The fundamental objectives of the Materials Management function ,often called the famous 5 Rs of Materials Management, are acquisition of materials and services :
· Operations Management of the right quality in the right quantity at the right time from the right source at the right price From the management point of view , the key objectives of MM are :
- To buy at the lowest price , consistent with desired quality and service
- To maintain a high inventory turnover , by reducing excess storage , carrying costs and inventory losses occurring due to deteriorations , obsolescence and pilferage
- To maintain continuity of supply , preventing interruption of the flow of materials and services to users
- To maintain the specified material quality level and a consistency of quality which permits efficient and effective operation
- To develop reliable alternate sources of supply to promote a competitive atmosphere in performance and pricing
- To minimize the overall cost of acquisition by improving the efficiency of operations and procedures
- To hire, develop, motivate and train personnel and to provide a reservoir of talent
- To develop and maintain good supplier relationships in order to create a supplier attitude and desire furnish the organisation with new ideas , products, and better prices and service
- To achieve a high degree of cooperation and coordination with user departments
- To maintain good records and controls that provide an audit trail and ensure efficiency and honesty
- To participate in Make or Buy decisions
Materials Management thus can be defined as that function of business that is responsible for the coordination of planning, sourcing, purchasing, moving, storing and controlling materials in an optimum manner so as to provide service to the customer, at a pre-decided level at a minimum cost.
The broad Materials function has the following as identified and interlinked sub functions:
Materials planning and control: Materials required for any operation are based on the sales forecasts and production plans.
Planning and control is done for the materials taking into account the materials not available for the operation and those in hand or in pipe line.
This involves estimating the individual requirements of parts, preparing materials budget, forecasting the levels of inventories, scheduling the orders and
monitoring the performance in relation to production and sales.
Purchasing: Basically, the job of a materials manager is to provide , to the user departments right material at the right time in right quantity of right quality at right price from the right source.
To meet these objectives the activities undertaken include selection of sources of supply, finalisation of terms of purchase, placement of purchase orders, follow up, maintenance of relations with vendors, approval of payments to vendors, evaluating, rating and developing vendors.
Stores : Once the material is delivered , its physical control , preservation , minimisation of obsolescence and damage through timely disposal and efficient handling, maintenance of records, proper locations and stocking is done in Stores.
Inventory control : One of the powerful ways of controlling the materials is through Inventory control.
It covers aspects such as setting inventory levels, doing various analyses such as ABC , XYZ etc ,fixing economic order quantities (EOQ), setting safety stock levels, lead time analysis and reporting.
Materials Management’s scope:
The scope is vast. Its sub functions include Materials planning and control, Purchasing, Stores and Inventory Management besides others.
Basically, under its scope are :
- emphasis on the acquisition aspect
- inventory control and stores management
- material logistics, movement control and handling aspect
- purchasing, supply , transportation , materials handling etc
- supply management or logistics management
- all the interrelated activities concerned with materials
Materials management can thus also be defined as a joint action of various materials activities directed towards a common goal and that is to achieve an integrated management approach to planning, acquiring, processing and distributing production materials from the raw material state to the finished product state.
In its process of managing , materials management has such sub fields as inventory management , value analysis, receiving, stores and management of obsolete , slow moving and non moving items. The various activities represent these four functions:
- Planning and control
- Value analysis and
- Physical distribution
The software on Stores functioning can be applied as a integrated Computerised document processing system for material receiving functions such as registration, clearing inspection and preparing for acceptance or rejection of incoming consignments. Besides, it can be used as monitoring, follow up, update & query and Management information system for a Receiving bay.
It is extremely useful for speedy processing of documents and thereby in increasing overall efficiency of the Receiving system where activities and document processing go together.
The important features of the software are :
(A) The software integrates the different stages that complete a standard receiving process such as :
- Registration of an incoming consignment
- Issuing Goods received intimation for inspection
- Generating Goods Receipt Note
- Status of Transportation
- Lodging of Claims on discrepancy
The system also provides an extensive on-screen updating and query mechanism for all the above functions.
(B) Some major Reports (outputs), on-screen as well as in print form , give:
- Total GRNs raised in a period
- Pending inspection consignments
- Goods in Transit report
- List of all recorded suppliers (Vendors) with addresses
(C) Follow up action produce :
Reminder to indentor for carrying out inspection
(D) Analysis of data :
- Number of Inspections cleared
- Average Inspection lead time
- Purchasing Software Inventory Management Software