Unit 1 materials management

Logistics elective: Materials and Inventory Management
Unit1: Materials management

1. Materials and Inventory Management Unit 1: Materials Management Prepared and presented by, Ganesha Pandian . N Assistant Professor 1 RLIMS - MBA 2018

2. Content Introduction to materials management Materials classification Concepts of storage, handling and inventory 2 RLIMS - MBA 2018

3. 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 3 RLIMS - MBA 2018

4. Materials management leads to Maximization of Production Reduction in cost of production and distribution Maximization of profit 4 RLIMS - MBA 2018 Introduction to materials management

5. Definition of materials management Bailey and Farmer define: “Materials Management” as the management of flow of materials into an 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.” 5 RLIMS - MBA 2018

6. Classification of materials Various items carried in store are generally divided into following major types: Raw materials Purchased equipments Work-in-progress Finished goods Spares Consumables Machinery and equipments Inflammables Chemicals Furniture Scrap materials Packing materials Fuel stock 6 RLIMS - MBA 2018

7. 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 7 RLIMS - MBA 2018

8. 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 8 RLIMS - MBA 2018

9. Functional areas of materials management It is classified into functional area into: Planning and sourcing Budgeting Researching and analyzing Intending and procuring Receiving, storing and preserving Accounting and controlling Issuing and dispatching Disposing 9 RLIMS - MBA 2018

10. 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 10 RLIMS - MBA 2018

11. 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 11 RLIMS - MBA 2018

12. Importance of materials management It affects nor only a particular industry. But the entire economic activity as whole Materials contribute to the quality of end product The amount spent on material is more than any other expenses Materials add value to the product Margin added between raw materials and finished goods – value addition Materials recognized as current assets Wastage of materials will be insufficient for organization Materials represent 60 to 70% of total cost of production 12 RLIMS - MBA 2018

13. 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 13 RLIMS - MBA 2018

14. Materials management as science or an art It is both science as well as arts Materials management basically divided into three broad classifications. Arranging for finance Assembly, acquisition, storage and production of materials Distribution 14 RLIMS - MBA 2018

15. 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 15 RLIMS - MBA 2018

16. An integrated approach to materials management by a concentrated and coordinated efforts Purchasing: purchasing department procures materials as per the requirements to meet quantity and time specifications Receiving and storing: The receiving and store functions accepts, store, handle and issue materials and process the documents to record transactions. Production control: materials are considered major part in the production control Inventory control: responsible for supplying materials to fulfill the production plans and schedules with minimum required stock 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 16 RLIMS - MBA 2018

17. 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 17 RLIMS - MBA 2018

18. 18 RLIMS - MBA 2018 Thank you