Material Management | Definition , Objective of Material Management
Definition and Scope
We can define Materials Management as the function responsible for the coordination of planning, sourcing, purchasing, moving, storing and controlling materials in an optimum manner so as to provide a pre-decided service to the customer at a minimum cost.
Objectives of Material Management
However, within the broader management objectives of any industry or business, Materials Management’s contribution towards objectives may be divided into two categories:
1) Primary and
The former contributes directly to the Materials Management function and the latter, helps other departments to achieve their objectives.
Materials play a vital part in the field of cost-control and operating expenditure of any organization and therefore, materials have a direct bearing on the cost of a product, manufactured. If the Materials Department can reduce the overall materials cost through an efficient system of buying, it can directly contribute its share to the enhancement of profit. Thus lower prices, lower procurement and possession costs are important objectives of Materials Management. Price consciousness or less materials cost means more profit as embodied in the phrase, “Purchasing for Profit” which is readily recognized by Management. It is therefore a prime functional responsibility of the Materials Management department.
Stores and inventory management:
Arriving at the right balancing point in the inventory investment like investment in any other capital assets has always been a perplexing problem to industries. Inventory Management function is more complex, more subtle and the balance of costs and gains is much more difficult to find out. Briefly, Materials Management objective here is to have the correct quantity and right quality of material on hand at the time required with a minimum of investment expenditure, consistent with business experience. When inventory turnover is high, storage and carrying costs are low.
Continuity of supply:
This is an other important objective of Materials Management. Specially in automated processes, where costs are rigid and are not easily amenable to reduction due to lack of production materials, the question of continuity of supply gains prominence. This foreshadows all other objectives, because idle-time costs of men and machines push up overall costs of production and expediting supply means additional transport costs.
Quality of materials:
Where quality of materials presents cost plus production engineering problems, it may well become one of the prime objectives of Materials
Management, where other objectives are sacrificed at quality-cost.
Good supplier relations:
A good supplier relation, on which depends much of the product-reputation of the company, is also one of the key objectives of Materials Managers. Suppliers respond to fair treatment but are uncooperative and unwilling if indifferently treated. The Materials Management department can improve relations by providing the required stimuli for their better performance.
Secondary objectives are so varied that they limit the possibility of listing exclusively in one breath. In one way or the other, they help to achieve the primary objectives, but different organizations put different emphasis on them. The following are a few examples.
Since the Materials Management department is immediately concerned with the selection of supply sources, materials-cost, procurement-cost and the availability of materials. it influences heavily the Make-or-Buy decision. Often, this is a Committee action where other departments are also involved. However, the Materials’ department’s contribution is still substantial and more direct.
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