Case Study On Production & Material Management



Location of a plant has direct relevance to raw materials, market, human resources, civic amenitiestransportation etc. However, in some countries the problem becomes complicated due to (i) Inter-Statecompetitions and tussles, (ii) Regional development and (iii) Political pressures and biased decision.Around 1970 Government of India mooted the idea of expanding steel production under public sector units to be established at suitable locations. A committee of eminent personalities was formed to gothrough claims of (i) Vijaynagar Steel plant near Bellary in Karnataka, (ii) Salem Steel in TN and (iii)Vishakapatam steel plant in A.P. Since it was under PSU the political pressure was going on and if it wasunder private sector, there would not have been any kind of political pressure.The most important raw materials for steel plant are iron core power and coal. Again in iron ore the iron percentage should be preferably more than 60% and ash content in coal should be less than 30%. Thesefactors enable production of iron and steel at competitive price. From experts’ reports the following brief was available:(a)Vizag – The Iron ore is rich with 65% Iron and coal can be arranged from MP and Bihar andVizag is well connected by broad gauge railway line to all important cities and the place has sea port and airport. Hence this place has more natural advantage than other cities.


Salem – Iron ore was having 60 to 65%. Iron content and hence be economically exploited. Thecoal is in lignite form which is low quality coal. Hence this needs to be converted as coke for use.The place has broad gauge line and Madras sea port and airport are nearby. This place wasconsidered second preference.(c)Vijaynagar – Bellary belt has Iron ore of 60% iron but coal has to come from AP (SingareniColliery). The place had meter gauge railway line and hence not well connected to all India network. The seaport and airports were far away and hence this place was not found suitable.As per the expert committee report steel plant work started Vizag and Salem and these plants came up as per the plan and are doing well. However, to everyone’s surprise the them PM, Smt. Indira Gandhi, didfoundation stone laying in 1971 at Toranagallu in Bellary district for Vijaynagar steel plant also. Thisultimately proved to be an election gimmick to please the votes, though the PSU unit did not come upthere at all. This is a clear example how politicians try to fool gulliable voters by way of inaugurations/foundation stone laying.Steel plants are quite huge with township having about 50,000 to 1,00,000 people. Hence requirements of housing, electricity, water, hospitals, education, institutions, entertainment facilities are very essential.The investment is huge and this helps to develop the surrounding area quite well and there is abundantscope for ancillary units, engineering services and employment inside and outside the steel plant. BothVizag and Salem got these advantages and production standard as per the plan and these industriescontinue to run profitably.The expert committee had made comment on Vijaynagar proposal that, the unit can be viable if it useslatest foreign technology. In this method oxygen is injected to force oxidation of ores instead of natural

Operations Management


Chapter 13 : Materials Management

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Necessity of Materials Management
Functions of Materials Management
Production Control
Inventory Control
Materials Handling
Materials Management Technology
Automated Storage and Retrieval Systems
Automated guided vehicles
Materials Management Techniques
JIT Purchasing
Kanban Systems
ABC Classification Systems

Chapter Summary

Every organization invests a considerable amount of capital on materials. In many cases, the cost on materials exceeds 50 percent of the total cost of goods produced. Such a large investment requires considerable planning and control so as to minimize wastage. Materials management encompasses all operations management functions from purchasing to the final delivery of the end items.

The scope of materials management includes decision on purchasing raw materials, management and control of work in progress items, stores and warehouse management, and the shipping and distribution of finished products. The materials flow is divided into three different overlapping functions - production control, inventory control and the materials handling function.

The objective of the production control function is to regulate the flow of materials throughout the manufacturing cycle. The departments that are part of the production control function are the purchasing, receiving, raw materials inventory and production departments. The inventory control function covers raw materials inventory, the production department and the finished goods department.

The materials management function handles the physical movement of materials into, through and out of the firm. The departments that are involved in material handling functions are the purchasing, receiving, raw material inventory, production, finished goods inventory, shipping, distribution and warehouse departments. Storage of materials is an important aspect of materials management.

All types of materials such as. raw materials, work-in-progress, finished goods, spare parts and other consumable goods are stored such that they are easily available whenever and wherever required. Usage of technology has improved the efficiency of the material handling. The technologies that are commonly used in materials handling are robots, automated guided vehicles, and automated storage and retrieval systems.

Techniques used in the management and control of material in an organization include the Kanban system, the ABC classification system and JIT purchasing. Through proper management and control of materials, an organization can achieve significant cost saving, reduction in lead time, improvement in production efficiency and reduction in wastage.

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