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.
