MATERIALS MANAGEMENT

Materials management is the detailed study of complete material flow process of

a Firm. The American production and Inventory control society (APICS) defines
materials management as the grouping of management functions supporting
the complete cycle of material flow , from the purchase and internal control of
production materials to the planning and control of work-in-process to the
warehousing, shipping and distribution of finished products,
Managers in any organization are worried if the material function does not
perform well. The proper management of materials enables smooth operation of
the firms functions moreover, the proper management and control of materials
lead to reduction in production. Therefore, materials management can be viewed
as an opportunistic tool to improve a firms profits.

NECESSITY OF MATERIALS MANAGEMENT

First, the cost of material is increasing due to scarcity and increasing demand.
So, the management should carefully assess the quantity required and minimize
wastage during production.
Second, reduction in expenditure on materials can improve the profits of a firm.
Since overheads other than material costs like labor costs and administration
expenses are relatively fixed and do not offer much scope for reduction, material
is only the major area for cost reduction.
Third materials management contributes to the quality of the end product or
service . As materials management covers the execution of functions like
purchasing, inventory control and material handling in a firm, the quality of the
end product is dependent on it.

Fourth, materials management aims at the preservation of important and scarce

resources for future requirement further, material management executives are

entrusted with the job of exploring new sources of supply and identifying the
ways to ensure environmental safety.

FUNCTIONS OF MATERIALS MANAGEMENT

The process of materials management can be explained by three overlapping
functions:

Production control
Inventory control
Materials Handling
The relationship of these functions can be better explained by studying the flow
of materials through the entire firm; starting from the selection of a supplier to
the point where the products reach the customers.
Materials flow is a stepwise process that describes the involvement of different
departments through which materials are processed and made available for the
end customers, represents the material flow process of a typical manufacturing
firm.

Production Control

The function of production control aims at regulating the movement of goods

through the entire manufacturing cycle from the process of purchasing materials
to producing the finished product. The departments involved in this function are

Purchasing department
Receiving department
Raw materials inventory department, and
Production department

Each department is headed by a manager who is responsible for all the activities
in the department. The production control function of materials management is
aimed at ensuring that the adequate amount of materials required for production
is available and the supply is obtained in the most effective and economical
manner.

Purchasing department
The main task of the purchasing department is to acquire the required materials
in the right quantity, of the right quality, from the right source, at the right time
and at the least possible cost. Materials can be purchased in two ways :
centralized or decentralized. In centralized purchasing activity is carried out by a
separate department usually known as the purchasing department. It purchases
materials in large quantities by grouping orders from all the departments of a
firm. In general, larger firms follow the centralized purchasing route, as it results
in consistency in buying policies and uniformity in maintaining purchasing
records. Also, the buyer maximizes his purchasing power, which helps him obtain
large purchase a discounts.
In decentralized purchasing, there are no special departments for purchasing.
Heads of individual departments undertake the activity of purchasing on the
basis of their departmental requirements. This results in greater flexibility in
departmental activities, as it is easier for the head of the department to change
purchasing preferences rapidly as per the requirements. Some firms hire external
specialists, called contract consultants to negotiate purchasing terms and
conditions. However, no firm adheres strictly to any one of these approaches and
usually follows a mix of the approaches.
The important tasks performed by a purchasing department are: processing the
requisitions for materials and supplies from all departments of the organization,
identifying and selecting supplies (or vendors) to obtain the materials required,
negotiating with suppliers in relation to purchasing contracts and quantity
discounts, inviting bids to acquire certain materials, and evaluating suppliers in
terms of their quality and promptness in delivery.

Receiving department
The primary responsibility of the receiving department is to process incoming
shipments of materials. In several firms, the activity of receiving materials is
taken care of by the purchasing department itself.
The tasks of the receiving department include unpacking incoming materials,
checking their quantity and inspecting their quality and generating receiving
reports.

A typical material receiving report consists of information on the quantity, price,

description and other technical specifications of the incoming materials. Usually,
the head of other delivery information. The report is used by the purchase
department to update its material database and to evaluate vendors. On the
basis of the receiving