ADDIS ABABA UNIVERSITY

ADDIS ABABA INSTITUTE OF TECHNOLOGY

SCHOOL OF CIVIL AND ENVIRONMENTAL ENGINEERING
CONSTRUCTION TECHNOLOGY AND MANAGEMENT
ORGANIZATION AND LABOR MANAGEMENT (CENG-6104)

MATE
RIAL
MANA
INDIVIDUAL ASSIGMNENT

GEME
NT
Submitted By: Andualem Tadesse MENGSTU

ID: GSR/3901/13

Submitted to: Instructor Teshome B..

Material Management

Andualem MENGISTU1
 ORGANIZATION AND LABOR MANAGEMENT (CENG-6110)
ASSIGNMENT

1
MSc Student AAiT, School of Civil and environmental engineering, Construction
technology and management. Addis Ababa University, Addis Ababa Ethiopia; ID:
GSR/ 3901/13; PH (+251) 911-278-945; email: andu117@gmail.com

1. ABSTRACT
.

Materials management contributes to survival and profits of an enterprise by

providing adequate supply of materials at the lowest possible costs. There are two main
objectives Making available (supply) of materials in specified quantity and quality at
economic cost and maintaining the continuity of supply in material management and
Secondary objectives help to achieve the primary objectives.

Material management functions are also discussed including production and material
control, purchasing, not production stores, Transportation, material handling, receiving and
store and inventory control.

CONTENTS

1|P a g e MATERIAL MANAGEMENT

 ORGANIZATION AND LABOR MANAGEMENT (CENG-6110)
ASSIGNMENT
1. Abstract...............................................................................................................................1
1. introduction.........................................................................................................................3
1.1. DEFINITION OF MATERIAL MANGEMENT........................................................3
1.2. Importance of Material Management:.........................................................................3
2. Objectives of Materials Management:................................................................................4
2.1. Primary Objectives:.....................................................................................................4
2.2. Secondary Objectives:.................................................................................................4
3. Scope of Materials Management:.......................................................................................5
3.1. Integrated Materials Management:..............................................................................5
3.2. Flow of Materials in Manufacturing:..........................................................................6
4. Functions of Material Management:...................................................................................6
4.1. Production and Material Control:................................................................................7
4.2. Purchasing:..................................................................................................................7
4.3. Non-Production Stores:...............................................................................................8
4.4. Transportation:............................................................................................................8
4.5. Materials Handling:.....................................................................................................8
4.6. Receiving:....................................................................................................................8
4.7. Stores and inventory control........................................................................................8
5. Summary and conclusion:...................................................................................................9
6. Reference:.........................................................................................................................10

1. INTRODUCTION

2|P a g e MATERIAL MANAGEMENT

 ORGANIZATION AND LABOR MANAGEMENT (CENG-6110)
ASSIGNMENT
1.1. DEFINITION OF MATERIAL MANGEMENT

Materials management is defined as “the function responsible for the coordination of

planning, sourcing, purchasing, moving, storing and controlling materials in an optimum
manner so as to provide a pre-decided service to the customer at a minimum cost”. [1]

The need for materials management was first felt in manufacturing undertakings. The
servicing organizations also started feeling the need for this control. Now even non-trading
organizations like hospitals, universities etc. have realized the importance of materials
management. Every organization uses a number of materials. It is necessary that these
materials are properly purchased, stored and used. [1][2]

Any avoidable amount spent on materials or any loss due to wastage of materials
increases the cost of production. The object of materials management is to attack materials
cost on all fronts and to optimize the overall end results. Materials management connotes
controlling the kind, amount, location and turning of the various commodities used in and
produced by the industrial enterprises. It is the control of materials in such a manner that it
ensures maximum return on working capital.

“Material management is the integrated functioning of the various sections of an

organization dealing with the supply of materials and allied activities in order to achieve
maximum co-ordination.” N.K. Nair has emphasized the co-ordination of all those activities,
which are related to the efficient use of materials. [2][4]

1.2. IMPORTANCE OF MATERIAL MANAGEMENT:

Material management is a service function. It is as important as manufacturing,

engineering and finance. The supply of proper quality of materials is essential for
manufacturing standard products. The avoidance of material wastage helps in controlling cost
of production. Material management is essential for every type of concern. [2]

3|P a g e MATERIAL MANAGEMENT

 ORGANIZATION AND LABOR MANAGEMENT (CENG-6110)
ASSIGNMENT
The importance of material management may be summarized as follows:

 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.

 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.

 The equipment is properly utilized because there are no breakdowns due to late
supply of materials.

 The loss of direct labor is avoided.

 The wastages of materials at the stage of storage as well as their movement is kept
under control.

 The supply of materials is prompt and late delivery instances are only few.

 The investments on materials are kept under control as under and over stocking is
avoided.

 Congestion in the stores and at different stages of manufacturing is avoided.

2. OBJECTIVES OF MATERIALS MANAGEMENT:

2.1. PRIMARY OBJECTIVES:

“Making available (supply) of materials in specified quantity and quality at economic cost
and maintaining the continuity of supply. Minimization of investments in materials and
inventory costs, and assuring high inventory turnover.” [3]

2.2. SECONDARY OBJECTIVES:

4|P a g e MATERIAL MANAGEMENT

 ORGANIZATION AND LABOR MANAGEMENT (CENG-6110)
ASSIGNMENT
Secondary objectives help to achieve the primary objectives and stated as

1. Purchasing the items from a reliable source at economic price.

2. Reduction of costs by using various cost reduction techniques such as variety
reduction, standardization and simplification, value analysis, inventory control,
purchase research etc.
3. Co-ordination of the functions such as planning, scheduling, storage and maintenance
of materials.

3. SCOPE OF MATERIALS MANAGEMENT:

Materials management encompasses all the aspects of the materials i.e. material costs,
material supply and material utilization. Materials management is concerned with material
planning and materials control activities.

3.1. INTEGRATED MATERIALS MANAGEMENT:

Materials required for production purpose are normally procured and stored in the
plant and issued to manufacturing when there is a requisition. Materials are to be purchased
in advance and stored to ensure uninterrupted supply.

There should be a proper co-ordination and co-operation among different functional

heads of materials department to optimize the operations of materials management. The
materials function to be effective; the objective must be to maximize materials productivity.
An integrated approach to materials management i.e. materials planning and control must
look in to the problem areas in a co- coordinated manner in order to maximize the
effectiveness of materials management. [3]

An integrated materials management will result in the following advantages:

a. Better accountability for materials and material concerned costs.

b. Better co-ordination within the materials functions and other functional areas
of business.
c. Better performance and effectiveness.
d. Adaptability to automated and computerized systems.[4]
5|P a g e MATERIAL MANAGEMENT
 ORGANIZATION AND LABOR MANAGEMENT (CENG-6110)
ASSIGNMENT

The important areas to improve materials planning and control are:

1. Value analysis and purchase price analysis.

2. Materials planning and control (Inventory Control).
3. Stores control.
4. Waste management.
5. Materials handling. [3][4]

3.2. FLOW OF MATERIALS IN MANUFACTURING:

In any manufacturing organization, there is a flow of materials at various stages of

manufacturing i.e. from input to output. The flow with reference to inputs involves such
activities as purchasing, traffic control and receiving. The activities associated with flow
within the factory include the material handling activities at different workstations as per the
order of processing. Output related activities include packaging, shipping and distribution [3]

4. FUNCTIONS OF MATERIAL MANAGEMENT:

Materials management is concerned with management functions supporting the

complete cycle of material flow, from the purchase and internal control of production
materials to planning and control of work in process, to warehousing, shipping and
distribution of the finished product. An effective materials management process ensures that
the right kinds of materials are at the right place whenever needed. [4]

Materials management is concerned with planning, directing and controlling the kind,
amount, location, movement and timing of various flows of materials used in and produced
by the process.

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. [4]

6|P a g e MATERIAL MANAGEMENT

 ORGANIZATION AND LABOR MANAGEMENT (CENG-6110)
ASSIGNMENT

4.1. 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 based on 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.

4.2. PURCHASING:

Purchasing department is authorized to make buying arrangements based on

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.

Purchasing plays a crucial role in the materials management because it is concerned

from input stage up to the consumption in manufacturing. Purchasing functions as a monitor,
clearing house and a pipeline to supply materials needed for production.

“Procurement by purchase of the proper materials, machinery and equipment and

supplies of stores used in manufacturing of the product, adopted to marketing in the proper
quantity and quality at the proper time and at the lowest price consistent with quality
desired.”[According to Dr. Walters’s scientific definition]

The basic elements in purchasing are:

1. The origin of demand for materials and components based upon the requisitions made
to purchase department by user departments with all the details like descriptions,
quantity and quality specifications.

7|P a g e MATERIAL MANAGEMENT

 ORGANIZATION AND LABOR MANAGEMENT (CENG-6110)
ASSIGNMENT
2. Specifications are checked and verified and purchase plan is made for items
demanded
3. Selection of source of supply.
4. Preparation of purchase order by supplier (order acceptance) and acceptance of terms
and conditions.
5. Follow up to ensure prompt delivery of right quality and quantity of materials.
6. Incoming inspection of materials (both to check quality and quantity) to ensure
correct material as per specification.
7. Checking supply invoice against purchase order and goods received and payments are
made.

4.3. 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.

4.4. TRANSPORTATION:

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.

4.5. 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.

4.6. RECEIVING:

8|P a g e MATERIAL MANAGEMENT

 ORGANIZATION AND LABOR MANAGEMENT (CENG-6110)
ASSIGNMENT
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.

4.7. STORES AND INVENTORY CONTROL:

This involves physical control of materials, preservation of stores, minimization of

obsolescence and damage through timely disposal and efficient handling, maintenance of
store records, proper location and stocking. A store is also responsible for the physical
verification of stocks and reconciling them with book figures. A store plays a vital role in the
operations of a company.

Inventory generally refers to the materials in stock. It is also called the idle resource
of an enterprise. Either inventories represent those items, which are stocked for sale or they
are in the process of manufacturing or they are in the form of materials, which are yet to be
utilized. The interval between receiving the purchased parts and transforming them into final
products varies from industries to industries depending upon the cycle time of manufacture. It
is, therefore, necessary to hold inventories of various kinds to act as a buffer between supply
and demand for the efficient operation of the system. Thus, effective control on inventory is
necessary for the smooth and efficient running of the production cycle with the least
interruptions. If surplus, obsolete and scrap stock is held in possession, this involves
inventory carrying, storage and security costs. Hence, this should be disposed of as soon as
possible.[3,4]

5. SUMMARY AND CONCLUSION:

The functional responsibility of a material manager are coordination of planning,

sourcing, purchasing, moving, storing and controlling materials in an optimum manner so as
to provide a pre-decided service to the customer at a minimum cost. This expanding demand
for materials establishes a need for materials management, which pertains to the coordination
of planning, organizing, and controlling the steps within the tangible component management
process.

The function of material management is involving material planning and determining

the total material requirement for any project by considering all factors. In addition, it

9|P a g e MATERIAL MANAGEMENT

 ORGANIZATION AND LABOR MANAGEMENT (CENG-6110)
ASSIGNMENT
involves locating source of material supply, receiving custody of purchased material,
locating, storing, and recording of goods so that they can be available. Quality control,
material handling if surplus, obsolete and scrap stock is held in possession, this involves
inventory carrying, storage and security costs. Hence, this should be disposed of as soon as
possible.

6. REFERENCE:
1. J.R. Jony Arnold, Stephen N. Chapman, Llyod. M. Clive, (2008), “ Introduction to
Material management”(6 th edition), Pearson printice Hill
2. Ogbuanya T.C. , Nweke J.N. and Ugwoke S.C, (2017), Material Resource
Management for Effective Teaching of Electrical/Electronic Technology in Colleges
of Education (Technical) in Nigeria, International Journal of Applied Engineering
Research ISSN 0973-4562 Volume 12, Number 18 (2017) pp. 7238-7253 © Research
India Publications
3. Smiriti Chand, (2016), “Material management, its definition, and organization”,
https://www.yourarticlelibrary.com/material-management/material-management-its-
definition-objectives-and-organization/27934
4. Venkatash, “Material management: meaning, meaning importance and function
https://www.yourarticlelibrary.com/material-management/materials-management-
meaning-importance-and-functions/53156

10 | P a g e MATERIAL MANAGEMENT