MATERIAL MANAGEMENT AND INVENORY CONTROL INTRODUCTION • Materials form a major part of the costs of any industry. About 60% of the cost of any product is attributable to materials. • Effective material management ensures that the cost of materials is minimised resulting in increased profitability for the organisation. MATERIAL MANAGEMENT • Material management may be defined as the planning, acquiring, storing, moving and controlling of materials to optimise the usage of facilities, personnel and capital funds and to provide service to the user in line with the organisational aims. functions • Materials planning and controlling • Purchasing of materials • Store and inventory control functions. Materials Planning and Controlling. • A forecast requirement of materials is prepared based on the forecast demand and the production plan. Budget is prepared for materials. • A forecast of inventories to be held is also prepared. Based on the forecasts orders are scheduled and progress is monitored in relation to production and sales. Purchasing. • This includes selection of sources of supply, finalising the terms of purchase, placing orders, follow up of placed orders and approval of payments to suppliers. The source must be able to supply materials in the desired quantity and of the desired quality. The source should be reliable and should continue to supply the materials as required. Smooth relations must be maintained with suppliers. Another important function related to purchase is vendor rating. Vendors are rated according to their ability to deliver materials. Stores and Inventory Control. • Storage of materials requires special care. Stores must be preserved. Obsolescence and damage should be minimised through timely disposal and efficient handling. Proper records should be maintained. These include records of receipts and issues, prices, sources and so on. Stores must be properly located and laid out to reduce material handling to the minimum. Periodic verification of stores must be carried out. • Inventory control includes setting inventory levels, fixing levels of safety stock to be maintained, carrying out lead time analysis and employing techniques to reduce he inventory. Safety stock is the stock maintained as a reserve to deal with fluctuations in demand and lead time. The time between placing an order and actually receiving the material is called lead time. OBJECTIVES OF MATERIALS MANAGEMENT • Low procurement price. • High inventory turnover • Low cost of acquisition and possession • Continuity of supply • Consistent quality • Low payroll costs • Favourable supplier relations • Maintenance of good records • New Materials, Processes and Products • Economic Make or Buy Decisions • Standardisation • Product Improvement CENTRALISATION VERSUS DECENTRALISATION ?
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