‘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, directing, controlling 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 production to meet customer’s demand as per schedule and at the lowest cost.
Materials Management is a basic function of the business that adds value directly to the product itself
Materials Management embraces all activities concerned with materials except those directly concerned with designing or manufacturing the product.
Materials Management deals with controlling and regulating the flow of material in relation to changes in variables like demand, prices, availability, quality, delivery schedules etc.
Thus, material management is an important function of an organisation covering various aspects of input process, i.e., it deals with raw materials, procurement of machines and other equipment’s necessary for the production process and spare parts for the maintenance of the plant. Thus in a production process materials management can be considered as an preliminary to transformation process.
It involves planning and programming for the procurement of material and capital goods of desired quality and specification at reasonable price and at the required time.
It is also concerned with market exploration for the items to be purchased to have up to date information, stores and stock control, inspection of the material received in the enterprise, transportation and material handling operations related to materials and many other functions. In the words of Bethel, “Its responsibility end when the correct finished product in proper condition and quantity passes to the consumer.”
Objectives of Materials 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:
(i) Material Selection
Correct specification of material and components is determined. Also the material requirement in agreement with sales programme are 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.
(ii) Low operating costs
It should endeavor to keep the operating costs low and increase the profits without making any concessions in quality.
(iii) Receiving and controlling material safely and in good condition.
(iv) Issue material upon receipt of appropriate authority.
(v) Identification of surplus stocks and taking appropriate measures to produce it.
The outcome of all these objectives can be listed as given below:
(i) Regular uninterrupted supply of raw-materials to ensure continuity of production.
(ii) By providing economy in purchasing and minimizing waste it leads to higher productivity.
(iii) To minimize storage and stock control costs.
(iv) By minimizing cost of production to increase profits.
(v) To purchase items of best quality at the most competitive price.
Organization of Materials Management Department:
To facilitate planning, direction, control and co-ordination of various activities related to material in an enterprise there should be a separate department of materials management. The organizational structure of the department can be.
There can be more sub-sections of the department but in general, materials manager controls the four major sections and is responsible for reporting to the president of the organization.
Importance of Material Management
The importance of material management may be summarized as follows:
(i) The material cost content of total cost is kept at a reasonable level. Scientific purchasing helps in acquiring materials at reasonable prices. Proper storing of materials also helps in reducing their wastages. These factors help in controlling cost content of products.
(ii) The cost of indirect materials is kept under check. Sometimes cost of indirect materials also increases total cost of production because there is no proper control over such materials.
(iii) The equipment is properly utilized because there are no break downs due to late supply of materials.
(iv) The loss of direct labour is avoided.
(v) The wastages of materials at the stage of storage as well as their movement is kept under control.
(vi) The supply of materials is prompt and late delivery instances are only few.
(vii) The investments on materials are kept under control as under and over stocking is avoided.
(viii) Congestion in the stores and at different stages of manufacturing is avoided.
Functions of Material Management
Material management covers all aspects of material costs, supply and utilization. The functional areas involved in material management usually include purchasing, production control, shipping, receiving and stores.
The following functions are assigned for material management:
- Production and Material Control
Production manager prepares schedules of production to be carried in future. The requirements of parts and materials are determined as per production schedules. Production schedules are prepared on the basis of orders received or anticipated demand for goods. It is ensured that every type or part of material is made available so that production is carried on smoothly.
Purchasing department is authorized to make buying arrangements on the basis of requisitions issued by other departments. This department keeps contracts with suppliers and collects quotations etc. at regular intervals. The effort by this department is to purchase proper quality goods at reasonable prices. Purchasing is a managerial activity that goes beyond the simple act of buying and includes the planning and policy activities covering a wide range of related and complementary activities.
- Non-Production Stores
Non-production materials like office supplies, perishable tools and maintenance, repair and operating supplies are maintained as per the needs of the business. These stores may not be required daily but their availability in stores is essential. The non-availability of such stores may lead to stoppage of work.
The transporting of materials from suppliers is an important function of materials management. The traffic department is responsible for arranging transportation service. The vehicles may be purchased for the business or these may be chartered from outside. It all depends upon the quantity and frequency of buying materials. The purpose is to arrange cheap and quick transport facilities for incoming materials.
- Materials Handling
It is concerned with the movement of materials within a manufacturing establishment and the cost of handling materials is kept under control. It is also seen that there are no wastages or losses of materials during their movement. Special equipment’s may be acquired for material handling.
The receiving department is responsible for the unloading of materials, counting the units, determining their quality and sending them to stores etc. The purchasing department is also informed about the receipt of various materials.