1) What is the role of materials management in fulfilling customers want?

Ans :- DEFINITION :- Materials Management thus can be defined as that function of business that is
responsible for the Coordination of planning, sourcing, purchasing, moving, storing and controlling
materials in an optimum manner so as to provide service to the customer, at a pre-decided level at
a minimum cost.
ROLE OF MATERIALS MANAGEMENT
Materials management is a core function of supply chain management, involving the planning and
execution of supply chains to meet the material requirements of a company or organisation. These
requirements include controlling and regulating the flow of material while simultaneously assessing
variables like demand, price, availability, quality, and delivery schedules.Material managers
determine the amount of material required and held in stock, plan for the replenishment of these
stocks, create inventory levels for each type of item (raw material, work in progress or finished
goods), and communicate information and requirements to procurement operations and the
extended supply chain. Materials management also involves assessing material quality to make
sure it meets customer demands in line with a production schedule and at the lowest cost. Material
management systems embrace all of the activities related to materials and are a basic business
function that adds value to a finished product. It can also include the procurement of machinery
and other equipment needed for production processes as well as spare parts.Typical roles in
Materials Management include inventory analysts, inventory control managers, materials
managers, material planners, and expediters as well as hybrid roles like buyer/planners.
From the management point of view, the key objectives of MM are:
-To buy at the lowest price, consistent with desired quality and service

-To maintain a high inventory turnover, by reducing excess storage, carrying costs and inventory losses
occurring due to deteriorations, obsolescence and pilferage

-To maintain continuity of supply, preventing interruption of the flow of materials and services to users

-To maintain the specified material quality level and a consistency of quality which permits efficient and
effective operation

-To develop reliable alternate sources of supply to promote a competitive atmosphere in performance
and pricing

-To minimize the overall cost of acquisition by improving the efficiency of operations and procedures

-To hire, develop, motivate and train personnel and to provide a reservoir of talent

-To develop and maintain good supplier relationships in order to create a supplier attitude and desire
furnish the organisation with new ideas, products, and better prices and service

-To achieve a high degree of cooperation and coordination with user departments

-To maintain good records and controls that provide an audit trail and ensure efficiency and honesty

-To participate in Make or Buy decisions.

 1. Write a brief note on profit center concept ,it’s implications and operations management
with a focus on materials

management? Ans:- PROFIT CENTER

CONCEPT

A profit center is a branch or division of a company that directly adds or is expected to add to the
entire organization’s bottom line. It is treated as a separate, standalone business, responsible for
generating its revenues and earnings. Its profits and losses are calculated separately from other areas of
the business. Peter Drucker coined the term “profit center” in 1945.A profit center is a branch or
division of a company that directly adds to the corporation’s bottom line profitability .A profit center Is
treated as a separate business, with revenues accounted for on a stand alone basis. The opposite of a
profit center is a cost center, a corporate division, or department that does not generate revenue.

Understanding Profit Centers

Profit centers are crucial to determining which units are the most and the least profitable within an
organization. They function by differentiating between certain revenue-generating activities. This
facilitates a more accurate analysis and cross-comparison among divisions. A profit center analysis
determines the future allocation of available resources and whether certain activities should be cut
entirely. The managers or executives in charge of profit centers have decision-making authority related
to product pricing and operating expenses. They also face considerable pressure as they must ensure
that their division’s sales from products or services outweigh the costs—that their profit center
produces profits year after year, either by increasing revenue, decreasing expenses, or both. While
profit centers are operated with a focus on bringing in revenue, cost centers are not associated with the
direct generation of profits. Cost centers also include various support departments, such as IT support,
human resources, or customer services, which are critical to business functions but do not have a
specific responsibility to make money.

Example for profit center concept

At the retailer Walmart, different departments selling different products could be divided into profit
centers for analysis. For example, clothing could be considered one profit center while home goods
could be a second profit center. In addition, departments that rotate on a seasonal basis, such as the
garden center or sections relating to holiday décor, can be examined as profit centers to separate these
departments’ seasonal contribution from those with a year-round contribution.The computer giant
Microsoft has a wide variety of profit centers ranging from hardware to software to digital services. In
analyzing these large revenue sources, the company may choose to separate the funds produced from
the sale of its Windows operating system from that of other software suites, such as Microsoft Office, or
other hardware sectors, such as the Xbox gaming console. This allows the profitability of different
products to be examined and correlated based on associated cost and revenue comparisons.The
concept of a profit center is a framework to facilitate optimal resource allocation and profitability. To
optimize profits, management may decide to allocate more resources to highly profitable areas while
reducing allocations to less profitable or loss-inducing units.

Contribution of profits – Implications of profit centre, profit impact of materials management A profit
centre concept .
 A profit centre is an organizational unit that is responsible to top management for some
measure of its own profitability – A measure like net income ,pretax income, or net contribution.
Revenues
measure that unit’s outputs , expenses measure it’s inputs and profit measures it’s excess of revenues
over expenses. Profit centres are basically treated as “companies within a company “ and ensures
effective control.

Efficient materials management will reduce material cost ,improves profitability and increase rate of
return on investment. Such increase in profitability . No doubt, can be influenced by increasing sales . In
fact , as market pressure intensifies organizations will be forced to cut down the costs.

Sustainable materials management (SMM) is a systematic approach to using and reusing materials more
productively over their entire life cycles. It represents a change in how our society thinks about the use
of natural resources and environmental protection. By examining how materials are used throughout
their life cycle, an SMM approach seeks to:

• Use materials in the most productive way with an emphasis on using less.

• Reduce toxic chemicals and environmental impacts throughout the material life cycle.

• Assure we have sufficient resources to meet today’s needs and those of the future.

3 What is sustainable materials management (SMM) and what are the principles of materials
management that are applicable to SMM?

Ans:- Sustainable materials management (SMM) is a systematic approach to using and reusing materials
more productively over their entire life cycles. It represents a change in how our society thinks about
the use of natural resources and environmental protection. By examining how materials are used
throughout their life cycle, an SMM approach seeks to: Use materials in the most productive way with
an emphasis on using less. Reduce toxic chemicals and environmental impacts throughout the material
life cycle. Assure we have sufficient resources to meet today’s needs and those of the future.How our
society uses materials is fundamental to our economic and environmental future.

Global competition for finite resources will intensify as world population and economies grow. More
productive and less impactful use of materials helps our society remain economically competitive,
contributes to our prosperity and protects the environment in a resource-constrained future. U.S. and
global consumption of materials increased rapidly during the last century. According to the Annex to the
G7 Leaders’ June 8, 2015 Declaration, global raw material use rose during the 20th century at about
twice the rate of population growth. For every one percent increase in gross domestic product, raw
material use has risen by 0.4 percent. This increasing consumption has come at a cost to the
environment, including habitat destruction, biodiversity loss, overly stressed fisheries and
desertification. U.S. food loss and waste alone “wastes” 140 million acres of agricultural land, 5.9
trillion gallons of blue water, 778 million pounds of pesticides, 14 billion pounds of fertilizer, 664 billion
kWh of energy, and releases 170 million MTCO2e GHG. Materials management is also associated with
an estimated 42 percent of total U.S. greenhouse gas emissions. Failure to find more productive and
sustainable ways to extract, use and manage materials, and change the relationship between material
consumption and growth, has grave implications for our economy and society.

Principles of materials management in SMM

Materials management is an important aspect of manufacturing and supply chain industry . It refers to
the process of planning. Executing , directing, coordinating , monitoring and controlling of all the
processes that are associated with the materials required in the industries. It involves management of all
activities from the inspection of materials to their use in the manufacturing process .

There are certain principles of that govern materials management. Knowledge of these principles
facilities individuals to exercise effective materials management. So whether you are a material manager
or aspire to enter the field you must be well versed with all these principles of material handling.

1. Planning principle

According to this principle ,the material manager must plan all the activities related to the handling of
materials and storage activities in advance in order to Achieve operational efficiency.

2. Gravity principle

As per gravity principle, laws of gravity must be implemented for shifting of materials from one place to
another place.

3. Space utilisation principle

It involves making the most effective utilisation of Available space . This principle is taken into account in
the work areas , storage areas as well as while transporting loads .

4. Safety principle

Safe handling of the material is quite important to achieve maximum output without any hindrance
different methods for sale and effective handling of the materials should be chosen under the principle.

5. Flexibility principle

It aims at finding different methods to safety different conditions. A material manager must find search
methods and equipments which are flexible enough to safety different types of conditions.

6. Ecology and environmental principle

Sometimes, methods of material handling can have adverse effects of the environment. Thus , ecology
principle ensures that while carrying out material handling.best alternative method must be adopted to
minimize the effect on the environment.

7. System principle

It states that the material management should integrate as many handling activities as possible and
practicable in a coordinated operation systems. Different storage activities and activities related to the
movement of materials can be integrated into a system of storage. Packaging, shipping, transportation,
production, inspection and many more.

8. Standardization principle

According to the principal the material management must standardise the type and side of handling
equipment along with standardising the handling methods.
 9. Simplification principle

This principle involves the usage of simplified methods with the removal of all the necessary stuff.

10. Maintenance principle

This principle states that frequent maintenance and reports can be prevented through proper
preparation of plans.

11. Work principle

This principle aims to minimize the handling work without affecting the operating productivity or service
level.

12. Dead weight principle

As per dead weight principle the ratio of mobile handling equipment dead weight to the weight of the
load carries must be minimized .

13. Materials flow principle

This principle is also known as principal of continuous flow according to the principle and operation
sequence and layout should be created in such a way that material flow can be minimized.

4 Write a brief note on efficient materials management and mention the steps that are needed
to improve profitability ?

Ans:-Materials management is a core supply chain function and includes supply chain planning and
supply chain execution capabilities. Specifically, materials management is the capability firms use to
plan total material requirements. The material requirements are communicated to procurement and
other functions for sourcing. Materials management is also responsible for determining the amount of
material to be deployed at each stocking location across the supply chain, establishing material
replenishment plans, determining inventory levels to hold for each type of inventory (raw material, WIP,
finished goods), and communicating information regarding material needs throughout the extended
supply chain.

Typical roles in Materials Management include: Materials Manager, Inventory Control Manager,
Inventory Analyst, Material Planner, Expediter and emerging hybrid roles like “buyer planner”.The
primary business objective of Materials Management is assured supply of material, optimum inventory
levels and minimum deviation between planned and actual results.

Materials management is related to planning, procuring, storing and providing the appropriate
material of right quality, right quantity, at right place in right time so as to coordinate and schedule the
production activity in an integrative way for an industrial undertaking. Most industries buy
materials, transport them in to the plant, change the materials into parts, assemble parts in to finished
products, sell and transport the product to the customer. The basic need of material management is to
pay the lowest possible prices, consistent with quality and value requirement for purchasing of
materials. Materials management integrates all materials functions i.e. demand estimation,
procurement, receipt and inspection, storage, issue and use, maintenance and repair, disposal
accounting and information system. Indian institute of Material Management has set up CRIMM in
Kolkata jointly with the Indian Institute of Social Welfare and Business Management (IISWBM).

Steps improved profitability:-

1. Learn to Read Financial Statements

The first step is to familiarize yourself with three key financial statements: the balance sheet, income
statement, and cash flow statement.Determine which pieces of these statements you can control as a
manager. A baseline understanding of the balance sheet, income statement, and cash flow statement
can give you a clearer picture of what your business is spending and earning, and lead to productive
conversations with other decision-makers about budgeting and efficiencies.

2. Calculate the Profitability of Future Projects

One way to gauge the impact you can have on your company’s financial health is to calculate projects’
predicted profitability. There are three metrics to consider when doing so: net present value, internal
rate of return, and payback period.

The net present value (NPV) is the amount of money a particular investment is worth to your
organization today. This calculation takes both the time value of money—the concept that your money
is worth more now than the same amount is in the future—and the inherent risk of investment into
consideration. If a project’s NPV is a positive number, the project is expected to be profitable.

The Internal rate of return (IRR) is the discount rate that sets the NPV equal to zero. In other words,
when using the IRR, your project would neither be profitable nor losing money. Your project’s discount
rate must be lower than its IRR to be profitable.

For instance, if you were to find that the IRR for a project is three percent, but the project’s discount
rate is five percent, you can predict that the project will not be profitable and pivot accordingly.

The payback period is how long an investment will take to pay back the initial cost. It’s useful to know
how quickly you expect to see a return on your investment when pitching projects and planning
budgets.

3. Find Efficiencies in Your Processes

Analyze your company’s income statement and notice the expenses. Are there any items that can be
eliminated by streamlining processes? Which line items do you have control over, and can any be
reduced or eliminated? Conducting an audit of your expenses and pruning away process inefficiencies
are necessary steps toward improving your company’s profitability.

4. Create Budgets and Stick to Them

Knowing how to create a budget is an essential skill for managers. Familiarize yourself with your firm’s
budgeting timeline, procedures, and financial statements so you can create a budget that equips your
team to complete projects that drive profitability and performance.Track each action item your team
completes so you can compare your actual spending against projected costs. This can allow you to learn
from mistakes and make better financial decisions moving forward.
 5. Conduct Market Research

Conducting market research can help you learn about your current and potential customers’ mindsets.
Options for undergoing market research range from inexpensive (for example, a free online survey) to
expensive (for instance, bringing in an outside vendor to conduct in-person focus groups). No matter
which option you choose, having these insights can be invaluable.Perhaps your potential customers
would be willing to pay $100 more for your product if it had a certain feature, or maybe your current
customers would be more likely to buy from you again if they received a discount the second time.
These insights could improve your organization’s profitability, but you won’t know until you ask.

6. Offer Bundled Products

If your company offers a variety of products, it could be in your best interest to offer two or more
together for a lower price than if they were each purchased separately.“Bundling is pervasive in several
markets, and it works in many cases,” says Vineet Kumar, an assistant professor in the Marketing Unit at
Harvard Business School, in Working Knowledge. however, that if bundling is the only option, it could
impact sales negKnowledg“It’s crucial to allow that kind of flexibility to the consumer,” Kumar says.Per
his research, consider pitching the idea of offering a bundled option alongside your individual product
offerings—a tactic called mixed bundling. Kumar and his co-author, Timothy Derdenger, found that a
pure bundling solution, in which no individual products are available, caused a 20 percent reduction in
sales, and that a mixed bundling solution yielded higher revenue increases than both pure bundling and
individual product sales.

7. Dedicate Time to Training New Hires

A recent survey found that 40 percent of employees who receive poor training leave their jobs within
the first year. Considering the cost of replacing an employee can range from one-half to two times the
employee’s salary, it’s in the best interest of your organization to train new hires thoroughly and
effectively. Doing so can not only lead to a greater sense of self-efficacy and aid in employee retention,
but also help mitigate costly mistakes down the line.

8. Foster Engagement in Your Employees

Research by Gallup shows the employee engagement rate in the US is at an all-time high: 38 percent.
The downside is that 13 percent of workers report feeling actively disengaged, leaving 49 percent
somewhere in between.To engage your employees, consider a few of the strategies below.Solicit
feedback from your team and act on the resultsCommunicate transparently across teams and business
levels.Provide constructive feedback based on observations.Recognize your employees for their work
and opinions.Support your employees’ learning and development.Delegate tasks to your employees to
demonstrate your trust in their abilities.

If managers and human resource professionals work to better engage their “actively disengaged” and
“in-between” employees, an increase in productivity and decrease in turnover rate could follow,
which would positively impact profitability.

5. . Write a brief note on profitability vs return on investment?

Ans:- Profitability is a measure of an organization’s profit relative to its expenses. Organizations that are
more efficient will realize more profit as a percentage of its expenses than a less-efficient organization,
which must spend more to generate the same profit.

Return on investment (ROI) is a performance measure used to evaluate the efficiency or profitability of
an investment or compare the efficiency of a number of different investments. ROI tries to directly
measure the amount of return on a particular investment, relative to the investment’s cost.To calculate
ROI, the benefit (or return) of an investment is divided by the cost of the investment. The result is
expressed as a percentage or a ratio.

Profitability vs ROI

Profitability

Profitability is one of the most important terms in business and accounting that you can use to
determine and describe a business long term success accomplishing profitability is essential to all
businesses as it allows them to grow understanding the concept and what determines profitability can
help you develop Better Business strategies in this article we provide any answerto,' what is
profitability?’, explain what determines a company ‘s profitability,explain types of profitability ratios and
share tips on increasing a company’s profitability.

Profitability is the primary goal of all companies because it’s the money that business ventures generate
through their activities it enables those ventures to grow develop new products or enter new markets
profitability what is the relative term that describes a situation of a company that generate profits to
calculate profit which is an absolute number you can use this formula:-

Profit = revenue from operation – expenses

increasing profitability usually requires you to analyze a company's current business strategy and
determine if there's anything that you can improve. for example to reduce cost .here are additional tips
that can help you increase profitability of a business.

ROI(return on investment)

Return on investment is a performance measure used to evaluate the efficiency or profitability of an

investment or compare the efficiency of a number of different investments ROI tries to directly measure
the amount of return on your particular investment relative to the investment cost .

• Return on investment is a popular profitability metric used to evaluate how well an investment
has performed.

• ROI is expressed as a percentage and is calculated by dividing an investment new profit or loss by its
initial cost or outlay.

• ROI can be used to make apples to apples comparisons and drank investment in different projects
or assets.

• ROI does not take into account the holding period or passage of time and show it can miss
opportunity costs of investment elsewhere.
• Whether or not something delivered a good ROI should be compared relative to other
available opportunities.

ROI = current value of investment – cost of investment/cost of investment .