Chapter 3

Introduction to Concept of Materials

Management
Integrated Materials Management:
Main activity of a typical production system is to convert raw materials
into useful products by value addition process.

Just to aid this activity, other resources or sub processes are used. If
closely examined, it could be observed that the materials management
would occupy one of the top position with regard to the prime cost list.

The materials which are required for the production purposes are
normally purchased in advance and stocked in stores mainly to
smoothen the production process.

The different modules of materials management are

i) Materials planning
ii) Purchasing
iii) Receiving
iv) Stores
v) Inventory Control
vi) Scrap & Surplus disposal
Integrated Materials Management:
Each module of the materials management will try to optimize the
operation of its own function.

For Example: If purchasing function plans to buy huge quantity of raw

material (just to exploit seasonal availability), it is possible that the rent
paid on the storage would be abnormal (in a place like Mumbai). In this
case, the purchase and stores function have conflicting objectives. This
could be resolved if the objectives of these modules are integrated
together.

This is only a small example involving two functions. In reality all the
functions of materials management are to be integrated to produce
better results.

An integrated materials management would result in

i) Better accountability
ii) Better coordination
iii) Better performance
iv) Adaptability to computerized systems
Components of Integrated Materials Management:
Although the different functions of materials management were studied as
Materials planning, Purchasing, Receiving, Stores, Inventory Control and
Scrap & Surplus disposal, these modules could be broadly grouped into
following management modules as

(i) Materials planning management

(ii) Inventory Control

(iii) Purchase management

(iv)Stores management
Materials Planning Management:
Sales forecasting and Aggregate planning are the basic inputs for
materials planning.

The different tasks under materials planning are listed below.

i) Estimating the individual requirements of parts

ii) Preparing materials budget

iii) Forecasting the level of inventories

iv) Scheduling the orders

v) Monitoring the performance in relation to production and sales

Inventory Control Management:
Tasks under inventory control are

i) ABC Analysis
ii) Fixing the economical order quantity
iii) Lead time analysis
iv) Setting safety stock and reorder level

Purchase Management:
Tasks under purchase management are

i) Evaluating and rating suppliers

ii) Selection of Suppliers
iii) Finalization of terms of purchase
iv) Placement of purchase orders
v) Follow up
vi) Approval of payments to suppliers
Stores Management:
Tasks under Stores Management include

i) Physical control of materials

ii) Preservation of stores

iii) Minimization of obsolescence and damage through building

iv) Disposal and efficient handling

v) Maintenance of stores records

vi) Proper location and stocking of materials

vii) Reconciling the materials with book figures