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”.
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
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
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.
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
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
DISPSAL OF MATERIAL INVENTORY
SURPLUS MATERIAL CONTROL
TRANSPORTATION STORE KEEPING
STORES SUPPLY CHAIN