MATERIALS MANAGEMENT

Materials management is the detailed study of complete material flow process of a Firm. The American production and Inventory control society (APICS) defines materials management as “the grouping of management functions supporting the complete cycle of material flow , from the purchase and internal control of production materials to the planning and control of work-in-process to the warehousing, shipping and distribution of finished products,

Managers in any organization are worried if the material function does not perform well. The proper management of materials enables smooth operation of the firm’s functions moreover, the proper management and control of materials lead to reduction in production. Therefore, materials management can be viewed as an opportunistic tool to improve a firm’s profits.

NECESSITY OF MATERIALS MANAGEMENT

First, the cost of material is increasing due to scarcity and increasing demand. So, the management should carefully assess the quantity required and minimize wastage during production. Second, reduction in expenditure on materials can improve the profits of a firm. Since overheads other than material costs like labor costs and administration expenses are relatively fixed and do not offer much scope for reduction, material is only the major area for cost reduction. Third materials management contributes to the quality of the end product or service . As materials management covers the execution of functions like purchasing, inventory control and material handling in a firm, the quality of the end product is dependent on it. Fourth, materials management aims at the preservation of important and scarce resources for future requirement further, material management executives are entrusted with the job of exploring new sources of supply and identifying the ways to ensure environmental safety.

FUNCTIONS OF MATERIALS MANAGEMENT

The process of materials management can be explained by three overlapping functions:

Production control Inventory control Materials Handling

The relationship of these functions can be better explained by studying the flow of materials through the entire firm; starting from the selection of a supplier to the point where the products reach the customers.

Materials flow is a stepwise process that describes the involvement of different departments through which materials are processed and made available for the end customers, represents the material flow process of a typical manufacturing firm.

Production Control

The function of production control aims at regulating the movement of goods through the entire manufacturing cycle from the process of purchasing materials to producing the finished product. The departments involved in this function are

Purchasing department Receiving department Raw materials inventory department, and Production department

Each department is headed by a manager who is responsible for all the activities in the department. The production control function of materials management is aimed at ensuring that the adequate amount of materials required for production is available and the supply is obtained in the most effective and economical manner.

Purchasing departmentThe main task of the purchasing department is to acquire the required materials in the right quantity, of the right quality, from the right source, at the right time and at the least possible cost. Materials can be purchased in two ways : centralized or decentralized. In centralized purchasing activity is carried out by a separate department usually known as the purchasing department. It purchases materials in large quantities by grouping orders from all the departments of a firm. In general, larger firms follow the centralized purchasing route, as it results in consistency in buying policies and uniformity in maintaining purchasing records. Also, the buyer maximizes his purchasing power, which helps him obtain large purchase a discounts.

In decentralized purchasing, there are no special departments for purchasing. Heads of individual departments undertake the activity of purchasing on the basis of their departmental requirements. This results in greater flexibility in departmental activities, as it is easier for the head of the department to change purchasing preferences rapidly as per the requirements. Some firms hire external specialists, called contract consultants to negotiate purchasing terms and conditions. However, no firm adheres strictly to any one of these approaches and usually follows a mix of the approaches.

The important tasks performed by a purchasing department are: processing the requisitions for materials and supplies from all departments of the organization, identifying and selecting supplies (or vendors) to obtain the materials required, negotiating with suppliers in relation to purchasing contracts and quantity discounts, inviting bids to acquire certain materials, and evaluating suppliers in terms of their quality and promptness in delivery.

Receiving departmentThe primary responsibility of the receiving department is to process incoming shipments of materials. In several firms, the activity of receiving materials is taken care of by the purchasing department itself.

The tasks of the receiving department include unpacking incoming materials, checking their quantity and inspecting their quality and generating receiving reports.

A typical material receiving report consists of information on the quantity, price, description and other technical specifications of the incoming materials. Usually, the head of other delivery information. The report is used by the purchase department to update its material database and to evaluate vendors. On the basis of the receiving