UNIT 20 MATERIALS INFORMATION

SYSTEM
Objectives
After reading this unit, you would be able to :
• describe the information systems in materials management and explain their
importance in manufacturing process;
• be familiar with the potential areas in materials management where the
information system development enables us for quick decision;
• demonstrate the process of system development through examples; and
• highlight the features of Manufacturing Execution System(MES) in achieving
Total Quality Management.
Structure
20.1 Introduction
20.2 Advantages of Materials Information System
20.3 Functions of Materials Information System
20.4 System Approach to Materials Management: Classical model
20.5 Simulation Methods for Materials Information: A System Approach
20.6 Information System for Total Quality Management (TQM)
20.6.1 Manufacturing Execution System (MES)
20.7 Summary
20.8 Self Assessment Questions
20.9 References and Suggested Further Readings

20.1 INTRODUCTION
Information can provide powerful tool for change. Information management is an
important task to be handled carefully by the managers to keep themselves always
connected to the latest developments for online decisions. Whether it is Finance,
Marketing, Human Resource Management or Operations Management, all processes
require a proper information system. An information center is a place where
information is collected, transmitted, stored, analyzed, or compiled. The information
relates to the internal operation of the firm as well as to the environment. Quite
obviously, decision centers and information centers in the firm are inextricably bound
together. Decision centers generally transmit decisions to others in the organization,
and in a sense act as information centers. In simple terms, for an effective information
management, the decision maker need to strictly systematize the procedure stated
below:
a) gathering the facts in time,
b) Store them in an ordered way,
c) Process for the requirement and
d) Present them in a specified manner.
In manufacturing process, a group of people, machines & infrastructure work together
by coordinating for producing different types of products with an objective of making
optimum production and profitability. A set of transaction ties together the different
activities manufacturing process. They are:
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1) Request from customer to bid on special product
2) Orders for special products
3) Orders for standard products
4) Production orders
5) Move orders
6) Purchase orders
The entire process is carried out in an organized way. The systematic approach to
execute the process involved in handling of materials for various purposes through
predefined steps is called Materials management system. This can be done through
programmed decisions so that the cost involvement in various processes of materials
management like ordering for raw materials, utilization level of the stock, overstocking
of the materials etc could be done judiciously.

In any manufacturing organization, it is required to deal with different forms, reports,

memos, labels and cards in use to assess the status of items movement and stock
available on hand. Many of these forms have the same usage with different layouts.
Each one of them has to be filed manually. It is a very time consuming and laborious
intensive process. Also, the transfer of these documents among related units of the
production causes delays in decision-making. The Materials Information Management
System streamlines and simplifies the entire filing procedure of the Bureau of
Materials, thus relevant information is integrated into an electronic data processing
and management system automatically. Materials Management uses bar code
technology to maintain stock levels and to re-order stock-using hand held scanners.

20.2 ADVANTAGES OF MATERIALS

INFORMATION SYSTEM
In addition to the above discussions, the materials Information management has
certain advantages as stated below:

Reduces time and costs by

• Establishing direct link between the data capture system and the suppliers
ordering system which reduces supply chain time and costs and reduces the
ordering errors
• Simplifying ordering – the data is inputted direct to the supplier via a hand held
barcode reader
The information retrieval through proper information system provides
• The data that can be used to forecast required stock
• Statistical analysis of historical data and generate reports to review product use
and to identify better efficiencies
It gives flexibility to manage products by
• Helping with product standardization programmes and effective stock control,
leading to more efficient use of limited storage and effective stock control
• Providing a modular storage system
• Streamlining receipting procedures, leading to improved payment systems
It saves money
• By saving on requisition costs, reducing obsolescence and waste and simplifying
stock valuation for the company
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 • By helping to give a clear understanding of a company’s spend and operating
costs
• By providing realistic stock levels linked to actual usage- matching service
delivery with company actual service need
Processing of a customer needs from its identification through conversion of raw
materials into finished goods and the distribution of these goods is carried out by a
sequence of fairly distinct activities. These activities are called the technical
development of the system. Out of all other system in functional management, the
sub-system used for materials manufacturing is considered to be significant in
operations management. They are inventory control system, demand management
system, remote electronic requisition system, warehouse management system, waste
management system etc. These sub-systems operate based on the product
specification, schedule, demand, availability of raw materials and assemblers.

A system to control movement and storage of materials within a warehouse is called

Warehouse Management System. The role of Warehouse Management System is
expanding to including light manufacturing, transportation management, order
management, and complete accounting systems.

The general function of materials information system integrates the various other
subsystems as shown below:

Manual Requisitions

Purchase Order

Sales Reports

Bar Codin
of Items &
Inspection

Quantity Received

Procurement

Shipment Data

Pending Or

Figure 20.1: Materials

The design and the development of the materials information system require
considerable research efforts. The major study topics include:
1) Identify and synthesize the operational logic and business rules in the materials
testing processes to search for the best ways to organize and unify the forms,
reports, approvals and all relevant documents. Use of bar code technology for
locating the status of the products.
2) Identify and normalize the relational database to secure data integrity and manage
data flows within existing networks using bar codes assigned to the product
3) To convert and integrate the existing electronic data for concrete decisions
through proper statistical analysis

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4) To protect and archive the data and outputs
5) To improve the system flexibility such that new materials and new information
can be inserted
6) To minimize the data entry errors through cross checking
7) To minimize the routine workload and improve the efficiency of the data
processing with customized client application programs and
8) To automate the filing processes and speed-up the closeout procedures by
scheduled replication tasks and alert message service of the database. In other
words, the entire closeout procedure will be monitored by the system and the
responsible person will be notified of the current project status.

20.3 FUNCTIONS OF MATERIALS INFORMATION

SYSTEM
The two main functions of Materials Information system are to generate an unordered
requirements listing for input to the purchasing system and to provide a materials
status and history report for use as follow up and status information. This would
facilitate to:
i) Identify and order long lead-time items in the early stages of requirements
determination
ii) Reduce existing clerical work load by paper work automation to the extent
practicable
iii) Provide a system of quick, accurate follow up and status reporting
iv) Provide whatever controls are needed to ensure that all required items are
ordered and not duplicated
v) Sketch the movement of items and report the status for further planning.
As can be seen, this system mainly deals with two different areas of operations
management namely Inventory Control, and Production & Manufacturing. Let us try
to understand the development of systems taking into all the aspects of requirement
and output for such system.
The inventory management system deals with:
• Maintaining an optimum level of raw materials and finished goods inventory
• Consolidation of purchase orders and inventory status
• Preparation of analysis reports like lead time, number of optimum runs etc
• Generation of MIS reports required for decision making
The various inputs and the processing of data to get output to this system are as
follows:

Table 20.1 : Inputs and Outputs for an inventory management system

System Inputs Processing Output Decisions

objectives receivable tools formats

Maintaining Data of suppliers Models used Number of units Minimize the

optimum level vendors, and in Operations to be ordered in a inventory cost
of raw materials buyers, storage cost research for EOQ specific interval
and other
finished goods

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Consolidation Materials requisition Tools of Demand quantity Forecast for
of purchase slips, Delivery classification and and order quantity future trend
orders and challans, materials tabulation and
inventory status return status simple analysis,
OR techniques

Preparation of Goods received, Different Number in Optimum

various analysis quantity issued, parameters units specified quantity order
reports materials jejection like lead time,
percentage of
rejection, capacity
production

MIS report Using existing Operations and Decision reports Effective and
master data queuing tools online information timely decisions
based on all
receipts and issues

Process of production and manufacturing deals with the following objectives:

• Compute parts from production schedule which include the economic number of
outputs per unit
• Minimize the production schedule
• Reduce clerical costs
• Control backorders
The system requirement, tools utilized and the output expected to this system are as
follows:

Table 20.2 : Inputs and Outputs for a production and manufacturing system

System Inputs Processing Output Decisions

objectives receivable tools formats

Calculate the Bills of materials, Production Quantity of Materials

optimum production models output and requirement and
number of schedule, time expected time supply in time
units per requirement
production run

Optimize Market data Trend Number of Minimize

production and analysis, optimum production
schedule requirement scheduling production cost
movement tools runs required

Reduce clerical Quantum of Manpower Requirement Reduce

costs invoices and planning of manpower manpower
processing cost
bills handled

Control Demand Operations Exact Reduce

back-orders notes and research tools requirement shortage
lead time and expected costs
demand

The schematic representation of the materials process, in general for both the
operations, can be seen from the following figure.

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 INPUT PRO

Data of supplies MA
Data of raw materials and INFO
Finished goods recieve note SYSTE
Materials requisition slip FOR
Delivery challan O
Materials rejection note

Figure 20.2: Input, Process and Outpu

20.4 SYSTEM APPROACH TO MATERIALS

MANAGEMENT: CLASSICAL MODEL
In industrial situations decision-making is a continuous process. It is a conversion
mechanism for changing continuously varying flows of information into control signals
that determine rates of flows in the system. For example, various parameters used in
industrial decisions like economic order quantity, lead-time, expected waiting time are
not static. Decision point is continuously yielding to the pressures of environment. It is
taking advantage of new developments as they occur. It is always adjusting to the
state of affairs. It is treading a narrow path between too much action and too little. It
is always attempting to adjust towards the desired goals. The amount of action is
some function of the discrepancy between goals and observed system status.

Let us take an example of very frequently used illustration in materials production

pertaining to inventory models. The status of inventory is linked with the production,
distributors and retailers. A demand function has been specified in order to generate
the orders from the ultimate customers. At each level of factory, distributor and
retailer, an inventory of stock item is held and periodically replenished. Delays in
processing orders are assumed, as well as the delays in transmission of orders
between levels. Materials flow is delayed between the levels to represent time
required for shipment. Hence the database once created can be used as centralized
pool of information and can be retrieved in whatever the format required.

Consider another example of retailer’s distribution system as discussed by McMillon

and Gonzalez. Requisitions arrive from customers and go into an unfilled order file.
Shipments from the distributor arrive and enter inventory. From this inventory
deliveries are made to fill customer’s requisitions. Decisions concerning shipments to
customers and quantities to order to replenish the inventory are made at a decision
centre on the basis of knowledge of (or information form) unfilled orders, actual
inventory, and desired inventory.

Three kinds of flow can be traced in the system: materials flow, information flow, and
order flow.

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 Distributor

Purchase Order
Shipments Received sent from Retail De
at Retail (SRR) (PSR)

Inventory Actual Decision

at Retail (IAR) Point

Shipments
Sent form Customer
Retail (SSR)

Figure 20.3: Three Kinds o

Inter-relationship among different states of retailer’s distribution system

The inter-relationship among the different state of the system can be expressed by the
following equation.
RRRn = f (n)
SSRn = RRR n-2
SSRn = PSR n-3
UORn = UOR n-1 + RRRn - SSRn
IARn = IARn-1+ SRRn - SSRn
IDR n = 20/9 [ RR n + RRRn-1 + RRRn-2]
PSR n = RRR n + ½ [ IDR n – IAR n ]
RRR n
SSRn
SRRn
UOR n
IAR n
IDR n
PSR n
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In which RRR n is the exciter of the system is a function of time, n. The state vector is
the state of the system at any period in time ‘n’ is simply the value of the variables in
this vector in period ‘n’

It is clear from the above illustration that most of the parameters in materials
movements are inter-related and recursive in nature. Analytical decisions through
systematic calculation enable the decision maker to know or predict the required
decision points. Sometimes even the graphical analysis using the existing functional
equations help the analyst to present proper results through graphs. The information
system designed in this situation will be able to help for drawing proper
interpretation.

20.5 SIMULATION METHODS FOR MATERIALS

INFORMATION: A SYSTEM APPROACH
In developing simulation models one is continuously tempted to abandon specific cases
and to pursue the exclusive but intriguing universal model, the general systems
simulator or as are ultimate, the general problem solver.

From a theoretical point of view, the universal model is potentially a powerful

analytical construct by means of which we can immensely improve our understanding
of the decision making process. But in dealing with applied problems in business and
industry are must concern ourselves with the specific. Now let us understand the
importance of information management in an industrial situation to control the
production level to optimize the profit.

SYSCO manufacturing company assembles computers for domestic use. SYSCO

has these units custom-made by a variety of suppliers and it resells them under the
brand name SYSCOM.

Lead-time for delivery of new stock from their suppliers, SYSCO has found, Varies
in a random fashion, with the following distribution.
Lead time Probability
4 .10
5 .15
6 .50
7 .15
8 .10
While SYSCO is uncertain about demand from week to week (and uses a sales
forecasting strategy that will be described shortly), demand is in fact, normally
distributed about a mean of 50 SYSCOMS per week with a standard deviation of 15.

When customers request SYSCOMS and SYSCO is unable to deliver immediately

due to stock-outs, customer orders are back ordered, and customer back orders are
first satisfied out of new stock received. New stock is received over the weekend.

At the end of each week SYSCO management appraises its operating experience
during the week, updates records, and makes two decisions:
i) Whether to declare a price markdown if demand has been less than that demand
satisfactory and
ii) How many new machines to produce, if any.
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Method of simulation based on probable demand from previous data is the best tool
to apply. Simulation either in the form of hand simulation or mechanical method is
quite obvious and required repetitive calculations. The problem is to develop an
information system by which SYSCO’s operating experience can be simulated so that
certain policy decision (notably the demand and forecasting strategy and the
inventory management policy ) can be tested to determine their influence on profits,
and so on. It would be profitable to design appropriate computer programs through
subroutines for generating demand and determining limits and making policy decision.

20.6 INFORMATION SYSTEM FOR TOTAL

QUALITY MANAGEMENT (TQM)
Total quality management as stated by Arora and Bhatia, is a philosophy aimed at
each and every aspect of business activity in alignment to the customer perspective.
The objective of TQM is achieving the concept of JIT (Just In Time) with initial
applications in the area of inventory management focusing on delivery schedules.
Purchase of materials and components arrive just in time in the factory site, often in
few hours when requisitioned. This requires placing small and frequent orders and
restructuring relationship with suppliers. The concept has further normalized to
produce as needed to meet customers order resulting in reducing lead times. The aim
is delineated to include elimination of inefficiency and improvement of product quality
in the manufacturing process. TQM has found relevance particularly in
manufacturing process which is by CIM (Computer Integrated Manufacturing)
including Computer Aided Design, product data management and manufacturing
execution system. Management of Information System plays a very vital role in
providing the required inputs at various stages to maintain the integrity of the system.

20.6.1 Manufacturing Execution System (MES)

The MES includes shop floor control, operator guidance and quality system. A cross-
functional team approach is encouraged for optimum employee participation. MES is
being considered as a key technology in drive to improve manufacturing performance
capability in the fiercely competitive global marketplace. MES is being increasingly
applied in a number of discrete batch and continuous process manufacturing industries
such as semiconductors, pharmaceuticals, petrochemicals, plastics and medical
equipments. Integrated MES implementation through computerized systems provide
useful integration of real time data with other information systems such as production
planning system and distribution control system. The corporate major objectives such
as profitability, market share and improved global competitiveness can be realized
through specific improvements such as short production runs, improved quality, lower
costs and customer responsiveness with the implementation of integrated
computerized MES. Schedule adherence, routing management, operator certification
control, work in progress management, process control, real time statistical process
control and statistical product monitoring are important ingredients of MES system
aimed at improved product quality and customer responsiveness.

20.7 SUMMARY
Development of Information system plays an information role in managerial decision-
making. Various manual formats are being needed to reference the information from
the master file, proper approach enables accurate information.

In this unit you have been exposed to the importance of Information System in
Materials Management with illustrative examples giving the steps for development of
a system. As the management of materials in a typical manufacturing environment
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