Material Management

What is Material Management

Materials management is the management of the flow of materials into an
organization to the point, where, those materials are converted into the
firm’s end product(s)

Materials management involves planning, programming, organizing,

directing, controlling, and coordinating the various activities concerning
the materials. The production managers found it necessary to develop an
organized body of knowledge on this subject. The resulting set of related
disciplines is known as materials management.

Materials management covers a wide spectrum of activities and deals

with all aspects of material supplies , material costs, and its utilization.

It is concerned with the entire range of functions which affect the flow ,
conservation, utilization, quality and cost of materials.
Why Need MM ???
 amount spend on material is higher
than other inputs

 material offer considerable scope for

reducing cost and improving profit

 material add value to the product

 quality of end product depend on

material

 efficiency of any organization depend

upon the availability of right material, in
right quantity at right time and at right
place.
Types of Materials
The various types of materials to be managed are:

(i) Purchased materials: They are raw materials, components, spare

parts, oils, grease, cotton waste, consumables and tools.

(ii) Work in process (WIP) materials: These are semi-finished and

finished parts and components lying on the shop floor.

(iii) Finished goods: These are the final products either waiting to be
assembled in the assembly lines or in stores which are stocked for
final delivery waiting to sell.

The various costs involved in these materials are: basic price,

purchasing costs, inventory carrying cost, transportation cost,
materials handling cost, office cost, packing cost, marketing cost,
obsolescence and wastages.
Functions
The following functions are generally brought under the scope of
materials management :
Material planning & programming
Purchasing
Storekeeping
Inventory / material control
Receiving & warehousing
Value analysis / standardization
Transportation of both incoming and outgoing materials.
Disposal of scrap and surplus.

Main Departments of Material Management

Materials planning
Purchase
Stores
Inventory control
Material Planning
It is a scientific technique of determining in advance , the requirements
Of raw materials , ancillary parts and component spares etc, given by the
Production program.

Material Planning is a way to find out how much of which raw materials are required
and roughly when they should be ordered to fulfill a set of product demand (orders +
forecast). Material Planning generally consists of four steps:

Bill of Materials Explosion - looking backward from each product, determine which
intermediates and raw materials are required, and in what quantities.
 
Netting - comparing the raw material quantities against current inventory.
 
Lot Sizing - determining how the needed materials will be purchased or
produced.

Start Date Determination - based on calculations, determine when each order

should start production.
Purchasing
Purchasing is to procure the materials, supplies,
tools, equipment etc.

Procurement – purchase, material supervision

and management as inventory control, receiving
and salvage operations.

5R’s of Purchasing :

In Right Quantity

Of Right Quality
At Right Time
From Right sources
At Right prices
Objectives of Purchasing
Procurement of required quantity and quality of materials at the most
economical price

Procuring the material well in advance to meet the needs of the

production dept., to save production losses from lack of materials

Buying an optimum quantity, neither too much nor too less, not
affecting capital or holding up production.
Inventory Management
The term inventory includes materials – raw, in process, finished
packaging, spares and others stocked in order to meet an unexpected
demand or distribution in the future.

Inventory can be used to refer to the stock on hand at a particular time,

of raw materials, goods-in –process of manufacture, finished products,
merchandise purchased for resale, and the like, tangible assets which
can be seen, measured and counted.

Objectives of Inventory Management

To facilitate smooth operation of the manufacturing process.
To minimize investment in inventory
To reduce material handling costs
Reasonable utilization of people
Stores Management
Store keeping
Definition:- Storekeeping is a function of receiving storing and issue of raw materials,
bought –out parts and components ,spare parts tools ,consumables, supplies and
stationery items etc. to the user dept. which have indented for the same
Storekeeping is primarily a service function in which the storekeeper acts as a
custodian of all items carried in the store
The aim of Stores Management is to provide this service as effectively as possible
with minimum possible cost

Importance of Storekeeping

Ready accessibility of important materials which provides efficient service to users

Efficient utilization of cubic space In the storage area stores
Flexibility in the arranging the storage of goods in stores
Minimization of deterioration and pilferage of materials stored
Ease of physical counting at the time of annual stock checking.
WAREHOUSING
Warehousing is the process of proper storage and handling of goods and cargo using
scientific methods, making them available conveniently when needed.
Warehouse is a commercial building used for storage of goods.
Warehousing decision is one of the most crucial factors in trade

Functions of Warehousing

Storage of goods.
Protection of goods.
Risk bearing.
Financing.
Processing.
Grading and branding.
Transportation.
Benefits of MM
 Material cost can be lowered
down
 Controlling of indirect cost
 Risk of Inventory loss
minimized
 Reduction in loss of time of
direct labor
 Control of manufacturing cycle
 Material congestion in storage
places avoided
 Improvement in delivery of the
product
Implementation Challenges
Optimizing Difficulty in
time and forecast
accurate
quality for demand
product

Selection of
appropriate Management
vendors of information
Process Flow

orders
Purchasing Finish
C
Goods
S U
Storage
U Raw D S
R T
P Material I
E O
P Storage S
C M
I T
I E
E R
V Transformation R
R I
I Processes
S B
N
G T
N
In Process
Storage
Wal-Mart Stores Inc. is an American Public Company.
In 2010 it was the world’s largest public company by Revenue US$ - 408.21Bn
The company was founded by Sam Walton in 1962.
It has 8500 stores in 15 countries and employs around 2 million employees.

Wal-Mart has more than 100,000 suppliers and generated sales of more than
$400billion last year. Its massive size gives its efforts a chance for wider adoption that
other retailers might not have.

The most important factor behind its phenomenal success is efficient SUPPLY
CHAIN MANAGEMENT PRACTICES.

PURCHASE and PROCUREMENT

Basically, Wal-Mart aims to provide it’s customers products of all varieties at
minimum costs. This very objective shapes the process of their procurement model. It
purchases the products directly from the manufacturers, bypassing all intermediaries.

Also ensuring that the products being bought are not available at a lower cost
anywhere else.
All computer systems of Wal-Mart are connected to their suppliers. Thus,
through EDI the suppliers download purchase orders along with the store to store
sales information of their products sold.
Using the obtained info, the suppliers ship the required goods to the distribution
centers.
It has 40 Regional U.S. Distribution Centers and each of 40 is over 1 million
square feet

Logistics Management
An important feature of Wal-Mart’s logistics infrastructure is its fast and
responsive transportation system.
The company has its own transportation system.
The distribution centers are 24/7 operations that keep 7,200 tractors and 53,000
trailers rolling around the clock and across the country.

Wal-Mart’s own warehouses directly supplied 85 percent of the inventory, as

compared to 50-65 percent for competitors.
A logistics technique “cross docking” allows Wal-Mart to directly pick up the
finished goods from the manufacturers, sort them and deliver them to the
customers.

This system greatly reduces the need to handle & store finished goods or have
a distribution centers and stores.

INVENTORY MANAGEMENT and IT

Wal-Mart invested heavily in IT and communication systems to effectively
track sales and merchandise inventories in stores across the country.
Employees at the stores had the “Magic Wand,” a hand-held computer which
was linked to in-store terminals through a radio frequency network.
These helped them to keep track of the inventory in stores, deliveries, and
backup merchandise in stock at the distribution centers.
In 1991, Wal-Mart had invested approximately $4 billion to build a retail link
system.
More than 10,000 Wal-Mart retail suppliers used the retail link system to
monitor the sales of their goods at stores and replenish inventories.
The suppliers could find out how their product was performing vis-a-vis
competitors’ products in a particular product category.

By the mid 1990s, Retail Link had emerged into an Internet-enabled SCM
system whose functions were not confined to inventory management alone, but
also covered collaborative planning, forecasting and replenishment (CPFR).

CPFR is defined as a business practice for business partners to share

forecasts and results data through the Internet, in order to reduce inventory
costs while at the same time, enhancing product availability across the supply
chain.

In efforts to implement new technologies to reduce costs and increase the
efficiency, in July 2003, Wal-Mart asked its top 100 suppliers to be RFID
compliant by January, 2005.

Wal-Mart planned to replace bar-code technology with RFID technology.

The company believed that this replacement would reduce its supply chain
management costs and enhance efficiency.
Q&A

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