04 Raw Materials and Supplies

Raw Materials and Supplies
Raw Materials and Supplies

A. Classification of raw materials D. Supply marketing and supply
and supplies programme
1. Raw materials  Supply marketing
2. Processed industrial  Supply programme
materials and components  Cost minimization
B. Specification of requirements  Risk minimization
 Project characteristics and
material inputs E. Costs of raw materials and
 Requirements of raw supplies
materials and factory  Unit Cost
supplies
 Annual Costs
C. Availability and supply
 Overhead Costs
 Input alternatives
A. Classification of Raw Materials and Supplies
Raw materials (unprocessed and semi-processed)

Agricultural, forest, livestock, Marine, Mineral
Agricultural products
Quality, Quantity ( now and in the future) , estimate the
availability, costs ,storage/transportation, machinery, methods
of collection, Laboratory and experimental tests.
Livestock and forest

Check viability of an industrial project. Perform detailed specific
(usually expensive) surveys.
Marine Products
Hard to assess the potential of availability, the yields, and the
cost of collection.
Marine products availability depends on ecological factors and
national policies and bilateral or multilateral agreements.
Mineral products
information on the proposed exploitable deposits based on
proven extensive reserves, study should show the viability of
opencast or underground mining, the location, size , depth
and quality of deposits, composition of the ore, and
impurities.
Provide detailed analysis of physical and chemical properties.
Processed industrial materials and components
Base metals
Availability, prices during certain period ( unstable international
markets) , substitutability, exchange rate/constraints.
Chemicals/petrochemicals intermediates
Availability, cost , implications of domestic manufacture, delivery
date and prices if manufactures is public sector.
Factory Supplies
Auxiliary materials and utilities (Factory Supplies)

• Auxiliary materials ( chemicals, additives, packaging materials,
paints and varnishes)
• Factory supplies( maintenance materials, oils, grease and
cleaning materials )
• Current consumption of wear-and-tear parts and tools
Electricity
• Energy situation analysis ( required and sources), availability,
costs, max power demand, the connected load, peak-load,
possible stand-by requirements, daily and annually
consumption .
• If the supplier is high-polluting power plant, the project may
be rejected for environmental reasons .
Fuel
• Price of energy have to be increased by the costs of disposal
measures of the combustion output( filters, desulphurization,
etc. )
• Better efficiency results in less energy consumption for the
same output.
Water
• Estimate water requirements for production process, recycling
arrangements, auxiliary purposes (cooling , heating, boiling,
rinsing facilities, grading, steam generation )
• Closed circuit processes ( in locations with water shortages)
• Check water quality to avoid damaging of pipes and pumps.
Packaging materials, containers crates
Packaging serves for:
• Physically holding and protecting a product.
• Achieve the marketing objectives defined in the marketing
concept ( functional design of bottles and boxes.
• Costs of materials are considered in relation to the production
costs ( export / brand policy )
• Assess the timely availability of the required quantities, the
qualities, and costs)
Other supplies
Identify items such as: steam, compressed air, air-conditioning
and effluent( sewage) disposal.
Recycled waste
• Dumping of specific types of waste is no longer possible.
• Waste combustion may fail due to population resistance or
economic reasons
Spare parts
• Very important to identify essential spare parts ,, quantities
needed, available suppliers , ( this is part of the engineering
design)
• Spare parts for first year or two is part of initial working
capital, while afterwards is a part of the annual production
costs.
Supplies for social and external needs
• Food stuff, medicines, clothing , education and training
materials for the employees
• Maintenance for external infrastructure
• Road Maintenance
• Railway Maintenance
B. Specification of Requirements
Such specification need to be both : Qualitatively and
Quantitatively
Take into account the following factors:

• Socio-economic factors
• Commercial and financial factors ( project size, labour force
productivity , market demands, materials competition ,
supplies and services, etc.)
• Technical factors : type of industry , technology and
production process, machinery type, production capacity,
estimated production )
Project characteristics and material inputs
To obtain the nominal and feasible plant capacity:

• Engineering factors: technology , machinery, equipment,
process
• Number of shifts and products
• Number of skills of the labour force.
• Marketing strategies
• Management and availability of external infrastructure
• Identify prerequisites and assumptions
Process flow sheet
• Identify vital/main sections of the process and how
production proceeds ( not detailed)
• A diagram showing quantitative flows, showing how and
when different items enter various sections of the process,
supply inputs, material transport, storage and emissions.
• More diagrams for extra details (machinery , capacity,
technical standards)
Requirements of raw materials and factory
supplies
User demands
The Users of the finished goods have demands and expectations
that will affect the choice of machinery, equipment, materials
and inputs used.
Quantities required
Quantities are expressed in the following terms:
• Units produced ( items/tonnes/cubic meters)
• Section of the production process
• Machine or labour hours
• Employees ( medicine and other social costs)
Qualitative properties
• Physical properties
• Mechanical properties
• Chemical properties
• Electrical and magnetic properties
For a material with no enough info, tests may be necessary.
C. Availability and Supply
• Show that the materials and inputs will be provided.

• Show general availability, potential users and supply sources
• Machinery, production process , capacity may be revised if
inputs cannot be provided as required.
• Determine if supplies are concentrated or disperse, location
of supplies.
• Transport costs
Input Alternatives
• Study the different available materials , determine the most

suitable. If alternatives are available easily, then the problem
is the process and technology economics
• Investigate the environmental impacts of each material.
D. Supply Marketing and Supply Programme
Supply marketing
The objectives of supply marketing are basically cost
minimization, risk minimization (reliability of supplies) and the
cultivation of relations with supplier.
Supply programme
The purpose of a supply programme is to show how supplies of
materials and inputs will be secured.
Evidence should be presented to justify the assumptions and
suggestions.
Cost estimates should be based on the supply programme
presented. A supply programme should deal with the
Identification of supplying sources and suppliers, Agreements
and regulations, Quantities and qualities, consignments,
Means of transport, Storage, Risk assessment
Cost minimization
Select suitable suppliers , proper volume, order frequency
Risk minimization and reliability of supplies

Reliability of quantities, deadlines, prices and such risks
considered in the purchasing strategy.
Cultivating relations with the supplier
Not only prices, but also establish smooth productive relations
with the suppliers.
Supplier should be able to conduct repair and maintenance
How to identify possible supply alternatives ?
• Directly by the individual enterprise
• Through agents
• Through purchasing cooperative formed by a number of
enterprises
Building up maximum bargaining power means optimizing

between:
• Too many suppliers( low risk but small bargaining power, small
quantity discounts)
• Too few suppliers ( high bargaining power, large quantity
discounts , possibly high reorganization costs)
When identifying suppliers/input quantities , take into account:
• Total price competitiveness
• Extras( payment conditions, warranty terms, delivery time,
repair services, customized packaging)
• Risk to further-in-house processing if not as required.
• Expected stability of supplier relations
• Reorganization costs incase of supplier change
• Wholesalers purchase possibilities
A Supply programme should deal with the following:
• Identification of supplying sources and suppliers

• Agreements and regulations
• Quantities and qualities
• Consignment( delivery)
• Means of transport
• Storage
• Risk assessment
Storage facilities
Indicate such facilities at the plant, ports, railways stations or other
places ( location and capacity) .
• Risk factors can be either: external or internal.

E. Costs of Raw Materials and Supplies
• Unit Cost
• Annual Costs
• Overhead Costs
Unit costs
• Availability of basic materials and factory supplies in details ,

current prices and future projections of the elasticity of the
supply. ( the lower the elasticity, the higher the price )
• Cost of alternatives( transportation)
• Importing costs ( insurance, freight, clearing charges , loading
and unloading costs, port charges , tariffs, local insurance and
taxes, internal transport to the plant )
Annual costs
Overhead costs of supplies
• When estimating material and input requirements by project
components, the project planner has to plan not only at the
level of production cost centres , but also at the level of
service, administration and sales cost centres.

04 Raw Materials and Supplies

Uploaded by

Copyright:

Available Formats

04 Raw Materials and Supplies

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

04 Raw Materials and Supplies

Uploaded by

Copyright:

Available Formats

Raw Materials and Supplies

Raw Materials and Supplies

Raw materials (unprocessed and semi-processed)

Livestock and forest

Auxiliary materials and utilities (Factory Supplies)

Take into account the following factors:

To obtain the nominal and feasible plant capacity:

• Show that the materials and inputs will be provided.

• Study the different available materials , determine the most

Risk minimization and reliability of supplies

Building up maximum bargaining power means optimizing

• Identification of supplying sources and suppliers

• Risk factors can be either: external or internal.

• Availability of basic materials and factory supplies in details ,

You might also like

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.