Introduction

All types of organizations, weather manufacturing, trading, or even non– profit, are continuously involved in procurement, storage and stock replenishment of different types of materials. At different points of time many of the items are bought, stored and stocked either for immediate or future use. The function of buying and stocking is a result of decision making process which may be simple or complex, intuitive or analytical, hasty or deliberate. In the manufacturing organization materials management is relatively more important as well as complex. The cost of materials in the different industries ranges from 50% to 85% of the product cost. On an average about 1/3rd of the total assets of the company represents the investments in inventories. In many cases material consumption varies from 25% to 75% of sales turnover. The expenditure made on materials is money invested in inventories cost of storage, transportation costs, insurance, wastage etc. Due to these reasons materials management assumed a greater importance since the inception of manufacturing activities. Material’s is a fatty cost element. The slightest efficiency in its management results in substantial absolute cost advantage. With the growth of the specialized functions in the corporate organization material management has given a distinct importance in modern management. In fact, it is recognized as one of the areas of management.

    In the manufacturing organization, the important inputs are – men, machines and materials which are the results of the monetary commitments. Materials being a key and inevitable input, directly affects the fundamental economic objective, viz., profitability of any manufacturing organization. Efficient management of any of the input directly affects the output and the result in the profitability of the organization. As materials consume lion’s share of the investments and that too with a possibility of turnover, its efficient management directly contributes directly contributes to the profitability of the organization.

Definition

Materials management is a term used to connote “controlling the kind, amount, location, movement and timing of various commodities used in production by industrial enterprises”.

Materials management is the planning, controlling, directing, and coordinating those activities which are concerned with materials and inventory requirements, from the point of their inception to their introduction into the manufacturing process. It begins with the determination of materials quality and quantity and ends with its issuance to meet customers demand as per schedule and the lowest cost.

Materials management is a basic function of the business that adds value directly to the product itself. 

“Materials management is a term to describe 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-progress, to the warehousing, shipping and distribution of the finished product. It differs from the materials control in that the latter term, traditionally is limited to the internal control of production materials”

  Thus materials management is concerned with those management functions circumscribed in the complete cycle of materials flow like purchasing, production and inventory control, material handling, packaging, traffic and distribution. All these related functions are grouped together and are put under the direct control of line manager. All the sections of the material management strive to attain the fundamental objectives of material management. It should also be noted that inventory control is an integral part of materials management and it is confined to the internal control of the production materials.

Objectives of Material Management

Materials management contributes to survival and profits of an enterprise by providing adequate supply of materials at the lowest possible costs. The fundamental objectives of materials management activities can be:

• Material selection: correct specification of material and components is determined. Also the material requirement in agreement with sales programme is assessed. This can be done by analyzing the requisition order of the buying department. With this standardization one may have lower cost and the task of procurement, replacement etc. may be easier.

• Low operating cost: it should endeavor to keep the operating cost low and increase the profit without making any concessions in quality.

• Receiving and controlling material safety and assure that they are in good condition.  

• Issue the material upon receipt of appropriate authority.

• Identification of surplus stocks and taking appropriate measures to reduce it.

The outcome of all these objectives can be listed as given below.

• Regular uninterrupted supply of raw materials to ensure continuity of production.

• By providing economy in purchasing and minimizing waste it leads to higher productivity.

• To minimize storage and stock control cost.

• By minimizing cost of production to increase profits.

• To purchase items of best quality at the most competitive price.

Functions of Material Management

    Material management embraces all functions concerning with ordering, storage and movement of materials i.e., purchasing, production control, stores, traffic and physical distribution.

1. Purchasing

Purchasing department buys materials in amounts authorized by requisitions received from the production control and stores department. Its main operation in this context is:

• Selection of suppliers and issue of purchase order

• To expedite delivery of material from the suppliers

• Acting as a liaison between suppliers and other departments of the enterprise

• To look for new products, materials and suppliers that can contribute to company’s profit

• Materials management department acts as company’s “eyes and ears” to the outside world and report on changes in market conditions and other factors that can influence operations and activities of the enterprise.

2. Production Control

This is done by

• Determining requirements of materials and parts to be purchased and manufactured.

• Schedules production and purchasing processes of parts and material

• Issues work order to manufacturing departments and purchase orders to suppliers.

3. Inventory and stores control

It keeps detailed and up to date data record of inventory, on order status and potential demand for each production part and material. It is also responsible for non-productive stores like office supplies, perishable goods etc.

4. Traffic

It controls inbound shipments of purchased materials and shipment of finished goods to consumers. This is done by

• Selection of carriers

• Auditing invoices from carriers and filing claims for refund in case of charges or damaged shipments

• Developing techniques to reduce transportation cost.

5. Physical distribution

Finished goods are moved from the production line to the warehouse and finally to the customers.

 Scope of Material Management

1. Planning Function

The planning part of material management deals with the following issues

• Translation of the sales projections into long-term requirements of methods

• On the basis of updated production plan adjusted to the latest sales demand, to adjust the materials accordingly

• To project the facilities required for the material management

2. Production control

The production control function develops the short-range operations plans and schedules from the long range plans. The function of production control is to direct and regulate the orderly movement of materials through the entire manufacturing cycle from the procurement of raw materials to the delivery of finished goods to the customers, minimum inventory investment and maximum manufacturing efficiency. This function deals with the following:

• To develop detailed plans for the production of parts or final products along with the need of materials

• To schedule the operations of parts and products on the basis of the availability of materials, operating cycle time, lead time, fluctuations  in the sales etc

• To dispatch the materials to the production departments

• To expedite the operations so that the production may be completed according to the schedule and according to the schedule along with the feedback variations

3. Inventory Control

Materials control or inventory control is a systematic procedure for ensuring the availability of items necessary to meet the production requirements at optimum cost. It is concerned with the following issues:

• Requisition of the materials according to the requirements at appropriate time

• Decision about the optimum size of the order which is popularly known as economic ordering quantity (EOQ)

• To keep the update records of the material received, issued and held in balance

• To report the inventory data to those who use them as the decision tools

• To report the inventory data to those who use them as the decision tool

4. Purchasing

The basic objective of purchasing is to procure the materials of desired quality in time to meet the production specifications and at the lowest ultimate cost. The main activities of purchasing are as under:

• To select the acceptable supplier

• To place the purchase order with the selected supplier

• To expedite the delivery of materials to meet the inventory requirements

• To keep abreast of the market conditions for the new as well as reordered materials

5. Receiving and Stores

The main activities of this section are as under

• To accept the delivery of purchased materials, to verify them with the purchased order and packaging slip, to inspect them and to prepare the ‘goods received note’ for stores and accounts, and to route the received materials to stores or to the using department according to the direction of the order

• To store the materials properly according to the policy and ensure their quick identification

• To issue the materials according to authorized requisition

• To verify the materials physically at periodic intervals and to record discrepancy if any, along with the reasons

6. Shipping

The shipping function is concerned with the distribution of the finished goods. It involves the following functions:

• To receive the finished goods from the production department and to verify the quantity

• To store the finished goods properly till they are distributed

• To pull the goods from the stores, to identify the customers, to pack and label them and to load into the vehicles for the transportation to customers

• To prepare shipping documents such as packing slip, bill of lading, railway receipt, lorry receipt etc., that are forwarded with the shipment

7. Material Handling

The material handling function is sometimes grouped with the stores function. Material handling as a distinct service involves the following functions:

• To handle in-plant materials through trucking, pallets, containers etc

• To maintain the material handling equipment and other incidental items like pallets, containers etc

8. Traffic

Traffic function is concerned with the incoming consignments of raw materials and outgoing shipments of finished goods. The former is sometimes attached to the receiving function and the latter to the shipment. However, when the company maintains its own traffic fleet or if the traffic service are hired

Importance of Material Management

Material management department plays a vital role in the success of an enterprise. A significant portion (around 70 %) of capital is invested in material and well-planned and well-designed materials management operation can lead to considerable saving in the capital expenditure. It is of great importance to production, marketing, engineering and final departments of an enterprise. The advantages and benefits from effective materials management operations can be outlined as:

• Regular supply of the materials is ensured, reducing the chances of any interruption in production process.

• Procurement costs and transportation costs associated with materials are checked.

• Efficient store and stock control minimizes waste of material.

• Inspection of material at the time of procurement minimizes the possibility of finished product being rejected by the consumer.

• Timely supply of raw-materials and other inputs can be assured.

• Better utilization of labor, capital and equipment.

• Congestion in stores and at different stages of production can be avoided by an effective materials management system.

• Length of manufacturing cycle is reduced to minimum.

• Slight changes in material costs will exert a great impact on a firm's profit picture.

• Shortages can be eliminated.

In short an effective material management can be a big asset to the organization playing significant role in various activities of the system and providing economy in overall cost of production.

References

• Production and operations Management, S.A. Chunawalla, D.R.Patel Himalaya Publishing House, Edition 8th