Materials Management

Definition Materials Management is a function responsible for - coordination of planning, sourcing, purchasing, moving, storing & controlling the materials in an optimum manner - so as to provide a pre-decided service level to the precustomer at a minimum cost

Materials Management- Functions ManagementMaterials Planning & Programming - Purchasing - Inventory Control - Receiving - Storekeeping - Materials Handling - Scrap & Surplus Disposal

Supply Chain Management

Defining the term  A supply chain is a - network of facilities & distribution option that perform functions of - procurement of materials - transformation of these materials into intermediates & finished products and - distribution of finished goods to customers

Supply Chain Management-Defining ManagementTraditionally these functions operated independently having their own objectives which at time seen conflicting and need for integrating these functions felt. SCM is a strategy through which this integration can be achieved.

Supply Chain Management

Supply chain exists both in services & manufacturing organization though complexity of chain may vary from industry to industry and firm to firm SCM can be compared with well balanced and practiced relay team

Supply Chain Management-Defining Management

Such a team is more competitive & cohesive when - each player knows how to be positioned for hand-off hand- relationships are stronger between who directly pass-on the baton pass- but entire team needs to make coordinated efforts to win the race

Supply Chain ManagementManagementDefining

SCM can also be defined as a network of autonomous or semi- autonomous semibusiness entities collectively responsible for - procurement, manufacturing & distribution activities - associated with one or more families of related products

Supply Chain ManagementManagementDefining

Lee & Billington have defined SCM as A supply chain is network of facilities that procure raw materials - transform them into intermediate goods - and than finished products and - deliver the products to customers through a distribution system

Objectives of Materials Management

Primary Objectives Right Price High Turn-over TurnLow Procurement & Storage Cost Continuity of Supplies

Objectives of Materials Management

Consistency in Quality Good Supplier Relations Development of Personnel Information System

Objectives of Materials Management

Secondary Objectives
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New Materials & Products Make or buy decisions Standardization & Variety Reduction

Objectives of Materials Management

Product Improvement Forecasting InterInter-department Harmony

Integrated Materials Management Approach

This is essentially an organizational concept that brings together, under one organizational component i.e. Materials Management Department, the responsibility for planning, purchasing, transportation, storing, disbursing and controlling materials.

Need for integrated concept



To avoid conflict among various functions of materials management Need to balance conflicting objectives from total organization point of view so as to achieve optimum results for the organization

Need for integrated concept



In the integrated set up, Materials Manager is responsible for all inter-related intermaterials functions Integration helps in rapid transfer of data

Advantages of integration of materials management functions:



Better coordination and reduction of interinterdepartmental conflicts. This is accomplished by eliminating buck passing between sub-functions suband providing a Central Figure (Head of MMD) to balance conflicting objectives. Reduction of inventory level and greater assurance of materials availability by better coordination and communication with user departments and among sections of MMD

Advantages of integration of materials management functions:



Improved supplier relation results from ensuring delivery schedule on the basis of latest inventory position and production requirements Paper work and duplication of work reduced through better coordination and proper communication among persons performing the related functions.

Advantages of integration of materials management functions:



Through centralization of authority for all aspects of Materials function a clear-cut accountability is clearestablished Department under Materials Manager creates an identity which results in better support and cooperation in accomplishment of materials function Integration of material functions made it possible to design data processing system

Advantages of integration of materials management functions:



Greater speed and accuracy results in communication due to integration of all interinter- related functions organizationally Improved customer services often results from reduced delivery time.

Advantages of integration of materials management functions:



Reduced overall cost of materials as a result of using more scientific and economical methods in planning, acquisition, storage and control of materials. A team spirit is inculcated resulting in better morale and cooperation

Which of the two organizational structure to be adopted depends on the factors:

How important are MM activities to the unit and for that matter to organization? Will Unit suffer substantially if MM does not perform effectively as it ought to? How much funds blocked in inventory and constraints of working capital?

Which of the two organizational structure to be adopted depends on the factors:

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How important it is that MM activities be closely coordinated with O&M, others & Accounts Department? Is it essential that materials cost be controlled tightly and effectively? What is absolute value of purchases? What is the range and variety of materials purchased?

Which of the two organizational structure to be adopted depends on the factors:

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What is the percentage of materials cost in total production cost?

What are the market conditions

- And last but not least, do we intend to develop a professional team of Materials personnel to effectively contribute in overall organizational objectives?

Which of the two organizational structure to be adopted depends on the factors:

Organization will certainly be benefited from a higher caliber, creative MMD, should it be treated as a profit- making profitcentre that receives close attention of general management. It is, however, realized that Accounts, Production, Engineering or Maintenance Deptts have their own priorities, which are in conflict with basic objectives of sound Material Management

Which of the two organizational structure to be adopted depends on the factors:

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Modern tendencies as such are to de-link dematerials functions from these Deptts. Integrated Materials Management function is recognized as top management function and Head of MMD reports directly to head of unit or organization. Even if Materials is primarily treated as service activity, it should report to that service head that it serves most

Centralization Versus Decentralization of Materials Functions: A company with several operating plant faces one additional organizational problem. To what extent should materials management functions be centralized corporate level? at

There may be complete centralization or complete decentralization or develop an organization somewhere between these two extremes.

Centralization Versus Decentralization of Materials Functions:

Factors to be considered:


Similarity of the classes of materials used in each of plant. If a firm s plants use different materials, centralization offers only minimal benefits, Size of each individual materials department. Centralization is more advantageous when a firm s individual plants do not have large materials department.

Centralization Versus Decentralization of Materials Functions:



Geographical dispersion of plants: Closure the firm s plant are located geographically, the feasible centralization becomes. Geographical dispersion of plants: Closure the firm s plant are located geographically, the feasible centralization becomes. No and size of plants: If there are large No of plant of fairly big size, centralization will become difficult & create more problems in availability of materials than any gains.

Centralization Versus Decentralization of Materials Functions:



Advantages of Multi-plant Centralization: MultiScope of greater specialization. Consolidation of materials requirements and economy through bulk purchases. Better coordination with suppliers Lesser buying cost.

 

 

Centralization Versus Decentralization of Materials Functions:



Advantages of Multi-plant MultiDecentralization: Better coordination with operating departments. Greater flexibility with operating departments. Effective use of local suppliers and facilities.

Centralization Versus Decentralization of Materials Functions:



Greater autonomy and accountability.

Lesser lead- time and resultant reduction leadin inventories. Faster decision on purchases and clarifications to vendors.

Centralization Versus Decentralization of Materials Functions:



Faster payment to the supplier. Lesser stock-out and rush purchases. stock-