Material Management (MM)

Objectives

At the end of this unit, you should be able to:

•Define the key advantages of material management process.

•Identify the objectives of material management.

•Describe the strategic roles & function of material management.

•Discuss the possibility of material management in an organization.

Structure

•Definition of Material Management

•Objectives of Material Management

•Advantages of Material Management

•Functional Role in Materials Management

•Roles of Material Management in an Organization

•Self-Assessment Questions

MM1.1  Definition of Material Management

Different organizational bodies, institutions and firms have developed various definitions of Material Management based on their perspectives and needs. Find below some definitions of Material Management:

"Materials Management is the total of all those tasks, functions, activities and routines which concern the transfer of external materials and services into the organization and the administration of the same until they are consumed or used in the process of production, operation or sale" (Institute of Purchasing and Supply, Great Britain). 

“Materials management is “the grouping of management functions supporting the complete cycle of materials flow from the purchase and internal control of production materials to planning and control of work -in-progress to the warehousing; shipping and distribution of the finished product," (American Production and Inventory Control Society (APICS). 

MM1.2    Objectives of Material Management

The basic objectives of material management in an organization are:

•To obtain materials at the minimum price, however, this minimum price must not compromise on the quality of goods and the continuity of supply.

•To minimize the inventory of an organization without sacrificing the timely availability of materials. This frees up working capital of an organization for other useful organization purposes.

Thus, the bottom line of any material management system is the minimization of material procurement, storage and handling costs, without compromising quality and availability of materials. Material management procedures are strategically placed within an organization.

They have different meanings for different people. Some of the material management procedures may give more weightage to purchasing, while others may attach a lot of importance to inventory control. A good material management process may have a strong backing of quality management and quality assurances of material purchasing and handling.

        

In addition to these primary objectives a materials management system indirectly fulfills many secondary objectives also.

These secondary objectives are normally related to the functions of a material management system. Some of these secondary objectives are:

•Identifying new or better sources of supply

•Development and sustenance of relationships with the vendors

•Creating a standardized quality of the products. 

MM1.3    Advantages of Material Management

Material management has created a niche in many organizations, which have implemented the integrated materials management. These organizations usually enjoy the following advantages:

•Better accountability on part of materials as well as other departments as no one can shift blame to others.

•As materials management is handled by single authority, it can result in better coordination, as it becomes the central point for any material related problems.

•Materials management department makes sure that better quality material is supplied timely to the requesting departments. This can result in better performance of the organization.

•A materials management system is typically controlled through an information system, thus, can help in taking decisions related to material in the organization.

•One indirect advantage of material management is that good quality material develops the ethical and moral standard in an organization. However, please note there is no study on this issue.

MM1.4    Functions in Material Management

Some of the key functions that are undertaken during the process of material management are:

1.Planning:  One of the key functions that identify the scope of the materials management is the materials planning and control. This function is based on the sales forecast and the production plans of an organization. The activities of this function are:

•Preparation of materials budgets

•Product research and development.

•Value analysis

•Standardization of specification

2.  Procurement: This is another major function for the materials management. Procurement practice in its totality also maximizes  operational cycle one of which is the “Procurement Cycle”. This cycle contains activities such as review selection, determinations of needed quantities of items, needs & fund reconciliation, procurement methods, supplier selection, contract terms definitions, order monitoring, receipt & inspection.

Some of the procurement functions are stated below:

•Determining order quantities

•Processing of works.

•Stores requisitions.

•Evaluation of quotations

•Supplier accreditation & appraisal

•Negotiation

•Placing of contract i e. order 

•Progressing of deliveries i.e. Expediting 

•Certifying payments (invoices)  

3.  Storage & Inventory Control: The functions below help in physical control of materials;

•Determining stores location.          

•Stores layout equipment

•Mechanical handling

•Inventory classification

•Coding and cataloguing

•Receipt of purchased items

•Inspection of goods or materials

•Storage and packaging

•Protection of stores (Security)

•Issuing to production

•Provision of Cost data

•Stock records

•Disposal of obsolete, surplus and scrap materials

4.  Production Control: The functions below help in the utilization/consumption of material thereby reducing waste;

•Forward ordering arrangements for materials (and Services)

•Preparation of production schedules and sequences

•Issue of orders to production

•Emergency action to meet material shortages

•Make or buy decisions

•Quality control and reliability feed back

•Adjustment of supplies flow to production line or sales trend

5.  Distribution:  To effectively complete the material management cycle adopted by any organizations, the functions below are essential:

•Warehousing

•Packaging

•External transportation (to end users or consumers)

•Customer Service

MM1.5    Roles of Material Management in an Organization

Some of the key roles maximized in material management are:

Market forecasting :  

One of the key role-played by materials management is to forecast the future demands. This forecast can be made on the basis of material usage patterns and increase in demand for the last few years, in addition expected enrolments for programs that are new, this information can be predicted on the basis of response to new programs of similar type/ area during last few years. Thus, materials management as a great role to play for an organization. But remember here, a forecast is always an estimation.

Production:

One of the key roles of material management system would be to  see that the process of production goes unhindered.

Finance:

The material management is strategically very much linked to cost reduction. The cost may include the inventory cost and thus, have a major impact on the material budget.

Inventory Control:

One of the key strategic roles of material management would be to minimize the inventory of an organization. This also results in cost minimization. In general a production schedule is made in an organization. This should be synchronized with the material procurement and supply so that the production process is not hampered 

Inspection or quality control:

This is a very interesting interface as the quality of material for different types of an organization is impacted during materials management cycles, though materials management is not directly responsible for quality, yet it can cause indirect effects on the quality of products. The products, whose quality deteriorates with time, are very likely candidates in this category.

Material handling, traffic and physical distribution logistics:

The role here is to see that the material is handled and distributed easily.

MMQ 1    Self-Assessment Questions

1.What are the objectives of Materials management? What are its advantages?

2.What are the activities of materials /Inventory Management flow in your organization?

3.Define the various roles of materials management in the context of internal and external interfaces to materials management system.

4.Describe the role of material management in performing various functions in your organization?

5.Discuss how Supply Management Concept can improve Material Management.

6.A company decides to move its factory from one town to a rural area. Suggest reasons which may have brought this decision and what difficulties that may arise as a result of the move.

7.What do you understand by the term “Capacity Planning”, “Throughput time”, Order Cycle, Lead Time and MRO.

ERP tips using Microsoft Dynamics 365 for Finance and Operation Supply Chain Management.

Business organizations who tend to adopt new ERP application should be ready to engage in change management process impacting on the way business transactional documents should be run, employee and management readiness to harness new business rules  and work style.  

Microsoft Dynamics 365 for Finance and Operations is an ERP application that provides business organizations flexibility and control required among others.

Why D365 for Finance and Operations?

For its simplicity,  control, flexibility, governance, effectiveness and ability to adapt the application to the business needs.

The integration capability and timely support from Implementation Consultants and OEM also gives comfort for business owners.

The diagrams below gives a tip of what to expect adopting Microsoft Dynamics 365 for Finance and Operations - Supply Chain Management.

Warehouse Optimization … The Little Things that matters

Globalization with the advent of information technology and the rapid improvements of industry standards has open doors to various opportunities in areas such as Warehouse Management, Supply Chain Management, Logistics and other areas just to mention a few.

When people think of optimizing warehouse operations, they usually think of warehouse management systems (WMS), automated material handling systems, bar coding and automated data collection. Often neglected are the “little things” that affect warehouse operations. These little things usually require little to no investment and can sometimes have an enormous impact on operations.

Training

Employee trainings in most organizations today are seen as a “little thing”, the fact is, training employees is inexpensive and will have the greatest return on investment of anything you will do in your operation.

An immeasurable wealth of an organization is the level of professionalism acquired via training on the job available to the employee for utilization and adoption to the job activities.

 

Operations that lack adequate procedures and employee training are likely to suffer from poor quality, low productivity, safety issues, low employee morale, highly stressed supervisors and managers, and a general lack of control. These chaotic conditions caused by poor training tend to contribute to the ongoing cycle of inadequate training by making it difficult for supervisors and managers to find time to define procedures and train employees. The only way to break the cycle is to take the time to define and document the procedures and implement an employee-training program.

Tools

Making sure employees have the proper tools readily available to perform their job functions can also have significant impact on operations. Time wasted by employees wandering around the warehouse searching for a pallet jack or a tape dispenser will certainly be more detrimental to the bottom line that will the cost of purchasing more of these low cost items.

While it’s OK to put emphasis on employees taking care of these tools, the fact is that items like pocket calculators, tape machines, markers, and razor knives will disappear. Whether they are lost, broken, or go home is someone’s pocket, doesn’t change the fact that you now have an employee that doesn’t have the proper tools to perform their job.

You’re much better off treating these as consumables and always having extras on hand than risking employees making counting errors because they don’t have a calculator, risking product damage because they couldn’t find a tape dispenser, or risking injury because someone couldn’t find a pair of safety glasses. Also make sure you are purchasing quality tools and supplies. Stretch wrap that doesn't cling or breaks in the middle of wrapping, tape dispensers that don't work properly, tape that doesn't stick or doesn't come off the roll correctly, and pallet jacks that require excessive pumping will not do much for productivity or morale. Below is a list of some of the key tools used by warehouse workers.

·         Warehouse Tools

• Pallet Jacks
• Hand Trucks
• Stock Carts
• Rolling Ladders
• Banding Dispensers
• Banding Cutters
• Banding Crimpers
• Pry Bars
• Stretch wrap Dispensers
• Tape Dispensers
• Pocket Calculators
• Clip Boards
• Razor Knives and Blades
• Markers, Pens, etc.

·         Cleaning Supplies

• Brooms
• Dust Pans
• Mops
• Trash Containers

·         Safety Items

• Safety Glasses
• Dust Masks
• Gloves
• Aprons
• Respirators
• Hard Hats
• Wheel Chocks

It will also prove to be very useful to have specific areas for these tools to be stored within each department. Tools required for daily operations should be made quickly accessible to workers while items only used occasionally should be stored away from the high activity areas.

Supply Chain Management is everybody’s business

"If you are in supply chain management today then complexity is a cancer that you have to fight, and process management is the weapon. This framework develops a robust model of supply chain management processes and properly defines them so that they can be managed. It has enabled our organization to understand that supply chain management is too important to be just a function. Instead it's everybody's job.”

—Tom Blackstock
Vice President, Supply Chain Operations, Coca-Cola North America

In the information age Supply Chain is not adopted as a business function anymore, but approached as a network of SCM frameworks and other industrial standard frameworks. It is the implementation of cross-functional relationships with key customers and suppliers in that network, thereby enabling new business models necessary for organizations to succeed in every function involved.

In today’s environment, there is the added pressure to be more socially and environmentally responsible and there are risks which need to be mitigated and managed. Then, there is the complexity created by ever increasing customer requirements and expectations, globalization, the pressure on cost, and the availability and access to resources. On top of this, management is expected to improve profitability, increase revenue growth and capture and protect larger market share.

In order to succeed, management must recognize that the ultimate success of an organization depends on the ability to integrate the company’s network of business relationships in a mutually beneficial way.

With this understanding, every business organization irrespective of the industry as a part to play in the supply chain processes. Your job role is a node of the chain which is dependent on others and of which other must rely on your quality output.

For your business organization meet the demands  or standardization in quality of product and services, you need to answer the following questions;

• ·         How effective are your business processes adopted in my organization?
• ·         How well as information technology been adopted to automate the business processes?
• ·         How do we track business performance in line with Supply Chain Management processes?
• ·         Is the quality of data from our business organizations dependable for others to rely on without issues?
• ·         As business owners, how well do we invest in the skill set of our employees?
• ·         Do we align our standards with industry standards?

By understanding the supply chain management process and how it should be implemented, you will be able to better understand the quality of value expected to build a sustainable business and global economy at large. 

Maximizing Information Technology Resources In Inventory Control & Warehouse Management.

Inventory Control and Warehouse management is a core entity within the Supply Chain Management (SCM) framework which if not effectively managed, can jeopardize the entire SCM process cycle. Inventory control & warehouse management in itself is a robust framework which requires a high level of efficiency, documentation, reporting and communication for effective operation.

With the introduction of Information Technology data capture, processing, reporting and communication is provided and applied at every stage of Inventory & Warehouse managements.

The table below shows how and where Information Technology can effectively improve Warehouse Management and inventory Control.

Other advantages using information technology management application:

• 1.       Visibility on real-time inventory balances across multiple locations
• 2.       Low inventory alert and re-order process trigger based on set threshold
• 3.       Inventory valuation methods is effectively setup and utilized for various group of inventory items
• 4.       Effective stock count using barcode integration.
• 5.       Tacking of stock transaction history and other related information
• 6.       Real-time report for decision making
• 7.       Integration with Account Management and other cost related entities.

      

Maximizing Barcode Technology In Inventory Control & Warehouse Management

    

Barcode is a unique technology which has been around for a long time now, which has contributed to the effectiveness of the warehouse operations. According to Wikipedia, “A barcode is an optical machine-readable representation of data relating to the object to which it is attached.” The barcode display varies from one another based on the dimensions, data structure and parameters configured by the barcode generator (a software application used to generate barcode labels), which are readable via a barcode reader for effective data capture.

Irrespective of the barcode display, each barcode is different from the other based primarily on the data structure computed into the system such as;

1.       Product Name

2.       Manufacture details

3.       Item properties e.g. size, unit of measure, quaintly, etc.

4.       Shipping details e.g. name of shipping company, location, movement time, etc.

5.       Storage details e.g. warehouse name, location, bin collection, etc.

Why should every store outlets, Warehouse Company, shipping or packaging company just to mention a few embrace Barcode Technology?

Inventory:

1.       Bar code readers provide accurate and up-to-date inventory item details with speed thereby reducing operational time.

2.        Warehouse operations such as stock count and audit are enhanced thereby reducing data duplication

3.        Stock movement in & out of the warehouse are easily facilitated, thereby tracking the in-flow and outflow of stock items

Price Scanning:

Shopping malls have now adopted barcode technology integrated to Point of Sale (POS) to enhance the price collation of items purchased by customers. The barcode on each product for sale contains product price which can be read by the barcode reader and displayed in the POS machine which sums the customer bill.  In addition, bar code readers provide accuracy and speed for scanning prices at the checkout.

Delivery Services:

Delivery services such as Federal Express and United Parcel Service use bar codes to track packages throughout the delivery process, so customers can inquire at any time where their package currently is located in transit.