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ASSIGNMENT OF MATERIAL MANAGEMENT

SUMMARY OF CASE STUDY


The case study is all about the business process reengineering, warehousing, material handling of an Indian refinery. The organization under study is the market leader in the petroleum working in closed economy under an administered pricing mechanism. Due to sudden changes in industrial policy and economic scenario of the country the organization is expected to face an open economy, competition from multinational. The major concern which affects the management of any industrial organization is the material management, as high inventory and an inefficient procurement process affect the profitability to a great extent. This study shows a radical improvement in material management function of an Indian petroleum refinery through business process reengineering by analyzing current process through customer value. There are certain issues that are associated with material management causing a evidence of loss of productivity. Thats why BPR can be seen to represent a range of activities concerned with improvement of processes. BPR emerges as a management philosophy like total quality management. TQR therefore address quantitative change and BPR causes qualitative change. This paper uses BPR as a tool for improvement in material management function. The organization under study operates a petroleum refinery which has material management function for uninterrupted supply of raw material and suffers from huge inventory carrying cost & ineffective warehousing and surplus disposal method. Process reengineering was proposed for improving material management function. The following were the processes which were considered for the study. 1. Material planning and procurement process. 2. Warehousing and surplus disposal method. A five days workshop was conducted with the executive from different functional group including material management for carrying out process reengineering. They worked together to determine the reengineered process applying above two methodology. Detailed current process were identified &mapped. A time cost profile and customer value structure were formed. Time cost profile was formed by listing all task in sequence and determining time and

cost for each task and the customer value structure was formulated by identifying all customer attribute on which value are to be determined. The following were the two models which were used 1. Integrated procurement model:- The centralized indent processing unit processes online indents that are raised by various functional groups for procuring spare, material for the annual maintenance. CIPU maintain an updated database which helps in preparing online purchase proposals for receiving offers from the prospective supplier. These offers are then evaluated through decision support system. 2. Integrated warehousing and surplus disposal method:- Under this model the anticipated spare requirement for plant operation &procurement policy form the inventory profile of the organization. Deriving surplus identification parameters &linking these with computerized inventory control system the online information on surplus material and inventory is adjusted. From the analysis and dynamic trend of globalization the study has led to philosophy of applying radical changes through BPR to achieve success along with two important activities material planning &procurement process and warehousing & surplus disposal. At last this study reveals: Monitoring of online inventory position for management information to enable correct decision at the correct time. Designing an effective vendor evaluating system for ensuring product quality, correct timing and optimum cost. Forming a network through the internet with other unit for exchange of information related to material procurement and inventory. Providing appropriate authority and responsibility to unit personnel for effective handling of issues and concern of material management.

PREPARED BY:SURYA PRAKASH