What is Materials management? Objectives, Functions of Materials Management, pdf

Materials management is vital as most manufacturing firms dedicate more than 60% of their revenue to materials. This means a substantial portion of the industry’s capital is tied up in materials.

This underscores the need for proper materials management and control since even minor savings in materials can significantly lower production costs, leading to increased profits.

Materials management ensures that the necessary materials are available to meet consumer demands, providing a cost and resource schedule for the company. It includes overseeing the type, quantity, location, movement, and timing of material purchases.

Materials management definition can be expressed as “Materials Management is the planning, directing, controlling and coordinating of the activities which are concerned with materials and inventory requirements, from the point of their origination to their introduction into the manufacturing process. It starts with the inspection of materials quality and quantity and ends with its issuance to production to meet customer’s demand as per the schedule and at the lowest possible cost.”

Effective materials management is crucial for ensuring smooth operations and minimizing costs in a manufacturing environment. By optimizing inventory levels, streamlining procurement processes, and closely monitoring material usage, organizations can enhance efficiency and meet customer demands more effectively.

Additionally, proper materials management helps in reducing wastage, improving cash flow, and maintaining a competitive edge in the market. Overall, a well-structured materials management system is essential for achieving operational excellence and driving business success.

Functions of material management

Materials planning:

Materials Planning is the scientific way of deciding the requirements of raw materials, components and other items needed for production within the production enterprise. Planning for materials management is aimed at determining the demand for the end finished products. This is possible only by forecasting methods. Therefore, forecasting creates “the basis for materials planning.

In addition to forecasting, materials planning also involves identifying sources of supply, determining the quantity of materials needed, and establishing timelines for procurement. By effectively managing materials planning, companies can ensure that they have the right materials in the right quantities at the right time to meet production demands and customer needs. This ultimately leads to improved efficiency, reduced costs, and increased customer satisfaction.

Procurement or purchasing of materials:

The procurement or purchasing department occupies a vital and unique position in the organization because procurement or purchasing is one of the main function in the success of modern manufacturing industries.

Mass production industries rely on the continuous supply of the right raw materials, therefore there is a demand for efficient purchasing division.

Purchasing implies – procurement of materials, supplies, machinery and services needed for manufacturing and maintenance of concern.

Efficient purchasing practices can lead to cost savings, improved quality of materials, and timely delivery of goods. The purchasing department must maintain good relationships with suppliers to ensure a smooth flow of materials.

Additionally, they must stay updated on market trends, negotiate contracts, and monitor supplier performance to ensure the best value for the organization. In essence, the procurement or purchasing department plays a crucial role in the overall success and profitability of the organization.

Receiving and warehousing:

The importance of warehousing is to receive the right product, in the right quantities, in the right condition, weight, and dimensions all at the right time.

The proper receiving of goods in warehouse will have a direct impact on all subsequent production processes. Efficient warehousing operations are essential for maintaining a smooth supply chain and ensuring customer satisfaction. By optimizing receiving processes, businesses can streamline operations, minimize errors, and enhance overall productivity. Properly managed warehouses play a crucial role in facilitating timely deliveries, reducing costs, and ultimately, improving the bottom line.

Storage and store administration:

Storage refers to the place where materials are kept under custody. Store is an important element of materials management since it is a place that keeps all the materials in a way, by which the materials are well accounted for, are maintained safe, and are available at the time of requirement.

The main activities involved in the store management are receiving materials, quantity verification and visual inspection, preservation of materials.

Issuing materials to the user departments, maintaining proper records of receipts and issues, conducting periodic stock verification, and ensuring proper storage conditions are also crucial aspects of store administration. Proper store management helps in efficient inventory control, cost reduction, and smooth functioning of the organization’s operations. Regular audits and inspections play a key role in ensuring that the store is well-organized and that all materials are accounted for accurately.

Inventory control:

Inventory control is the process of maintaining a business’s stock level which is materials in our case, to meet customer demand and minimize costs. Inventory control involves inventory tracking and maintenance of goods. It also includes decision making to get the most profit out of your materials and planning purchases.

The primary objectives of inventory control are guarding the inventory against damage or theft and reporting inventory in the financial statements. 

Effective inventory control also helps to prevent stockouts and overstock situations, which can lead to lost sales or unnecessary holding costs. By implementing proper inventory control measures, businesses can improve their overall efficiency and profitability.

Additionally, inventory control systems can provide valuable data and insights for strategic decision-making and forecasting future demand. Properly managing inventory is essential for the smooth operation of any business and can have a significant impact on its financial health and success.

Standardisation, simplification and value-analysis:

Meaning of Standardization is producing a maximum variety of products from the minimum variety of raw materials, tools and operations. It is the process of setting up standards or units of measure to which extent, quality, quantity, value, performance etc. can be compared and measured.

The concept of simplification is nearly related to standardization. Simplification is the process of reducing the variety of products produced, assemblies, number of parts, materials and complicated designs.

Value analysis is concerned with the costs added due to inefficient or unnecessary specifications and features of the products. It makes its contribution in the maturity stage of the product life cycle. At this stage research and development no longer make any positive contributions in improving the efficiency of the functions of the product or adding new functions to it.

External transportation in material management:

External transport means any of the different kinds of transport facilities used to carry goods, raw materials, people outside the manufacturing plant. Some of the examples are truck, aeroplane, ship, etc.

External transportation plays a crucial role in material management as it ensures the timely delivery of goods and materials to and from the manufacturing plant. By utilizing various modes of transport such as trucks, airplanes, and ships, companies can optimize their supply chain and streamline their operations. Effective external transportation not only helps in reducing costs but also enhances overall efficiency and customer satisfaction.

Material handling:

Material handling is the movement, protection, storage and control of materials and products throughout the manufacturing plant, warehousing, distribution, consumption and disposal. As a materials management process, material handling merged a wide range of manual, semi-automated and automated equipment that support logistics and make the supply chain work very easily.

Material handling plays a crucial role in ensuring smooth operations and efficient workflow in various industries. By utilizing the right equipment and techniques, businesses can optimize their processes, reduce costs, and improve overall productivity. From conveyor belts and forklifts to automated robotic systems, material handling solutions continue to evolve to meet the changing demands of modern manufacturing and distribution environments. Whether it’s moving raw materials in a factory or fulfilling orders in a warehouse, effective material handling is essential for maintaining a competitive edge in today’s fast-paced business world.

Disposal of scrap, Surplus and Absolute materials:

Disposal of scrap, when handled in a creative manner, can result in big returns to the organization. Disposal action follows when the scrap cannot be used within the organization anymore.

Before disposal action it is necessary that the scrap is separated according to metal, size, etc. when the scrap is mixed, the return can be even lower than the lowest element present in the mixture. 

Separating the scrap allows for better organization and identification of valuable materials that can be sold or recycled for a profit. By implementing a strategic disposal plan, organizations can minimize waste and maximize returns on materials that are no longer needed. Proper disposal of scrap, surplus, and absolute materials is not only environmentally responsible but also financially beneficial for the organization.

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Objectives of Materials Management

1. Effective material management minimizes the material cost so that profit can be maximized.
2. To procurement and purchase materials of desired quality and quantity when required, at the lowest possible overall cost.
3. Materials management try to reduce investment tied in inventories for use in other productive purposes and develop high inventory turnover ratios.
4. To purchase, receive, transport and store materials efficiently to reduce the storage and warehouse related costs.
5. To trace the new source of supply and to develop cordial relations with the suppliers, in order to ensure continuous material supply at reasonable rates.
6. To cut down costs through simplification, standardization, value analysis, import-substitution, etc.
7. To modify and improve the paperwork procedure in order to minimize delays in procuring materials.
8. To conducts studies in the domain such as quality control, consumption and cost-estimation of materials so as to minimize the cost of production.
9. To train personnel in the field of material management in order to increase the operational efficiency of the manufacturing firm.

Steps in Materials Management

There are five steps involved in the work undertaken by the materials management. They are as follows:

1. Materials Requirements Planning:

This is one of the most important steps in the material management process as the inventory of materials costs acquire around 60% of the total investment of a manufacturing plant. The amount of material used is inversely proportional to the profit gained by the business. Less investment in materials with proper planning increases the profit.

At present days some industries considering “Just in Time ” (JIT) strategy to avoid inventory. However, this strategy requires careful planning to maintain continuous production without impacting the operation schedules.

2. Purchasing:

The profit margin of a business increases by efficient and economical purchasing. It is the set of functions associated with procuring the goods and services that an organization requires. Purchasing process includes activities like ordering, expediting, receiving, and fulfilling payment.

3. Inventory Planning and Control:

Inventory includes finished goods, goods ready for sale, goods used in production, etc. During inventory planning the company follows a JIT strategy, which means materials are purchased from vendors and brought in the warehouse just before they enter the production process or just before their delivery time. This reduces the cost of maintenance of inventory. For better material management, close to zero inventories are beneficial.

4. Flow and Supply of Materials:

During the distribution of materials in various production plant, make sure that continuous supply of the materials should be maintained. Otherwise, a lack of inventories can lead to huge losses to the organization. So, Materials management is a very important part of supply chain management.

5. Quality Control of Materials:

The quality of raw materials is one of the deciding factors of the quality of finished goods. The importance of using good quality material is huge in any production system. So inspection of materials before purchasing is necessary to control the quality.

Conclusion

Effective material management keeps the right stuff moving at the right time. It’s like a well-oiled machine, ensuring you have the materials you need to avoid production delays and keep customers happy, all while reducing costs by preventing excess inventory. In short, it’s a win-win for efficiency and profitability.Material management is the backbone of any successful operation, requiring meticulous planning and execution.

By optimizing inventory levels, streamlining procurement processes, and fostering strong supplier relationships, businesses can achieve a competitive edge in today’s fast-paced market. This strategic approach not only boosts operational performance but also paves the way for sustainable growth and long-term success.

Related terms

Types of Materials

There are two types of material –

1. Direct Materials

Direct Materials represents the raw material or goods necessary to produce or manufacture a product. The cost of direct material varies according to the level of output of the production system.

For example, Milk is the direct material of butter, Iron ore is direct material of steel.

2. Indirect Materials

Indirect materials are the materials that are necessary for the production process but it’s not directly used in the product itself, which means these materials does not become an integral part of the product.

Examples- cotton waste, sandpaper, oil, greases, etc.