Importance and scope of Materials Management Flashcards
Materials Management:
It is an organizational concept in which a single manager has authority and responsibility for all activities principally concerned with the flow of materials into an
organization. (Purchasing, production, planning and scheduling, incoming traffic, inventory control, receiving and stores normally are included.)
Materials management is one of the following six functions Notes
performed by any firm:
Design : Converts concept into specification
Finance : Acquires and controls capital
Personnel : Manages human resources
Materials : Planning, acquisition and logistics of materials, service and equipment
Production : Converts materials into goods and services
Marketing : Distributes goods and services to buyers
Objectives of Materials Management
ensure continuous uninterrupted production or operation or project work by maintaining a steady flow of materials
To achieve the above objective in an efficient and economical manner
To effect economies in the cost of materials by purchasing materials of the right quality, in the right quantity, at the right time, from the right source, at the right price; (PQRST)
To affect economies in the costs incurred on materials after they have been purchased, through storage, processing and warehousing, till the finished goods ultimately reach the customer. These economies contribute towards cost thereby leading to higher profits;
To reduce working capital requirements through proper and scientific inventory control;
To save foreign exchange through import substitution and economizing on foreign purchases;
Integrated materials management
conceived as a comprehensive supply system can substantially contribute to a company’s profits, via its systematic influence upon these cost categories. Materials Costs, Capital Costs, Overhead Expenses
Integrated materials management and company’s profitability
Purchasing must make its contribution to optimise the costs of materials
Directly by making full use of its opportunities in the procurement markets, i.e., systematic procurement marketing, and
Indirectly by early introducing its market knowledge into design and development processes, i.e., even at the stage of determining the materials and parts to be used.
Directly by making full use of every opportunity for reducing stocks at all stages.
Indirectly by efficiently coordinating the processes from customer order processing to purchasing processing.
Market-oriented purchasing, on the one hand, and a comprehensive approach to planning, controlling, and handling the flow of materials and goods, using logistical instruments, on the other hand, is thus the two pillars of Integrated Materials Management.
Lead Time
The time between the initiation and completion of a production process
Hand to Mouth Purchasing
This purchasing is also widely known as Zero Stock Buying, which means that there are no purchase transactions done until a demand arises, and accordingly the purchase of quantities is decided
Seasonal Purchasing
when Buyers and Vendors determine the order quantities based on a purchase per season. This method is typical for seasonal product, such as swimwear,
