12:34 PM
Definition
The grouping of management functions related to the complete cycle of material flow
from the purchase and internal control of production materials, to the planning and control of
work-in-process, to the warehousing, dispatch, and distribution of the Finished Product.
In manufacturing, 4 keys variables to control Men, Machine, Money and Materials.
Also it is a process by which an organization is supplied with the goods
and services that it needs to achieve its objectives.
Means
Materials Management is the means by which delivery performance, investment in stocks and effective utilization of manufacturing resources is achieved. It therefore comprises all those systems by which a company organizes materials and production resources to meet delivery promises at a reasonable cost.
Purpose
- Basic goal is to maximize profits and minimize costs
- Centralization of authority and responsibility
- Improved communication
- Reduced transfer of blame for parts shortages, late deliveries
- Growth of specialized functions in corporate organization
- Materials cost as a percentage of cost of goods produced/sold
Activities
- Purchasing / Procurement
- Inventory Management
- Receiving Activities
- Warehousing / Stores
- Materials Planning, Production Planning, Scheduling and Controls
- Dispatch and transportation
- Salvage and Scrap Control
Importance
- Cost of materials in a product
- Investment in inventories is usually one-third of a company’s assets.
- Potentials of saving are enormous
- Reduction in Stockouts, number of orders issued etc.
Materials Management can result in cost reduction and improved performance;
but the concept must be built into the philosophy of
the company and its organization.
Inter-Relationship
1. Marketing
Ø Support sales with a satisfactory level of services which can be an effective competitive tool for marketing.
2. Manufacturing
Ø Availability of Materials
Ø Stockouts can be a potential problem
3. Finance
Ø Movement of materials as, expressed in turnover
Ø Audit of material management procedure
Ø Budgeting for planning cash flow
Ø Accounting & Costing for inventories
4. Quality Control
Ø Inspection of incoming material
5. Top Management
Ø Optimum resources utilization
Ø Profit maximization
Main Objective
· Continuity of Supply
· Consistent Quality
· Competitive Pricing
· Low Operating Cost
· High Inventory Turn-Over
· Low Pay-roll Cost
· Good vendor – Buyer Relationship
· Good Record Keeping for Control
· Reciprocity : Buying from those who buy company products
· Economic Make for buy decisions
· Diversification of sources
· Good Store-Keeping
· Good Distribution System
· Co-ordination with other Department