Material Management
Material management is an approach for planning, organizing, and controlling all those activities principally concerned with the flow of materials into an organisation.
The scope of Materials Management varies greatly from company to company and may include material planning and control, production planning, Purchasing, inventory control, in-plant materials movement, and waste management.
It is a business function for planning, purchasing, moving, storing material in a optimum way which help organisation to minimise the various costs like inventory, purchasing, material handling and distribution costs.
The fundamental objectives of the Materials Management function ,often called the famous 5 Rs of Materials Management, are acquisition of materials and services :
1.Of the right quality
2.In the right quantity
3.At the right time
4.From the right source
5.At the right price
From the management point of view , the key objectives of MM are :
To buy at the lowest price , consistent with desired quality and service
To maintain a high inventory turnover , by reducing excess storage , carrying costs and inventory losses occurring due to deteriorations, obsolescence and pilferage
To maintain continuity of supply , preventing interruption of the flow of materials and services to users
To maintain the specified material quality level and a consistency of quality which permits efficient and effective operation
To develop reliable alternate sources of supply to promote a competitive atmosphere in performance and pricing
To minimize the overall cost of acquisition by improving the efficiency of operations and procedures
To hire, develop, motivate and train personnel and to provide a reservoir of talent
To develop and maintain good supplier relationships in order to create a supplier attitude and desire furnish the organisation with new ideas , products, and better prices and service
To achieve a high degree of cooperation and coordination with user departments
To maintain good records and controls that provide an audit trail and ensure efficiency and honesty
To participate in Make or Buy decisions
Materials Management thus can be defined as that function of business that is responsible for the coordination of planning, sourcing, purchasing, moving, storing and controlling materials in an optimum manner so as to provide service to the customer, at a pre-decided level at a minimum cost.
The broad Materials function has the following as identified and interlinked sub functions:
Materials planning and control : Materials required for any operation are based on the sales forecasts and production plans.
Planning and control is done for the materials taking into account the materials not available for the operation and those in hand or in pipe line.
This involves estimating the individual requirements of parts, preparing materials budget, forecasting the levels of inventories, scheduling the orders and
monitoring the performance in relation to production and sales.
Purchasing : Basically, the job of a materials manager is to provide , to the user departments right material at the right time in right quantity of right quality at right price from the right source.
To meet these objectives the activities undertaken include selection of sources of supply, finalisation of terms of purchase, placement of purchase orders, follow up, maintenance of relations with vendors, approval of payments to vendors, evaluating, rating and developing vendors.
Stores : Once the material is delivered , its physical control , preservation , minimisation of obsolescence and damage through timely disposal and efficient handling, maintenance of records, proper locations and stocking is done in Stores.
Inventory control : One of the powerful ways of controlling the materials is through Inventory control.
It covers aspects such as setting inventory levels, doing various analyses such as ABC , XYZ etc ,fixing economic order quantities (EOQ), setting safety stock levels, lead time analysis and reporting.
Materials Management's scope :The scope is vast. Its sub functions include Materials planning and control, Purchasing, Stores and Inventory Management.
