FUNCTIONS _ OBJECTIVES OF MATERIAL MANAGEMENT

					                    MATERIAL MANAGEMENT


DEFINITION
      Material management is “the process by which an organisation is supplied with good and services
       that it needs when the material is either consumed or incorporated into some product. The
       executive who engage in material management are concerned with three basic activities, viz.,
       buying, storage of materials and movement”.

                                                                       …….Ammer


IMPOTRTANCE OF MATERIAL MANAGEMENT

Material management facilitates the accomplishment of the following objectives:

      Lower price for material and equipments
      Faster inventory turnover
      Continuity of supply
      Reduced lead time
      Reduced transportation costs




   OBJECTIVES OF MATERIAL MANAGEMENT
                         PRIMARY OBJETIVES
   LOW PRICES: - Obtaining the least possible price for purchased materials is the most
    obvious and important objectives of the purchasing department. If the purchasing
    department is able to lower the prices of the goods it buys, operating costs are reduced
    and the profits are enhanced. This objective is essential for the purchasing of all kinds of
    materials and services including transportation.
   HIGH INVENTORY TURNOVER: - When inventories are low in relation to sales,
    less capital is tied up in inventories. This increases the efficiency with which company’s
    capital is utilized, so that, return on investment is higher. Also, the storing & carrying
    costs of inventories are low when the turnover is high.
   LOW COST ACQUISITION & POSSESSION: - If materials are handled & stored
    properly their real cost is lower. Acquisition & possession costs are low when the
    receiving & stores department operate efficiently. They are also reduced when shipments
    are received in large quantities, which reduces the per unit cost of handling.
   CONSISTENCY IN QUALITY: - Quality of the end product depends upon the
    materials which go into it. In case of the materials being homogeneous in the primitive
    stage for e.g. sand & gravel, quality is rarely a problem for the buying personnel but
    when a variety of raw materials of different kinds go into the final product quality
    becomes the single most important objective of materials management.
   CONTINUITY OF SUPPLY:-When there are disruptions in the continuous supply,
    excess costs are inevitable. Production costs go up, excess expediting, and transportation
    costs are likely & so on. Continuity of supply is high essential in case of highly
    automated processes where the costs are rigid and are incurred even if the process of
    production stops.
   FAVORABLE SUPPLY RELATIONS: - A company with a good reputation with the
    suppliers is likely to attract customers more than a one having a bad name. The product
    research & development efforts of the suppliers are passed on to the company if it has a
    good relation with the suppliers.
   DEVELOPMENT OF PERSONNEL: - If u want to plan for a year, plant corn. If you
    want to plan for 30 years plant trees. But if you want to plan for 100 years plant men. So
    goes a Chinese proverb. Every head of each department should understand this saying
    and take keen interest in the development of the personnel working under him. He should
    spot the potential leaders among them and encourage then to develop into future
    executives as the company’s future depends upon talents of these employees.
   GOOD RECORDS: - Good records are considered to be a primary objective of the
    materials management. Buyers spend company money and can be subjected to
    tremendous temptation. Although, 99% of the buyers are above corruption but still the
    opportunity does exist. Good records along with well-planned administrative controls &
    periodic audits can discourage corruption.
                        SECONADRY OBJECTIVES
Secondary Objectives are the indirect objectives which may be achieved by contribution of
material management activities helping other departments to achieve their primary objectives.
Some of the important secondary objectives:

   1. RECIPROCAL RELATIONS: When a company deliberately buys as much as possible
      from its own customer, it is said to practice reciprocity. In consumer goods industries,
      reciprocity is not a problem as the sales are spread among many users. In consumer goods
      industries, however, reciprocity is fact of business life.
   2. For Example: of furniture manufacturer may try to sell his products to the supplier firm
      which supplies raw materials [i.e., steel sheets] to his firm.
   3. NEW MATERIALS & PRODUCTS: The R& D engineers and the products
      development engineers are always interested in adopting latest technology materials and
      components that will help them to be more efficient and there by achieve their primary
      objectives. So the purchasing department can help because it deals regularly with the
      suppliers.
   4. ECONOMIC MAKE – OR –BUY: Make – or – buy decisions are generally made by
      the committee consisting of departmental heads. The purchase manager can furnish
      valuable information regarding outside sources of supply to the committee members
      responsible for make – or – buy decisions.
   5. STANDARDISATION: The fewer the items that need be controlled, the simpler and
      more efficient does the material management process becomes. Thus, it is to the interest
      of the material personnel to promote standardization and simplification of specifications.
      The engineering groups are primarily responsible for the standard, but material
      management personnel can make a substantial contribution. They can review stock to
      weed out non-stock items, they can promote the incorporation of the standard
      components into product design to reduce cost.
   6. PRODUCT IMPROVEMENT: This is the most important primary objective of
      engineering department but the purchasing department can assist the engineering
      department. Their economic knowledge can supplement the technical skills of the
      engineers on programmes to boost profits through product change. The engineering of
      any product is basically a compromise between design and economic objectives.
      Purchasing personnel can help engineers achieve their designed objectives more
      economically by suggesting materials or components that will do a better or equivalent
      job at a lower cost.
   7. INTER-DEPARTMENTAL HARMONY: Materials management department deals
      with almost all departments in the company. It can greatly contribute to the success of
      every other department and at the same time, the success of materials management
      department depends on co-operation from the personnel of the other departments. Most
      material managers are aware of the need for good inter-departmental relations. To
      prevent disputes, they are careful to define departmental responsibilities clearly and also
      try to familiarize others with materials, directives, policies and organization.
8. FORECASTS: In order to manage materials better, some conception of the future
   outlook for prices, costs and general business activity is necessary. In large companies,
   professionals, economists make forecasts that are used for both sales and purchase
   planning. Purchasing managers translate the general forecasts into specific forecasts for
   purchased materials. They may also provide the economists with data for forecasts
   because, more than any other group in the company, they are intimately familiar with the
   market and general business conditions through their daily contacts with suppliers. In the
   smaller company that cannot afford a staff of professionals, the materials manager can
   double as a company economist. In such a case, good forecasts became a primary and not
   a secondary objective of materials management.




         FUNCTIONS OF MATERIAL MANAGEMENT



                                       MATERIAL
                                       PLANNING
     WASTE                                                                PURCHASING
   MANAGEMENT
                                     FUNCTIONS OF

    DISPSAL OF                         MATERIAL                           INVENTORY
 SURPLUS MATERIAL                                                          CONTROL
                                     MANAGEMENT


 TRANSPORTATION                                                         STORE KEEPING



                             STORES                SUPPLY CHAIN
                           ACCOUNTING
                                                  MANAGEMENT

				
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posted:5/16/2010
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