Organization of Material

Management
Introduction of Organization
Organization is a process of dividing and combining efforts of a
working group for making such joint efforts more
productive, effective and fruitful. The organization as a body
of professionals allocates duties to the managerial staff. It
adds certainty and promptness to the work to be one. It
avoids gaps and overlapping functions. It establishes a neat
pattern of relationships among efforts to be put in, jobs to be
done and the work to be performed. It ensures team-work.
The organization, thus, provides a framework for the
management.
 What a Good Organization Does
1) Increasing managerial efficiency,
2) Ensuring an optimum use of human efforts,
3) Balancing various activities,
4) Facilitating coordination,
5) Providing a good scope for adequate training,
6) Developing managerial skills,
7) Identifying the pitfalls,
8) Consolidating the growth and expansion of the undertaking,
 Fundamental Principles of Organization
1) Determination of the basic objectives:
2) Determination of the areas of activity:
3) Determination of an ideal structure to accomplish the desired activities:
4) Determination of authority and responsibility:
5) Determination of the span of control:
6) Determination and assigning of jobs according to personal ability:
7) Unity of command:
8) Preparation and circulation of rules and regulations:
9) Two-way communication
10) Flexibility
 Organization Structure of Material
Management
Organization, as we have seen above, is an exciting area of
management without which nothing substantial could be
achieved. Organization brings together the basic resources so as
to unite people in the inter related tasks with the intention of
accomplishing certain given specific goals. An organization aims
at the:
(i) Division of Work
(ii) Assignment of Work
(iii) Creation of an atmosphere under which the work is to be
accomplished, and
(iv) Establishment of relationships among the personnel and
the units.
Conventional Approach
One of the most important requirements of the organization in
materials management is an integration of various functions
assigned to the department. The conventional approach with
regard to the materials organization is concerned with the
integration of all functions of materials management under a
head generally designated as the materials manager who is
responsible for achieving the materials objectives and who
derives his powers and authority from the chief executive of
organization. Conventional approach, therefore, refers to
centralization of all materials functions into one powerful
authority who becomes the real source of all, which flows
downwards in the materials management wing of the enterprise.
 Material Management Organization
at the top level
Organization Chart
Organization Chart
Shareholder
showing
Top material Board of Directors
management deriving
power and authority General Manager
from the chief executive,
i.e., General Manager. Materials Manager
Here flows the power
and authority from
materials manager Assistant Material Manager
downwards to his
assistants, etc,
Supervisory & Operation Staff
Cont.
Under the conventional dispensation all the problems of the
materials department are dealt with at the apex. Here
purchasing, inventory control, transportation, distribution,
disposal and other allied functions of the department are
grouped together and placed under the materials department
headed by the materials manger. Such a dispensation may be
depicted with the help of the following chart:
 Material Management Organization
at the middle level
Organization Chart
Top----------- Material Manager

Asst. Asst. Asst.

Asst.
Materials Materials Materials
Asst. Materials
Middle-- Manager Manager
Materials
Manager(Inv
Manager
(Purchase (Transpor entory
Manager (Storage &
& tation & control &
(Disposal) preservati
Procureme Distributi Stores
on)
nt) on) Accounting)

Organization chart showing the materials functions grouped and managed by middle-level under the overall guidance and
control of the material manager.
Cont.
There is no denying the fact that the Purchase Department of an
under-taking is primarily involved in Materials Management. In
fact the management of materials begins with the Purchasing
Process. Conventionally, the purchase department is placed
under the Materials Management Department and the purchase
executive is made responsible to the Material Manager. In many
manufacturing units material management is directly linked with
purchase and Production Planning Departments. In order to
maintain effective control over inventories, it is also necessary
that the materials manager should have a close link with the
Stores Department. Such a conventional materials organization
is explained with the help of the chart appearing :
The Detailed Organization Chart
 Modern Approach
But in India, as elsewhere in the world, the conventional
approach to material management organization is now steadily
yielding place to a modern approach. The modern approach to
materials organisation is to carve out the Purchase Depart from
the Material Management Department and put the same under a
separate head free from the clutches of the material manager,
who usually heads the materials management department, and
who under the conventional system is responsible for purchasing
and procurement as well. Modern approach, therefore, creates
two independent departments under the chief executive, namely
Purchase Department and Materials Department.
 A Modern Approach to
Materials Management Organization
at top level
Organization Chart
Shareholders

Board of Directors
General Manager
Purchase Department Materials Department
Headed By Headed By
Purchase Manager Materials Manager

Assisted separately By Middle-Level Executives, Supervisory

Staff and Operating Staff

Top Purchase and Material Executives deriving powers and authority from the Chief Executive for
managing their respective wings.
 Aims of New Approach
1) A smooth functioning of the enterprise;
2) Perfect coordination among different functionaries in the department
as well as among other departments in the organization;
3) Avoidance of all types of delays, wastage and spoilage;
4) A reduction in operation cost at all levels including reduction
in time and effort in the accomplishment of a given job;
5) Division of whole materials organization into two broad but clearly
distinguishable categories, namely:
a) Top functionaries designated as Top Material Management Staff and
b) The Operating Staff including (i) the Middle-order Management Staff,
and (ii) the Actual Operating Staff.
 HOW GO FOR NEW APPROACH
Under the new dispensation the materials manager is assigned the job
of decision-making including materials budgeting, planning and
programming. The rest is left to the operating staff. The middle-
order materials manager is made responsible for supervision,
control and guidance. The operating staff is asked to carry out the
instructions ect. With a view to implementing the various policies
and programmes. The materials manager on the top also undertakes
the functions of general guidance, control and supervision.
In a material management organization it is
necessary that the middle level management should practically be
included in the operating staff and asked to work as hard as the
lower staff is supposed to work. Guidance, direction, control and
supervision should come from the above as far as possible.
 Cont.
On similar lines the purchase manager is assigned the job of
decisions making including sourcing, analyzing, negotiating,
researching, substituting is obviously left to the operating staff who
carry out instructions and undertake the responsibility of
implementing the purchasing plans and policies. An effective
management of the purchasing activity and the supporting
functions is the key success of all business activities.
A Mixture of the Two Approach
Factory
Manager

Chief
Material
Manager
Material Material Material Material Material
Manager Manager Manager Manager Manager
(Mumbai) (Bhopal) (Calcutta) (Delhi) (Chennai)

Purchase Production Materials Traffic & Disposal

 A Mixture of the Two Approach
The modern approach for the organization of materials management department
may not find favour with most of the commercial and industrial units because
of either their conservative thinking or because of their economy and nature.
Size or purpose of business may not permit them to such an organization on
modern lines.
An industrial unit incorporated as a company having multiplant units in
different geographical locations may opt for a conventional organization
system, at the same time keeping four different department separate under the
charge of a Senior Executive responsible and answerable to the Chief Material
Executive, who, in turn, may be made answerable to the Factory Chief.
Further, since the industrial unit in question is heaving different units in
different geographical regions, the Chief Materials Executive may be assisted
by a number of Materials Executives posted at different region, Who will
naturally be made responsible for their respective units. In such cases the unit
head- the Materials Executive of a particular region- Should have a double
reporting system. He will then be required to report and will be accountable
to the Factory Chief for all administrative activities and to the Chief Materials
Executive for functional (material) activities.