MATERIALS AND INVENTORY
MANAGEMENT
UNIT 1: MATERIALS MANAGEMENT
CONTENT
Introduction to materials management
Materials classification
Concepts of storage, handling and inventory
INTRODUCTION TO MATERIALS
MANAGEMENT
Materials management ensures the
balanced growth and effective running of
the enterprise
Need for control in material cost,
material supply and utilization
INTRODUCTION TO MATERIALS
MANAGEMENT
Materials management leads to
1. Maximization of Production
2. Reduction in cost of production and
distribution
3. Maximization of profit
DEFINITION OF MATERIALS
MANAGEMENT
Bailey and Farmer define: “Materials Management”
as the management of flow of materials into an
RLIMS - MBA 2018
organization to the point where these materials are
converted into firm’s end product
Ammer defines it as the “process by which an
organization is supplied with goods and services
that is needs to achieve its objectives.”
“ The materials management begins the supplier
and ends with the material being consumed.”
CLASSIFICATION OF MATERIALS
Various items carried 6. Consumables
in store are generally Machinery and
RLIMS - MBA 2018
7.
divided into following equipments
major types:
8. Inflammables
1. Raw materials
9. Chemicals
2. Purchased
10. Furniture
equipments
11. Scrap materials
3. Work-in-progress
12. Packing materials
4. Finished goods
13. Fuel stock
5. Spares
Materials management is concerned with
those management functions like
purchasing, production and inventory
control, materials handling, packing , traffic
and distribution
Inventory control is the integral part of
materials management
OBJECTIVES OF MATERIALS
MANAGEMENT
To ensure an uninterrupted operations/production – flow of materials
To enjoy economics in cost of materials – purchasing materials at
the right time, quantity and quality
To enjoy economies in cost incurred for warehousing, storage and
processing.
To reduce working capital requirements
To improve the quality of manufactured goods
To increase competitiveness of goods by reducing prices
To save foreign transaction through import substitution
To make use of Co-ordination among all departments
To conserve materials resources with an organization
FUNCTIONAL AREAS OF MATERIALS
MANAGEMENT
It is classified into functional area into:
1. Planning and sourcing
2. Budgeting
3. Researching and analyzing
4. Intending and procuring
5. Receiving, storing and preserving
6. Accounting and controlling
7. Issuing and dispatching
8. Disposing
MATERIALS MANAGEMENT AS A
PRIME CORPORATE
When raw material converted into finished
products, the cost of the materials
contributes 60% to 70% of product cost
So materials management is treated as
important functional area like marketing, HR,
financial or production
MATERIALS MANAGEMENT AS AN
OPERATING FUNCTION
Function of materials management is
considered subordinate to the production
function
Materials management considered as service
function to production/operations department
Splitting of materials management as prime
function depends on quantum of work of
each section
IMPORTANCE OF MATERIALS
MANAGEMENT
1. It affects nor only a particular industry. But the entire
economic activity as whole
2. Materials contribute to the quality of end product
3. The amount spent on material is more than any other
expenses
4. Materials add value to the product
5. Margin added between raw materials and finished goods –
value addition
6. Materials recognized as current assets
7. Wastage of materials will be insufficient for organization
8. Materials represent 60 to 70% of total cost of production
MATERIALS MANAGEMENT AS
SERVICE FUNCTION
Materials management is a staff function and
it serves production and marketing function
There is a concept of “integrated materials
management” –combining three functions
It is a combination of interdependence
function
MATERIALS MANAGEMENT AS
SCIENCE OR AN ART
It is both science as well as arts
Materials management basically divided into
three broad classifications.
1. Arranging for finance
2. Assembly, acquisition, storage and
production of materials
3. Distribution
INTEGRATED APPROACH TO
MATERIALS MANAGEMENT
Materials management – needs coordination from various
departments
Materials management spends large sum on purchase of
materials – so it is close with finance department.
Product design of designing department needs coordination from
materials department
Likewise other departments were closely interrelated with the
materials department
Integrated approach to various problems of materials
management – would optimize the benefits
Mere application of tools and techniques in materials
management – does not solve the problem
An integrated approach to materials management by a concentrated
and coordinated efforts
1. Purchasing: purchasing department procures materials as per the
requirements to meet quantity and time specifications
2. Receiving and storing: The receiving and store functions accepts,
store, handle and issue materials and process the documents to
record transactions.
3. Production control: materials are considered major part in the
production control
4. Inventory control: responsible for supplying materials to fulfill the
production plans and schedules with minimum required stock
5. Product distribution: product distribution receives, stores, select
orders, pack and ships finished products ready for dispatch
Materials cost control and reduction is the main function of materials
management
ADVANTAGES OF INTEGRATED
MATERIALS MANAGEMENT
To obtain materials, tool and supplies at right
time
Other department also responsible for delay in
lead time and stock levels.
Conflicting departmental objectives should be
aligned to the common objectives
Cost reduction and increases the productivity
Departmental coordination needed to avoid
bottlenecks in production process
Thank you
