Professional Documents
Culture Documents
Course Code : MS - 56
Note: Attempt all the questions and submit this assignment on or before 31st October, 2018 to the
coordinator of your study centre.
Q1.Discuss, with suitable examples, how socioeconomic and cultural aspects may become
the determining factor in the success of international purchasing.
Ans:
Socio economic philosophy studies the relation of economics to social values, social responsibility.
It also studies the reciprocal relationship between economic science on the one hand and ethics and
human dignity on the other toward social reconstruction and improvement.
Social factors include the cultural implications, the gender and connected demographics, the social
lifestyles, the domestic structures.
1.Changes in our Life Styles and Social Values: For instance, changing role of women, emphasis on
quality of goods instead quantity of goods, greater reliance on government, and greater preference
for recreation activities.
2.Major Social Problems: For example, concern for pollution of environment, demand for socially
responsible marketing policies, head for safety in occupations and products, etc.
It approaches corporate social responsibility from the perspective of being a responsible corporate
citizen. The company has identified projects across all its manufacturing locations in the country
primarily in the areas of education, healthcare and rain harvesting.
1|Page
Corporate social responsibility continues to be an integral part of GSK‘s business. It makes a
contribution to society through medicine donations, conducting healthcare awareness programmes
and community development. The uniqueness of GSKs social initiatives lies in the development of
self reliance by tackling issues through the involvement of the beneficiaries themselves. While
selecting projects, priority is given to those which contribute to healthcare, especially of women
and children.
Socio-economic environment differs from country to country and also from place to place within
the same country or region. It may also change significantly over time. A complete understanding of
the demographic features of a market is very necessary for designing the appropriate business
strategies. Many multinational companies have entered India during the last few years considering
the sheer size of population in these countries.
Size of Population
The main problem that is faced by most of the developing countries of the world including India is
their growing high population, leading to high pressure on the land and agricultural sector.
According to the provisional reports released on 31 March 2011, the Indian population increased to
1.21 billion with a decadal growth of 17.64%.
A country where the population growth rate is high, children constitute a large section of
population resulting in more demand for baby products.
The increase in the size of population with middle and high income group has resulted in increased
demand for consumer goods, both durable and non durable, as in the case of India where demand
for automobiles, branded ready-made garments, electronic products, home appliances, etc. has
increased manifold.
A business firm which reads the demographic changes accurately and monitors them continuously
will find opportunities knocking at its doorsteps.
The size of the population is an important determinant of demand for many products. Poor
countries with small population are generally not attractive for business. As against that, the
advanced countries, particularly those with large population, are generally attractive markets.
Because of the large potential of these markets, the competition is also quite strong. When the
population is large, even if the country is poor, there could be a sizeable market even for those
goods and services which are regarded luxuries in these countries. For example, if just five percent
of the Indian population is well to do, the absolute number is larger than the total population of
many of the high income economies.
2|Page
Emergence of Young Population
High population growth rate also implies an enormous increase in the labour supply and its cost.
Cheap labour and a growing market have encouraged many multinationals to invest in developing
countries. Many companies in the developed countries have relocated their production facilities,
wholly or partially, in the developing countries to reduce the labour costs.
India has more than 50% of its population below the age of 25 and more than 65% below the age of
It is expected that, in 2020, the average age of an Indian will be 29 years, compared to 37 for China
and 48 for Japan.
Q2.Define the various roles of materials management in the context of internal and external
interfaces to materials management system.
Ans:
The various roles of materials management in the context of internal and external interfaces to
materials management system
Materials Management (MM) is a grouping of the organizational functions responsible for the
planning, sourcing, stocking, manufacturing, control and distribution activities of materials used in
the internal and external fulfillment of demand.
Typically the term includes all logistical activities that controls the transmission of tangible,
physical materials through the value chain such as shipping and transport, distribution and
warehousing, quality control, work in progress and manufacturing.
The goal of MM is to ensure an unbroken chain of components for production to manufacture goods
on time for the customer base. The materials department is charged with releasing materials to a
supply base, ensuring that the materials are delivered on time to the company using the correct
carrier.
Inventory accuracy
MM is not a science. Depending upon the relevance and importance that company officials place
upon controlling material flow, the required level of expertise differs. Some companies place MM on
a level whereby there is a logistics director, other companies see the importance level as managing
3|Page
at the plant level by hiring an inventory manager or materials manager, and still other companies
employ the concept that the supervisors in the plant are responsible accompanied by planners.
Origin. History
Initially the trend was having big socks and large inventory based on the idea that the bulk
purchases would result in large benefits due to discounts. As a result there were large warehouses
and stock houses.
Over time people released that a lot of cash was being blocked here. Also there were losses due to
improper material handling.
To control these cost a new sub branch MATERIAL MANAGEMENT came into existence whose main
aim was to release the blocked cash, make the material flow easy, reduce the inventory without
hampering the production.
Various techniques like increasing Inventory Turn Over Ratio, decreasing Days Inventory
Outstanding, EOQ ordering, and Just-in-time were implemented and it was found a large amount of
cash could be saved for the company.
Assumptions
Various assumptions are made in practice. The inputs are usually obtained from various
departments. The production scheduling data plays a very important role here.
For example the calculated economic order quantity data comes from the forecast department, but
the calculated values will not match exactly with the vendors offerings, so then we need to assume a
nearby quantity.
Various cost like the cost of tracing materials or rising a purchase order are never known. We need
to make assume them. The ability to do so comes with experience in the particular field.
Companies are increasingly competing on a supply chain level. MM plays a very important role in
this. Some of the major benefits of MM can be explained as:
Challenges
4|Page
The major challenge that materials managers face is maintaining a consistent flow of materials for
production. There are many factors that inhibit the accuracy of inventory which results in
production shortages, premium freight, and often inventory adjustments. Further issues that all
materials managers face are:
Un-reported scrap
Shipping errors
Receiving errors
Ans:
Materials management information systems (MMISs) automate the continuous cycle of supplies
procurement and usage throughout the care delivery organization (CDO). Traditionally, MMISs
have included the following functional modules:
•Distribution--tracking where and when supplies are dispersed throughout the organization.
•Invoice and payment processing--invoice tracking, EDI or Web transmission of payments, and
forwarding of financial data to the general ledger system.
•Management reporting.
5|Page
CDOs have embraced material management because of its potential for tremendous cost savings
within virtually every department. Many CDOs have implemented materials management
applications as part of an overall enterprise resource planning (ERP) solution. ERP product suites
automate back-office functions, such as general-ledger, accounts payable, fixed assets, budgeting,
human resources, and payroll, in additional to materials management. In the 1990s electronic data
interchange (EDI) and just-in-time inventory (JIT) changed the way MMISs were used to order,
purchase, and distribute supplies across the enterprise. Now, supply chain management (SCM)
solutions are replacing MMISs.
SCM significantly improves the manner in which CDOs manage procurement and payments. SCM
involves all parties within the supply chain, not just the CDO. With SCM, the system can alert an
outside supplier or manufacturer when a predetermined par level is reached. It can create and
electronically transmit a requisition to the CDO's supplier via electronic data interchange (EDI) or
over the Internet (e-commerce) and can pay the invoice in the same manner. Interfaces to the CDO's
financial systems allow the materials management application to automatically update the
accounting department. When materials management is implemented as part of an overall SCM
strategy, CDOs realize the following benefits:
•Cost containment and access to more detailed information about supply cost and usage.
Before Web-enabled applications entered the market, CDOs supplemented or replaced manual
ordering and payments to outside sources with electronic data interchange (EDI). EDI is the
exchange of electronic documents between suppliers/manufacturers and users such as CDOs. EDI
consists of standardized electronic message formats, called transaction sets, for common business
documents, such as Request for Quotation, Purchase Order, Purchase Order Change, Bill of Lading,
Receiving Advice, and Invoice. The electronic transaction sets enable the computer system in one
organization to communicate with another organization's system directly or via e-mail. Paper
documents and the human effort required to read, sort, and physically transport them are
eliminated, as is the manual keying of information. Office or warehouse space that normally would
be occupied by paper files can be allocated for other uses. Manual filing by clerical staff is
eliminated.
When selecting EDI software or an MMIS with built-in EDI capability, it is important to ensure the
application is compatible with ANSI X12 standards. The X12 Committee of the American National
Standards Institute (ANSI) developed the voluntary standards for use by U.S. businesses. One of the
most common uses of EDI among CDOs is for
6|Page
purchase orders and resultant invoices. Trading partners subsequently issue payment for goods or
services received. The ANSI X12 Payment Order/Remittance Advice transaction set enables
payments to be made by transferring funds from the buyer's bank to the seller's bank.
Data security is maintained through the use of unique user identification numbers and passwords
assigned by the business partners. Generation/translation software includes extensive data editing
and error-checking routines. This ensures that the data is valid when transmitted and received. The
standards also allow the receiver to acknowledge successful receipt of the transmission by sending
a functional acknowledgment.
Portable computing devices, including handheld, pen tablet computers and voice-activated PCs, as
well as wireless local-area networks (LANs), have made MMISs easier to use. Pen- and voice-based
systems help increase productivity for clinicians and others who may lack typing skills or the time
required to enter information into the system via keyboard. Rather than entering data at a desktop
workstation, nurses, laboratory and radiology technicians, operating room staff, pharmacists, and
other users in ancillary departments can access information at the point of use.
The MMIS must efficiently communicate with the CDO's general ledger, accounts payable, and other
financial systems. ERP software vendors market materials management or procurement
applications as part of a product suite that includes general ledger, accounts payable, and budgeting
modules. Many also incorporate human resources (HR) management and payroll. Unless a CDO is in
the market for such an ERP solution, it will require an MMIS that can seamlessly exchange
information with legacy financial systems. The process is easiest when the same vendor has
provided both the financial and the materials management software. When the general ledger or
accounts payable software operates on the same hardware platform as the materials management
system, information sharing is also facilitated.
Interfacing capabilities must also include clinical information systems for charge capture,
requisitioning, and inventory. If the MMIS is HL7 compliant, the task of writing special interfaces to
clinical systems is made easier. When used to maximum capability, the MMIS should interface to the
computerized patient record (CPR) system (if one is in place) and to all clinical information systems
implemented within the organization. These include the following:
•Clinical information system (CIS) in acute and critical care units and in the emergency room
•Pharmacy
•Radiology
7|Page
•Surgery
•Laboratory
Importance
The need for materials management was first felt in manufacturing undertakings. The servicing
organizations also started feeling the need for this control. And now even non-trading organizations
like hospitals, universities etc. have realized the importance of materials management. Every
organization uses a number of materials. It is necessary that these materials are properly
purchased, stored and used.
Any avoidable amount spent on materials or any loss due to wastage of materials increases the cost
of production. The object of materials management is to attack materials cost on all fronts and to
optimize the overall end results. Materials management connotes controlling the kind, amount ,
location and turning of the various commodities used in and produced by the industrial enterprises.
It is the control of materials in such a manner that it ensures maximum return on working capital.
Q4.MRP II is widely used in the batch production environment. However, it has some
discernible limitations. What are these limitations? How they can be overcome these
limitations by using mixed strategies?
Ans:
Companies successful with world class manufacturing techniques are those prepared to make
fundamental changes in the way they do business. Many Japanese pioneers of world class
manufacturing methods simplified production processes so that computerized planning and control
systems were not necessary. These innovative companies introduced manual methods of control
like the kanban system. As time has gone by many of these companies have begun to use
computerized systems, but have not resorted to a Western style MRPII. Companies like Nissan have
integrated MRPII into their production planning processes but have combined it with the radical
changes in management philosophy needed to bring about total quality and continuous
improvement.
MRPII and other modern production and distribution techniques were developed in a very different
environment from that of world class manufacturing. Although the objectives of a Western
approach to production and inventory control is entirely consistent with world class
manufacturing, the theoretical framework within which each was developed was quite different.
The basis of modern Western production management lies at a time when computer systems were
becoming widely available to industrial companies. The premise of operations research is that if the
problem can be modeled mathematically, then the issues of the problem can be analyzed and a
solution determined. This approach has been widely used in manufacturing and distribution
industries for forecasting, economic order quantities, shop-floor scheduling, and MRPII. During the
1970's and early 1980's thousands of companies employed these techniques - but they run counter
8|Page
to the ideas of world class manufacturing. They are complex, inhibit change, foster mediocrity, and
are inflexible.
Mathematical modeling is complex. The people using the results often do not understand where the
numbers come from. This leads to people feeling confused and alienated, and they either
unthinkingly follow the figures or manually override so many that the analysis becomes useless.
World class manufacturers stress simplicity of methods and empowerment of the shop-floor
personnel. For this to work effectively the systems - both manual and computerized - must be
simple and transparent to the people using them, and the people must be trained to use them
properly. The complex operations research approach, replete with algorithms, is not compatible
with this new approach to management.
The purpose of developing an operations research model is to simulate reality by incorporating all
the myriad variables and conditions of "real life" into the model. Operations research engineers
have been amazingly clever and creative in the development of production planning and inventory
control models. Unfortunately these models have enshrined within them many features of the
production plant that need to be changed or eliminated. It is difficult to eliminate a bad practice
once it has been "baked" into the system, particularly when the people using the system do not fully
understand the model.
An example of this is the standard cost; much loved by accountants and operations managers. The
standard cost calculation takes account of scrap rates, queue times, material movement, and many
other non-value-added activities. If a production supervisor manufacturers to standard - with no
variances - he or she will think they are doing a good job. Nothing could be farther from the truth. A
company manufacturing to traditional standards is far from world class.
The assumption of trade-offs, that is inherent within traditional production planning and control
systems, betrays a basic philosophy that is contrary to world class manufacturing. World class
manufacturers are always striving for perfection; never achieving it but continuously moving
towards it. An operations research approach is always looking to balance contradictory variables;
often using complex regression analysis for optimization. This practice is good mathematics but it is
very poor business management. The world class company strive to eliminate the trade-offs.
An arch example of this is the general acceptance of economic order quantities (EOQ). EOQ is a
trade off between carrying costs and set up costs, and takes account of spurious factors like
inventory holding costs to make the calculation. The only thing a world class manufacturer needs to
know about EOQ is that batch sizes should be halved every 90 days until they approach a batch size
of one.
The inflexibility of traditional systems creates further problems to the world class manufacturer by
developing a model with a specific approach to production in mind and then driving the plant in
accordance with that approach. Flexibility is an increasingly important aspect of world class
manufacturing. Increased flexibility of product mix, product volume, production methods, and
flexible people are significant objectives of a world class manufacturer. Other aspects of flexibility
are reduced time-to-market and concurrent engineering with its emphasis on meeting customer
9|Page
needs and expectations. The inflexibility of the traditional systems hamper companies striving for
radically improved service to their customers.
Limitations
As with any concept, MPR II isn’t without its imperfections. Often these imperfections come from
the humans implementing them. For instance, even with a technology-driven process, one
miskeyed number can throw things off. Additionally, if teams rely heavily on software and the
system goes down for a few hours here and there, operations can come to a halt.
MRP II’s one-size-fits-all approach may not be right for certain manufacturers. Those who specialize
in engineer-to-order products may find that the framework isn’t as useful as it would be for make-
to-stock manufacturers. However, there are enough useful components to the methodology, that it
might be worth putting it in place if only to use the parts that work. You may find that it works well
for the human resource scheduling aspects of your plant, but that you should leave ordering and
inventory management to your previous processes.
Although it uses technology to apply the concepts in the manufacturing environment, MRP II is not
a proprietary software program. Instead, it is an overall strategy that helps manufacturing leaders
plan their resources for maximum efficiency. This in itself is the top advantage, since planning
ensures that manufacturers have the materials and human resources they need to handle
production on a day-to-day basis. This preplanning also reduces waste, since it allows management
to only order what they need.
MRP II also creates standards that can be enacted across all areas of operations. Once those
standards are firmly put in place, leadership can then regularly monitor performance and highlight
areas where improvements can be made. As the company grows and more demands are placed on
existing resources, the manufacturer will already have processes in place that can be scaled to
accommodate them. This also will help provide guidelines to the employees tasked with doing the
work each day, since their job expectations will be clearly outlined from the start.
Q5.Which problems are unique to spare parts that other materials do not exhibit? Why do
these problems occur?
Ans:
Most companies are reluctant to maintain a comprehensive spare part inventory because they fear
that stocking assets like spares is counterintuitive when trying to effectively control operating
costs. They expect plant managers to identify ways to reduce cost while maintaining the
performance and efficiency of plant operations.
Practical spare part management is the foundation for reliable plant operation and is crucial to a
plant managers success. As plant manager, you need to know how to determine which spare parts
10 | P a g e
are needed to make up an effective and comprehensive inventory system. Rather than using
perception to determine what’s needed, it’s best to establish a strategic method that will adequately
manage the movement and storage of your inventory.
Operating strategy, inventory control and lead times are a few of the factors you should consider
when developing or reviewing your part management system. Taking these factors into account can
help minimize performance disruption, promote efficiency, and reduce carrying cost. Ultimately,
producing successful spare part management.
Operating Strategy
As a parts manager, you will either operate from a predictive or reactive position. Most companies
fall into the habit of building their management strategy around reactive events. To successfully
manage part inventory a manager should adopt a predictive strategy. While reactive management
can be beneficial during a crisis, the essence of successful management is the ability to prevent
problems before they arise.
Predictive management of spare parts includes the collection and analysis of data, and the ability to
look at the entire scope of operation to locate and solve important underlying problems that may
surface in the long run. In relation to collecting and analyzing data, be sure to look out for patterns
of failure that can reveal problems that are not clearly visible. Predictive management will help you
to make better use of resources, cutting the time and cost associated with fixing issues.
Source of Stockout
It is impossible to eliminate the nagging issue of stockout (out of stock parts) without investing in
spares. However, if you try to identify the major cause(s) of your stockout you can limit the effects
it has on your operation. Start recording the reason(s) for out of stock parts in real time.
Additionally, review forecasted demand and look for parts that may have an incorrect order setting.
It should be noted that the most typical cause for stockout is the delay that may exist within a
supply chain (internally/externally).
Inventory Control
Your spare parts inventory does not have to be all-encompassing to be effective. In fact, it is
unrealistic to stock large quantities of various parts. To achieve better control over inventory,
develop clear criteria that will help define and categorize spares. Designations such as “critical”
spares can help you prioritize your inventory. Recognize that terms like this are multi-dimensional,
and can be refined further. For instance, a part can be labeled as critical to the operation or critical
to specific machine function. A higher priority may be given to one designation over another,
depending on its risk and impact if a failure should occur.
Properly storing and organizing spares in a designated, secure space is also beneficial for the
control of inventory. A prompting for reorder will not take place if a part is taken without a record.
Likewise, if new stock is placed on the shelf without a record, it cannot be accounted for. A review
and analysis of your storage and check-out system can reveal reasons for stock inaccuracies.
11 | P a g e
Lead Times
Having a thorough understanding of spare part lead times is critical to building a successful stock
program. Part lead time is particularly important when determining which parts to stock. If
downtime is not critical for your company, parts that can be acquired quickly and easily can be left
out of a stocking plan. However, if lost production time means a significant financial loss for your
operation, even a day or two without a part can be too long. Many parts with long lead times are
made to order and do not carry expediting options. Therefore, it is best to keep parts with long lead
times on hand.
All too many times we hear the following from operations and maintenance mangers: “Our
equipment was just installed, it’s brand new, and we don’t need spares.” While it sounds logical for
many reasons, this train of thought is wrong. There is also an assumption that vendors will supply
perfectly functioning, quality parts (and they typically do). But, unfortunately, part failure upon
startup is a common occurrence.
Having proper spares on hand for the start-up/commissioning of new equipment is extremely
important. If a part is found to be defective, you can mitigate downtime by having spares available
for replacement right away.
True Stories
It may help to hear about a few real-world examples of issues that occurred because spares were
not kept on hand–
An oriented strand board (OSB) production facility had a set of grate bars that required immediate
replacement. They did not have spare grate bars on hand, so 8,000 pounds of grate bars had to be
ordered and delivered via specialty courier. Even with expedited delivery (which was quite
expensive), production was still down for more than three full days. If these spares had been kept in
stock, the expense and lost production time could have been avoided.
In another case, a large building materials company discovered they had a faulty flame scanner.
Despite a price tag of less than $300, the company did not keep additional scanners on hand. The
original equipment manufacturer had the part in stock and could ship it out immediately, but the
building materials company still lost a full 24 hours of production time while it was being shipped
overnight. The loss of production time during the 24 hours cost them approximately a quarter of a
million dollars.
12 | P a g e