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- Materials Management: Meaning, Importance and Functions
- 01 - Integrated logistics, procurement, materials management and production
- Materials management
- Introduction to Total Materials Management
The need for materials management was first felt in manufacturing undertakings. The servicing organizations also started feeling the need for this control. And now even non-trading organizations like hospitals, universities etc.
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Materials Management: Meaning, Importance and Functions
Therefore, in order to meet the needs of the customer while meeting the set objectives there is a great need for a continuous production schedule which is only made possible by holding of the aforementioned ingredients in form of stock. Materials management is that aspect of business activity that deals with planning for ISSN: Website: www. Also, materials are industrial goods that will become part of another physical product.
Managing of these materials are referred to as materials management. Thus, materials management has been defined by Lee and Dobler as the total of all those tasks, functions and routines which are concerned with the transfer of external materials and services into the organization and the administration of same until they are consumed or used up in the process of production, operation or sales.
Materials management includes all the activities relating to the acquisition, handling and control, and movement of materials and supplies used in the production for a firm's final product.
Materials management is a tool to optimize performance in meeting customer service requirements at the same time adding to profitability by minimizing costs and making the best use of available resources. The basic objective of materials management as explained by Banjoko and Jacobs, Chase, and Aquilano is to ensure that the right item is bought and made available to the manufacturing operations at the right time, at the right place and at the lowest possible cost.
They stressed that without adequate planning for material resources, the overall performance of an organization may be crippled. Barker articulated that improvement in continuity of supplies with reduced lead times, reduction in inventories with reduced obsolescence and surplus, improvement in cooperation and communications with reduced duplication of effort, reduction in materials costs, improvement in quality control, improvement in status control, and quicker identification of problems are the main benefits of materials management in organization.
In the earlier years, materials management was treated as a cost centre, since purchasing department was spending money on materials while store was holding huge inventory of materials, blocking money and space Ramakrishna, However, with the process of liberation and opening up of global economy, there has been a drastic change in the business environment, resulting in manufacturing organizations exposed to intense competition in the market place.
The manufacturing companies' worldwide has been forced to work out various strategies to face the challenges and to cut down manufacturing costs to remain competitive. As noted by Ramakrishna, , progressive management has since recognized that materials manufacturing can provide opportunities to reduce manufacturing costs and can be treated as a profit centre.
Website: www. Major competition has shifted from the market to the production floor where manufacturing costs can be cut down and profitability boosted for firms to compete favourably. Backed by advanced technology, firms are closely monitoring their manufacturing costs and embarking on efficient management of materials Ondiek, Fearon and Weiters see the introduction of computers as a great boost to the adoption of materials management, as materials functions have many common databases.
Therefore, efficient materials management is fundamental to the survival of business, industry and economy. ISSN: Previous researchers Whybark and William, ;Ramakrishna, ;Ogbadu, ;Ondiek, , Inyang, have shown that materials account for more than fifty percent of the annual turnover in the organization.
This shows clearly that priority should be given to management should no longer be viewed as a drain-pipe, but as a serious stabilizing and economic growth potential factor.
Materials management is a tool that can be used effectively in promoting profit maximization in a company. The objective of materials management is to maximize the use of the firms' resources by ensuring adequate supply of materials for production process and also minimizing cost of holding excessive inventories.
This objective when achieved, leads to cost reduction and improve profitability. Theoretical Framework Material management is a tool to optimize performance in meeting customer service requirements at the same time adding to profitability by minimizing cost and making the best use of available resources.
An integrated approach to materials management defines it as "the functions responsible for the coordination of planning, sourcing, purchasing, moving, storing and controlling materials in an optimum manner so as to provide a predetermined service to the customer at a minimum cost" Gopalakrishnan and Sundaresan, International Federation of Purchasing and Materials Management IFPMM defined it as a total concept having its definite organization to plan and control all types of materials, its supply, and its flow from raw stage to finished stage so as to deliver the product to customer as per his requirements in time.
These definitions provide the scope of materials management which includes Materials Requirements Planning MRP , decision on purchasing, procurement of materials, inventory management, staffing, stores and warehouse management, production, and distribution of finished goods at minimum cost at due time Monday, Achison , views material management as, a concept requiring an organizational structure which unifies into one functional responsibility the systematic planning and control of all material from identification of the need through delivery to customers.
Fadipe , defines material management as a confederacy of traditional material activity found by a common idea, the idea of an integrated approach to planning, acquisition, conversion, flow and distribution of production materials from the raw materials stage to the finished product stage.
He further explained that, this concept looks at the whole flow of materials and parts from supplies to the manufacturing establishment which it stores, and ISSN: Website: www. Lenders , view materials management organizational concept as having a single manager responsible for planning, motivation and controlling of all those activities that are principally concerned with the flow of a materials into an organization.
There are different emphases on the above definitions, but all are concerned with the management of materials and all starts with the supplier. However, purchasing, goods receiving, quality control, materials handling and internal transportation are also included in the definition.
In this sense, material management is concerned with all activities which are related to the flow of materials, from the supplier's plant through the manufacturing process, into finished goods warehouse and on to the ultimate users of the product.
Material management encompasses the planning and management of all activities involved in sourcing, procurement, conversion and logistics management activities. It is considered as a cross-functional approach to managing the movement of raw materials into originations, certain aspect of the internal processing of material into finished goods out of the organization towards the and consumers.
The true cost of material is the total amount invested in them up to the point of final use, and all operations that contributed to the cost from the ordering of the materials to their delivery to the workplace must be geared into two objectives. First, to provide the manufacturing operation with an adequate supply of the right materials at the right time and second, to minimize the total cost. Today, buyers must be thoroughly familiar with how many more materials and products than his counterparts of decade ago and must work harder to keep abreast of new process, development and technologies.
Problems of material procurement and control are becoming more difficult and complicated and material cost should be maintained at low level. With high cost of materials in Nigeria, the application of material management should aim at reducing cost so as to maintain the organization's level of competition in the market.
Organizations should not afford to waste material and scrap. Wastage and deterioration allowance should be drastically reduced and if not totally eliminated. This view was supported by Achison , when he stated that material make the co-ordinated function responsible to plan for acquire store, move and control materials and final products to optimize usage of facilities, personnel, capital, funds and to provide customer service in line with corporate goals.
Objectives And Roles Of Materials ManagementThe Classical definition of the objectives of material management is the acquisition of materials and services of the right quality, in the right quantity, at the right price, from the right source and at the right time. Apart from these general objectives, the following under listed points also constitute some of the objectives of materials management. This can be achieved through detailed planning of the supply of materials, parts and components so that they are brought together at the right ISSN: Website: www.
Also making the most economical use of plant and equipment by smoothing out production processes and scheduling to the best of utilization. This can be done by maintaining favorable relationship with suppliers consistency of quality.
This could be achieved through proper production planning, procurement, storage control and distribution. PlanningThis involves preparation of materials budget what is needed, how much, where and when to fulfill the objective of the organization , product research and development, value engineering, analysis and standardization of specification. This involves forward ordering, arrangement of materials for production, preparation of production schedules and sequences, issue of order to production emergency action to meet material shortages, make or buy decision, quality and reliability, feedback, and adjustment of supplies flow to production lines or sales trends.
DistributionIt includes distribution of the finished goods, warehousing, packaging and assembly, palletizing and shopping to customers. Transport ControlThe routing standards, carrier selections, commodity rates consolidation and dispatching shipments. Sometimes other non-related areas such as operation of the company store which sells finished products to the employees at special prices , order entry, and perhaps communication activities are grouped under the jurisdiction of materials management function.
The Importance of Material Management In An OrganizationMaterial management represents an important asset and it is the largest single item of costs in almost every business organization.
It is an important aspect of factory and industrial process which covers the entire spectrum of function such as material handling, material acquisition, assembly line management, storage, as well as material transport.
Material management and control include several smaller components that work side by side to make the business organization more efficient and cost effective. Fadipe outlined the importance of introducing material management and control in organizations as follows; It improves control of quality and improves profitability level. Pandey explained that the question of managing materials arises only when the company holds inventories.
Maintaining the inventories involved trying to hold up to organisation's funds and incurrence of storage and handling cost. Speculative Motive: This motive influences the decision to increase or reduce inventory level to take advantage of price fluctuation. Fadipe further highlighted two specific control methods in material control. They include: i Establishment of control to minimize losses from spoilage and theft and to prevent "stock out" situation as well as duplication.
Lenders , stated that the objective of material management are to solve material problems from a total organisational view point optimizing by coordinating performance of the various material functions, providing a communication network and controlling material flow. The introduction of computer into organization, provided further reasons to adopt materials management, because material function have many common data needs and can share a common data base.
The share of corporate resources required for material in organization form the larger part of the organisation's revenue that the use of materials must be a primary concern of management to achieve the objective. Fadipe further explained that the use of corporate resources can be greatly improved by breaking down departmental barriers and subjecting them to the same discipline of the total flow of materials from the formulation of purchasing plans to the amount of finished goods throughout the organization.
The concept is widely developed where the system is generally being used to cover all activities concerned with "purchased" material and services to the point where there are economically used.
The basic objective of business is to. Managers have to ensue that there is a continuous flow and optimum utilization of materials. That will provide the necessary functions required by the customer. Materials management is concerned with management functions supporting the complete cycle of material flow 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.
Achieving Profitability Through Materials ManagementEffective management of materials contributes a great deal to achieving business profit. This is done through effective acquisition, control, handling and movement of materials. The major contributions of materials management to profitability are discussed below: Make or Buy DecisionA manufacturing company should be able to make prudent decision between buying raw materials and producing them.
In taking this decision, the comparative advantage of making in or buying out should be analyzed. According to Ogbadu , many factors have to be considered when arriving at make or buy decision. Therefore, a material manager will strive for the cheapest and qualitative raw material. Materials acquisition function starts with the receipt of the purchase requisition from the store.
The purchase order is therefore prepared based on the contents of the requisition. The most important thing to bear in mind while planning for profit is to procure the right quality at the right price. Procurement in highly technical areas required skill and experience on the part of the buying manager. Cost improvement is simply the result of learning effect among workers, reflecting the development of skill and dexterity that occurs when a task is performed repeatedly.
According to Ayoade , acquisition circle consists of recognizing defining and describing the need; transmitting the need, investigating and selecting the supplier, order, receipt and inspection of good supplied, auditing the invoicing and closing the order.
Receipt of materialsOne important aspect of receipt of materials is to check the source of good supplied and to ensure they conform to specification as contained in the purchasing order Damaged and sub-standard materials are rejected thereby preventing the firm from incurring unnecessary cost and thus promoting profitability. The effect of inferior materials to both the machine and the profitability of the firm must be borne in mind as they cause production hold up which may lead to substantial losses to the firm.
01 - Integrated logistics, procurement, materials management and production
Materials Management is the process of supplying goods and services to an organization in such a way that it achieves its objectives. The objectives include procurement, storage and movement of the materials to achieve maximum profit. As per definition, Material Management is the process of planning, procuring, processing and providing raw material in the right quantity, in the right place, at the right time, with the right cost for production purposes. It comprises of processes such as time management, cost management, schedule management, etc. The amount of material utilized directly affects the profit earned by the organization. Lesser the amount of material used, the more the profit gained.
The MPM suite of applications includes Bill of Material, Work Order Processing, Forecasting and MRP, and Shop Floor Control. With MPM you can easily.
Integrated logistics, procurement, materials management and production 2. Material inventory and material requirements in the enterprise 3. Strategic procurement International Supply Chain Management 4. Management of procurement and purchasing 5.
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.
Total Materials Management pp Cite as. Materials management is an organizational philosophy that has evolved through application of the systems approach to management, an approach that provides for integration of all management functions. Materials management is an umbrella that integrates all the critical materials-related subfunctions, and, as such, is a major company function, among such others as engineering, finance, and manufacturing.
Introduction to Total Materials Management
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Introduction to Materials Management covers all the basics of supply chain man- agement, manufacturing planning and control systems, purchasing, and.
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