Case Study Materials Management

4. Materials Management

All deliveries of materials will be entered as goods received by the inventory management department with invoice verification performed by the accounting department.

4.1 Materials Master Data – Material type

AMI uses the material type “bike” to describe all semi-finished products. The material type bike will have to be created. Be sure that the new material type has all the functionally of the standard HALB material type.

4.2 Procurement

The following purchasing Groups are required:

001 for procurement of accessories
002 for procurement of services
003 for procurement of motorcycles

Requirements for both Manufacturing and Marketing companies are ordered by one purchasing organization based in Manila.  However, there are Cebu requirements that are ordered locally but under the same purchasing organization.

In addition, someone must consider the following points while ordering raw materials or semi-finished products:

After their in-house production, the frames are given to an outside company. Top Design, contracted for the special finish. The required finishing color and the appropriate logo have to be considered as raw material of ABC Motors International.

Handling fee per frame:    PhP 25.00

Raw material costs for color (per frame):  PhP 2.50

Raw material costs for logo (per frame):  PhP 0.50

4.3 Valuation

ABC Motors International is valuing motorcycles at standard cost, accessories using moving average.

4.4 Physical Inventory Method

Because ABC Motors International uses annual inventory count, all company stocks have to be physically inventoried by the balance sheet cut-off date. During the counting, the warehouse for material movements must be blocked.

4.4.1 Materials Requirements Planning

AMI Marketing in Cebu orders motorcycles from Laguna, maintained through MRP. Material requirements planning will be carried out for the creation of purchase requisitions and planned orders. The requisitions are then automatically converted into purchase orders. All requisitions that do not have an explicit source of supply assigned to them are to be converted manually.

Accessories are planned using automatic re-order point planning.  Motorcycles are ordered based on manual stocks and Forecasts provided by the sales offices. ABC Motors International would like to utilize consumption of independent requirement.

4.4.2 Distribution Center Inventory

Using the prescribed methods above, replenish the inventory levels at the distribution centers for all salable products.

4.4.3 External Service Management

AMI’s Laguna plant annually requires duet work cleaning and air filter replacement to the plant HVAC System. AMI Roces Avenue has selected though competitive bid Cleaners, Inc for the project. The cleaning contract is valued at PhP15000. The cost of this service should be allocated to all production cost centers. All payments to quick cleaning are subjected to service entry and acceptance of the actual services rendered.

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