) (warehouse space, refrigeration, insurance, etc. usually not related to the unit cost) The Total Cost function The single-item EOQ formula finds the minimum point of the following cost function: Total Cost = purchase cost + ordering cost + holding cost - Purchase cost: This is the variable cost of goods: purchase unit price annual demand quantity. This is PD - Ordering cost: This is the cost of placing orders: each order has a fixed cost S, and we need to order D/Q times per year. This is S D/Q - Holding cost: the average quantity in stock (between fully replenished and empty) is Q/2, so this cost is H Q/2 TC=PD+DS/Q+HQ/2 To determine the minimum point of the total cost curve, set the ordering cost equal to the holding cost: DS/Q=HQ/2 Solving for Q gives Q* (the optimal order quantity): Therefore: FPRIVATE "TYPE=PICT; ALT=Q^* = \sqrt{\frac{2DS}{H}} ". Note that interestingly, Q* is independent of P; it is a function of only
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S, D, H.

Assumptions of Wilsons lot size formula or Classical EOQ model Demand is at a constant rate and continuous 1. Process is continuous 2. No constraints are imposed on quantities ordered, storage capacity, budget etc. 3. Replenishment is instantaneous 4. All costs are time invariant 5. No shortages are allowed 6. Quantity discounts are not considered

Limitations of Classical EOQ model We have seen that Classical EOQ model made assumptions that are really not realistic. When the model is put to practical use we find that so many adjustments are needed to be made. Hence EOQ model is formulated under some limitations. If we are not conversant with these limitations, managerial application of this concept can be counter productive.

Major limitations are some of the assumptions made 1. The demand or usage is predictable.

2. 3.

The demand or usage is constant. The price of the item remains constant throughout the

procurement cycle.
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4.

Materials in many processes are flow controlled ie,

materials move in pipe lines starting and stopping depending on operational requirements. If the concept of EOQ is applied without taking into account the limitations results can be disastrous.

Adjustments to EOQ -

1.

Volume transportation rates

EOQ model does not consider cost of transportation of

goods from vendors place to the purchaser. Transportation costs are sensitive to weight of consignment. If the quantity suggested by EOQ model does not get favorable transportation cost, summation of inventory cost and transportation cost may be detrimental to the interests of the organization. Hence we should always evaluate batch sizes from total cost perspective. In the traditional approach when inbound logistics are totally vendors responsibility, the company never used to worry about this aspect. But as the concept is now enlightened and minimization of the costs in the supply chain is the focus, this aspect is very significant Annual demand Unit value Inventory charge Ordering cost EOQ Shipment rate R1 [applicable 2400 U $ 5.00 20% $19.00 per order 302 U $1.00
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to EOQ quantity = 300 U] Shipment rate R2 [applicable to 480 U quantity]

$.75

Alternative 1 Inventory carrying cost Ordering cost Transportation cost @ $1 per U Total cost Q [EOQ] = 300 $150 $152 $2400 $2702

Alternative 1 Q = 480 $240 $95 $1800 $2135

2.

Quantity discount Impact of quantity discounts is seen if we look at the costs by doing summation of inventory costs and relief derived out of quantity discounts. Quantity discounts can upset the benefit of EOQ if we dont evaluate the situation from total costs perspective.

3. Other EOQ adjustments a) Production lot size

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Buyers EOQ and suppliers EBQ sometimes do not match. Then some adjustment will have to be made to the EOQ to make it practicable. b) Multiple item purchase When a combination of several products is sourced from a supplier, the impact of quantity discounts and transportation costs will be different from that for individual product. So adjustment is required to EOQ from the angle of total cost for the combination of products c) Limited capital Budgetary allocations play a significant role in buying. The budget has to satisfy the requirement of entire product line. So the EOQ of various items requires adjustment d) Private trucking If the company uses private transport for procurement, getting a full truck becomes significant from cost perspective. e) Standard package When a standard package is used for transportation, if EOQ suggests one and a half package then transporting half package becomes more expensive than transporting two packages with enhanced order quantity

ABC Analysis -

ABC analysis provides a tool for identifying those items that will make the largest impact on the firm s overall inventory cost performance when improved inventory control procedures are implemented. A
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perpetual inventory system, improvements in forecasting procedures, or a careful analysis of the order quantity and timing decisions for A items will provide a larger improvement in inventory cost performance than will similar efforts on the C items. Therefore, ABC analysis is often a useful first step in improving inventory performance. ABC analysis helps focus management attention on what is really important. Managers concentrate on the vital few (the A items) and spend less time on the trivial many (the C items). A type items should have one or two supplier who can supply quality products at optimum cost and at minimum time. ABC-Always better control Money value of consumption Basis of classification *0 Value of usage Or *1 2. % number of items contributing to proportion of total value of inventories Let us define ABC *2 A - significant few , items few in number contributing high proportion of value of inventories *3 B- not few, not too many, neither very cheap nor very costly *4 C- Insignificant many ,relatively large no. of items ,normally inexpensive Benefits of ABC Analysis 1. Identification significant 15% to 20%items responsible for 80% of value for close management control selective management control 2. Effective management of inventory results in short span of time

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3. Allocation of management resources to significant items, reduction in clerical work and time. 4. Helps in selection of appropriate inventory control models or systems. E.g. Q model or P? 5. Helps in formulation of inventory policy

Limitations of ABC Analysis 1. An exhaustive analysis of all items in the whole organization is required to make ABC analysis a useful effort. A, B, & C items should be identified for the whole organization for which data regarding consumption pattern, lead time and its fluctuation of all items is necessary. Only then the benefits can be felt. To carry out this exercise high degree of standardization and codification is primary. This exercise is obviously time consuming. 2. Focus is only on money value; criticality of the item is not taken into account. 3. Price of an item is assumed to be same through out the year. In practice it is unlikely to be so.

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VED Analysis -

VED- vital, essential & desirable- analysis is used primarily for control of spare parts. The spare parts can be divided into 3 categories Vital Essential Desirable Depending upon their criticality for production, the spares, the stock-out of which even for a short time will stop production for quite some time are vital spares. The spares, the absence of which cannot be tolerated for more than few hours or a day & which are essential for the production to continue, are essential spares. The desirable spares are those spares which are needed but their absence for even a week or so will not lead to stoppage of production.

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FSN Analysis

FNSD analysis divides the items of stores into 4 categories in the descending order of importance of their usage rate. F stands for fast moving items that are consumed in a short span of time. N stands for normal moving items which are exhausted over a period of a year or so. S indicates slow moving items which are not issued at frequent intervals & are expected to be exhausted over a period. D. Means dead items & the consumption of such items is almost nil. HML Classification The HML classification is similar to the ABC classification, except for the fact that instead of consumption values of items, their units values are considered. Items are classified on the basis of their unit value into: H= High value items M= Medium value items L=Low value items

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COMPANY PROFILE Founder The roots of the Aditya Birla Group date back to the 19th century in the picturesque town of Pilani, set amidst the Rajasthan desert. It was here that Seth Shiv Narayan Birla started trading in cotton, laying the foundation for the House of Birlas. Through India's arduous times of the 1850s, the Birla business expanded rapidly. In the early part of the 20th century, our Group's founding father, Ghanshyamdas Birla, set up industries in critical sectors such as textiles and fibre, aluminium, cement and chemicals. As a close confidante of Mahatma Gandhi, he played an active role in the Indian freedom struggle. He represented India at the first and second round-table conference in London, along with Gandhiji. It was at "Birla House" in Delhi that the luminaries of the Indian freedom struggle often met to plot the downfall of the British Raj. Ghanshyamdas Birla found no contradiction in pursuing business goals with the dedication of a saint, emerging as one of the foremost industrialists of pre-independence India. The principles by which he lived were soaked up by his grandson, Aditya Vikram Birla, our Group's legendary leader. Aditya Vikram Birla: putting India on the world map A formidable force in Indian industry, Mr. Aditya Birla dared to dream of setting up a global business empire at the age of 24. He was the first to put Indian business on the
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world map, as far back as 1969, long before globalisation became a buzzword in India. In the then vibrant and free market South East Asian countries, he ventured to set up world-class production bases. He had foreseen the winds of change and staked the future of his business on a competitive, free market driven economy order. He put Indian business on the globe, 22 years before economic liberalisation was formally introduced by the former Prime Minister, Mr. Narasimha Rao and the former Union Finance Minister, Dr. Manmohan Singh. He set up 19 companies outside India, in Thailand, Malaysia, Indonesia, the Philippines and Egypt. Interestingly, for Mr. Aditya Birla, globalisation meant more than just geographic reach. He believed that a business could be global even whilst being based in India. Therefore, back in his home-territory, he drove single-mindedly to put together the building blocks to make our Indian business a global force. Under his stewardship, his companies rose to be the world's largest producer of viscose staple fibre, the largest refiner of palm oil, the third largest producer of insulators and the sixth largest producer of carbon black. In India, they attained the status of the largest single producer of viscose filament yarn, apart from being a producer of cement, grey cement and rayon grade pulp. The Group is also the largest producer of aluminium in the private sector, the lowest first cost producers in the world and the only producer of linen in the textile industry in India. At the time of his untimely demise, the Group's revenues crossed Rs.8,000 crore globally, with assets of over Rs.9,000 crore, comprising of 55 benchmark quality plants, an employee strength of 75,000 and a shareholder community of 600,000.

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Under the leadership of our Chairman, Mr. Kumar Mangalam Birla, the Group has sustained and established a leadership position in its key businesses through continuous valuecreation. Spearheaded by Grasim, Hindalco, Aditya Birla Nuvo, Indo Gulf Fertilisers and companies in Thailand, Malaysia, Indonesia, the Philippines and Egypt, the Aditya Birla Group is a leader in a swathe of products viscose staple fibre, aluminium, cement, copper, carbon black, palm oil, insulators, garments. And with successful forays into financial services, telecom, software and BPO, the Group is today one of Asia's most diversified business groups. Mr. Kumar Mangalam Birla Chairman, The Aditya Birla Group

Mr. Kumar Mangalam Birla is Chairman of the US$ 28 billion Aditya Birla Group and Indias first truly multinational corporation. An iconic figure, Mr. Birla holds several key positions on various regulatory and professional boards. He is a director of the Central Board of Directors of the Reserve Bank of India and chairman of the Staff Sub-Committee of the Central Board of the Reserve Bank of India. He serves on the Prime Minister of Indias Advisory Council on Trade and Industry. He is the chairman of the Board of Trade constituted by the Union Minister of Commerce & Industry, also chairman of the Ministry of Company Affairs Advisory Committee. Additionally, he is on the National Council of the Confederation of Indian Industry (CII); the Apex Advisory
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Council of the Associated Chambers of Commerce and Industry of India, New Delhi and the Advisory Council for the Centre for Corporate Governance. He served as the chairman of Securities and Exchange Board of Indias Committee on Corporate Governance, and as chairman of SEBIs committee on insider trading. He authored the nations first report on corporate governance. Several accolades have been showered on Mr. Birla such as the Asia Pacific Global HR Excellence Exemplary Leader Award and NDTVs Global Indian Leader of the year, and Most Socially Responsible Leader by Outlook Business Magazine all in 2007. Earlier, the Lakshmipat Singhania IIM, Lucknow National Leadership Award 2006, Business Leader, was conferred on Mr. Birla by the Prime Minister. Mr. Birla also has been named the World Economic Forums Young Global Leader, Ernst & Young Entrepreneur of the year", the Economic Times Business Leader of the year, Business Indias "Business Man of the year, Business Todays Young Super Performer in the CEO Category, NITIEs Business Visionary, and the Bombay Management Associations Management Man of the year. A chartered accountant, Mr. Birla earned an MBA from the London Business School, where he is also an Honorary Fellow. Mr. Kumar Mangalam Birla and his wife, Mrs. Neerja Birla, have three children, Ananyashree, Aryaman Vikram and Advaitesha.

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Aditya Birla retail operates in two streams as super markets and hyper markets. They deal majorly into sale of finished goods. Raw material procurement is only for the perishable goods which form the materials for the bakery products like Cakes, pastries, etc. They have developed their own flow chart for the processes involved in procurement and storage of these goods. The standard operating procedure is what they follow for the daily activities to achieve the material management effectively. The various steps involved in the standard operating procedures are as follows.
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1. 2. 3. 4.

Opening procedures: Define the ingredients required to prepare a certain kind of cake. Closing procedures: Finalize the amount of ingredients required with respect to quantity in which each has to be mixed. Rostering: Put down the details in the ERP system to maintain the quantity and value of the materials acquired. Bar-Coding: Assign barcodes to the materials acquired so as to identify them in the ERP system. Barcode form the basis for maintaining the acquiring and consumption details of the SKU. Grooming: Maintain the environment were these perishable good stay intact and does not get spoilt. These will help tremendously to reduce loss at storage. Raw Material Storage: Store the raw material procured in FIFO basis, in shelf so that the packages are put in from one end and are removed the from the other end. Pricing: Decide the price by one of the standard costing method, average costing method used in this case. The ERP used has provisions to carry out costing for various products after certain transactions to update the valuation for the commodities.
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5. 6.

7.

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8. 9.

Promotions: Create seasonal promotions and offers or for a festive season. Article Masters: Maintain the article master in the system with the BOM (Bill of Materials) details. Display Merchandising Packaging Fire safety procedure Hygiene & Quality Maintenance Gas Bank

10. 11. 12. 13. 14. 15.

Due to company policies, not every detail was revealed but the process was clearly explained.

Conclusion: A systematic and standard material handling process, leads to ease of functioning and reduction in inventory carrying cost for the manufacturing process. Materials input is very important as excess material as inventory causes costs to the company and shortage of material
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results into stoppage of conversion process and subsequently shortage of finished goods leading to customer dissatisfaction. Out of 5Ms, that are inputs to a conversion process, material is substantial in terms of its contribution to product cost, and current assets. More retail process though does not use the legacy standards, but have mixed the processes and came up with their company specific standards. Materials management provides information about availability of new products and services in the market which leads to cost efficient changes in the process.

Bibliography: Websites:

www.adityabirla.com www.morestore.com
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Google books from internet.

Reference book by Ayna pure.

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