MATERIALS MANAGEMEN

T

MATERIALS• One of the five M’s of an industrial organization• Occupy significant place among M’s of an

industrial enterprise

REASONS:1) The amount spend on materials is increasing in

relation to the expenditure on other outputs.2) Materials offer considerable scope for reducing

cost and improving profit.

3) Materials forms an important form of current assets in any organization.

4)Materials ‘add value’ to a product.

5)Quality of the finished product depends on quality of materials used.

MATERIALS MANAGEMENT

Material management involves organizing and coordinating all management functions that are responsible for every aspects of materials, storage and transformation.

It is defined as the process by which an organization is supplied with goods and services that it needs to achieve its objectives.

Material management begins with the supplier and ends when the material is either consumed or incorporated into some product.

The executives engaged in materials management are concerned with three basic activities: Buying Storage of material Movement

OBJECTIVES OF MATERIAL

MANAGEMENT

PRIMARY OBJECTIVESo Low prices

o High inventory turnover

o Low cost acquisition and possession

o Continuity of quality

o Consistency of quality

SECONDARY OBJECTIVES Reciprocal relations

New materials and products

Economic make-or- buy

Standardization

Product improvement

Interdepartmental harmony

Forecasts

Acquisition

IMPORTANTS OF MATERIALS MANAGEMENT

Lower prices for materials and equipment

Faster inventory and turnover

Continuity of supply

Reduced lead time

Reduced transportation cost

Less duplication of efforts

Elimination of buck-passing

Reduced material obsolescence

Better interdepartmental cooperation

Personnel development

MATERIAL MANAGEMENT INFORMATION SYSTEM

&MATERIAL MANAGEMENT

ORGANIZATION

Material Management Information System Material management information system is a system which provide information on online about the materials . It helps in decision making , rapid access of information and detect errors about the materials.

MMIS is provide online information about

Stock level of raw material Work-in-progress Finished goods Stores and spares

Material management organization

Material management organization is an important area of management like production, marketing, finance, and human resource management.

In organizations where the cost of materials is high material management is considered not as a sub function but as a major function like production department.

In small or medium organizations material management is considered as a sub function of production management.

MATERIAL MANAGEMENT ORGANIZATION

CEO/ MD

Manager

(purchase)

Manager

(Stores)

Manager

Materials,

Planning and control

Manager(Material

s Handling

)

Manager(Shippin

g and traffic)

WHAT IS MATERIAL PLANNING?

Material planning is the scientific way of determining the requirements of raw materials , components , spares and other items that go into meeting the production needs within economic investment policies.

Significance of Materials Planning

Lack of proper materials planning and coordination.

Poor planning for materials . Materials planning activity

raises the level of the buyer from a mere order placer to a purchase executive or manager.

Materials planning aims at motivating people and saves as an effective control device.

Efficiency in materials management function cannot be visualized without a sensible or effective materials planning function.

Benefits of Materials Planning It tries to avoid the practice of crisis

management of struggling in the last minute to procure materials to meet the production requirements.

It helps to get things done efficiently and effectively.

It provides step for effective materials budgeting , follow-up of suppliers to procure materials in time.

Purchase planning enable the buyer to know not only the price of the materials but also their cost.

Factors influencing Materials Planning

The factors influencing material planning process are classified as:

Macro factors:- price trends, business cycle, import policy of the government, credit policy etc.

Micro factors:- corporate objectives, working capital, seasonality, delegation of powers, communication systems.

APPROACHES TO MATERIAL PLANNING

All material planning flow from preliminary master production schedule.Requirement of various materials are worked out by exploding the master production schedule for the planning period through the planning horizon.This technique is “BILL OF MATERIAL EXPLOSION”.

WHAT IS THIS BILL OF

MATERIAL EXPLOSION ?

It is a document which shows for given product ,the list of materials required, unit consumption and location code.

“PAST CONSUMPTION

ANALYSIS”It is used for items that are consumed on a continuous

basis.

PROBLEMS IN MATERIAL PLANNING Sales forecasts becomes less

reliable. Import policy of

government,credit availability.

HOW TO OVERCOME THESE PROBLEMS IN MP

Anticipate lead time. Proper study of external environment. When MP extends beyond 1 year it

becomes unrealistic. Computerized planning and

information system.

GUIDELINES Cover longest lead time. Demand fluctuation should be taken care

off. Computerization of MP. Computerization of MP results in saving time

and effort apart from obtaining accurate forecast.

Planning periods are considered within the year, MP will be more reliable. Quarterly planning are more popular than monthly.

MATERIALS BUDGETING

the process of preparing materials budget or purchase budget in terms of quantity and money value of materials to be procured for a given period of time.

Materials budgeting is

Process of Preparing Material Budgets Requirement of

materialsInventory of materials on

hand

Amount of materials to be purchased

Forecast of prices and rates

Inventory norms and

targets

Purchase budget or materials budget

Actual purchases

Variance report for control

Main Purposes served by materials budgeting • The availability of financial resources can

be known exactly.

• The comparison of budgeted price of materials and actual price can be done.

• The cash requirements for procuring materials can be projected.

Benefits of Material Budgets

• It helps financial department to draw up realistic schedule of cash requirements.

• Inventory investment and its associated risks can be reduced.

• Materials budget provide maximum purchasing lead time.

• Supplier relationships can be improved.

Material control

Function of maintaining constantly, availability of all kinds of materials.

It is the systematic control over the purchasing, storing and using of materials so as to have the minimum possible cost of material.

Importance of material control

To provides raw materials and parts in proper quantities.

To ensures the flow of materials. (arrived at plant when they are needed).

Procurement of raw materials and purchased parts and supplying these to production.

To meet the needs of production.

Material control are classified into :

Raw materials Component parts Supplies or indirect items Work in process Finished products

Material control cycle

Comprises of all procedures which are necessary for the provision of materials for the manufacturing process with a minimum investment and lowest possible costs.

Steps:

Determining material needs. Preparing for the requests made. Receiving purchase materials into the

plant. Inspecting the purchased material &

parts made. Delivering all parts & materials into

stores. Issuing materials for production &

assembly. Recording & entering all receipts in store

records.