BBAOL105

Materials Management

Introduction:
Materials management is the process of organising, obtaining, and storing the
appropriate materials in the proper quantity, quality, and location at the appropriate time.
Organizations of all sizes depend on it as one of the most crucial management techniques in
order to survive in the marketplace. It aids in achieving organisational goals by facilitating
the storage of materials, their acquisition, and their transfer.
In the modern organisation, material management is just as important as other
management functions. It is the responsibility of the materials manager to guarantee that the
appropriate materials are available for the manufacturing of specified items even before
production has started. In addition to these, other production-related tasks such as packaging,
accounting, and material handling are included in the scope of materials management.

Objectives of Materials Management:

 Continuous production must be maintained. A material manager must purchase the
appropriate quantity and quality of materials at the appropriate time, from the appropriate
location, and for the least amount of money. He makes certain that all supplies are
accessible at all the organization's manufacturing facilities.
 A consistent flow of materials must exist with the aid of materials management.
 The inventories at the production facilities must be efficiently controlled.
 It improves the communication between the customer and the seller.
 A material manager is responsible for upholding high moral standards within the
boundaries of the company.
 A manager must maintain adequate working capital through material management in order
to keep up the production processes.
Definition of Materials Management:
International Federation of Purchasing and Materials Management defines materials
management as total concept involving an organisation structure unifying into a single
responsibility, the systematic flow and control of material from identification of the need
through customer delivery. Included within this concept are the material functions of
planning, scheduling, buying, storing, moving and distributing. These are logically
represented by the disciplines of production and inventory control, purchasing and physical
distribution. The objective of materials management is to contribute to increased profitability
by co-ordinated achievement of least material cost. This is done through optimising capital
investment, capacity and personnel, consistent with the appropriate customer service level.
P. Gopalakrishnan and M.Sundaresan define materials management as the function
responsible for the co-ordination 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.

Significance of Materials Management:

The entire cost's material cost component is kept within tolerable bounds. Materials
can be purchased at affordable prices with the use of scientific purchasing. Reduced wasting
of materials is another benefit of proper storage. These elements aid in regulating the cost of
things. Indirect material costs are kept in check. Due to improper management over these
supplies, the cost of indirect inputs might occasionally increase the overall cost of production.
There aren't any breakdowns as a result of delayed material supply, indicating that the
equipment is being used appropriately. Direct labour loss is prevented. It is kept under control
for materials to be wasted during storage and transportation.
Functional areas of Materials management:

Issuing,
Panning and
despatching
sourcing
and disposing

Accounting and
Budgeting
Controlling

Receiving,
Researching
storing and
and analysing
preserving

Indenting and
procuring

Functions of Materials Management:

All facets of material costs, supply, and usage are included in material management.
Purchasing, production control, shipping, receiving, and stores are frequently included among
the functional areas involved in material management.

 Production and Material Control:

Production schedules are prepared by the production manager. Production schedules are used
to determine the necessary parts and materials. Orders that have been received or projected
demand for goods are used to create production schedules. To guarantee that production runs
properly, every kind of material or component is made available.
  Purchasing:

On the basis of requisitions issued by other departments, the purchasing department is

permitted to create purchasing agreements. This division maintains contracts with vendors
and routinely gathers quotes, etc. This division makes an effort to buy goods of suitable
quality at fair pricing. A managerial activity called purchasing encompasses planning and
policy-making activities that cover a wide variety of related and complementary tasks in
addition to the simple act of buying.

 Non-Production Stores:

Office supplies, perishable tools, maintenance, repair, and operating supplies are maintained
in accordance with business needs. Even though these items may not be needed every day,
having them available in stores is crucial. Work may halt if these stores are not accessible.

 Transportation:

An essential component of materials management is the transportation of goods from

suppliers. Transportation services are organised by the traffic department. The company's
automobiles may be purchased or rented from outside sources. Everything relies on how
much and how often you acquire materials. The plan is to set up affordable and efficient
transport options for incoming materials.

 Materials Handling:

It is concerned with how materials move inside a production facility and how much it costs to
handle materials. Additionally, it is observed that no materials are lost or wasted during their
transportation. It is possible to purchase specialised equipment for material handling.

 Receiving:

Unloading the materials, counting the units, evaluating their quality, and distributing them to
stores are all tasks that fall within the purview of the receiving department. The receipt of
various commodities is also reported to the purchasing department.

Materials Management as a Service function:

Materials management is a staff function and it serves essentially the production and
marketing of manufactured goods. It is usually a service and advisory in nature. It is a service
function in blend and objectivity. It is a functional management closely associated to the
other fields of a business enterprise.

Materials Management as a Science or an Art?

Materials management is both a science as well as an art of managing materials. It is an

application to achieve the desired results. To meet the ends, the management is functionally
divided into broad but basic functions known as the three segments of management. They are:

 Arranging for finance

 Assembly, acquisition, storage and production of materials
 Distribution
It is these three basic segments of management which slowly but steadily have crept into the
materials management giving rise to the concept of integrated materials management.
Obviously, management of materials largely depends on adequate availability of finance,
proper procurement, storage and utilisation of materials and effective handling, issuance and
disposal of incoming and outgoing materials. The integration of all three segments is
necessary in order to achieve the desired results.

Organisation of Materials management:

Board of
Directors

Chief
Executive

Personnel Finance Production Materials Marketing

Manager Manager Manager Manger Manager

Purchase Receiving Stores Material Traffic Shipping

Officer Department Department Handling Section Section

Integrated approach to Materials management:

The function of materials management is in charge of organising the planning,
sourcing, purchasing, moving, storing, and controlling of materials in the best possible way in
order to deliver a pre-determined service to the customer at the lowest possible cost. In order
to get the best outcomes for the organisation, it is necessary to balance the competing
objectives from the perspective of the entire organisation if the aforementioned materials
management functions are handled independently. In order to fulfil the demands of an
integrated materials management function, which necessitates the ability to bring together
competing yet linked tasks, the organisation that is adhering to the integrated materials
management idea needs the services of expert managers.
Advantages of Integrated Materials management:
 Better accountability
 Better Coordination
 Better performance
 Better adaptability to EDP
 Noticeable team spirit
 Morale and cooperation
Inventory classification:
 Raw materials
 Components and parts
 Maintenance, repair and operating inventories (MRO)
 Work-in-progress
 Finished goods
 Resale goods
 Capital goods
 Construction materials
 Hard goods/Soft goods
 Fuel and Lubricants
 Stationery goods
 Primary packing materials
Scope of Material Management:
 Material planning
 Cataloguing or coding the materials
 Standardisation
 Scheduling
 Procurement
 Inspection
 Quality control
  Packaging
 Storage
 Inventory control
 Distribution
 Disposal

Standardisation:
In order to produce the commodities, they produced and maintain the quality and
standards in accordance with the standardisation stated, all organisations, industries, and
corporations must adhere to a set of regulations known as standardisation. By standardising
products, the quality may be preserved and the products can be compared using the
predetermined benchmarks.
The concept of standardisation was designed to solve the coordination issue and
reduce the number of decisions needed for commodities and products created within the
company. Increasing productivity, quality, safety, or compatibility are the goals of
standardisation.

Importance of Standardisation:
1. Appropriate price established:
As long as the product quality is upheld, the price can be set at a level that makes it
convenient for people to buy.
2. Protection:
Because the product complies with the standardisation procedure, the product's quality is
unaffected, and buyers may easily buy from the market with confidence. The risk of poor
product quality is decreased by the standardisation procedure.
3. Easy to Purchase:
Products that adhere to standards are more likely to be purchased than non-standard
products in the market. It makes it easier to sell the standardised goods on the market.

Uses of Standardisation:
 The standardisation process has numerous applications across numerous industries. As
an example, consider the following:
1. Assists in keeping food products of a high standard in the food business. Since
people's health directly depends on this industry, the quality of food products cannot
be compromised.
2. It contributes to upholding standards in the IT industry, protecting sensitive data from
prying eyes.
3. It helps the organisation directly by maintaining product quality and productivity.
4. It can be used to uphold environmental standards, ensuring that the environment is
safe and long-lasting.
Disadvantages of Standardisation:
1. Stagnation
2. Failure to communicate.
3. Difference in equipment
4. Cultural differences
Codification:
CIMA defines coding as, “a system of symbols designed to be applied to a classified
set of items, to give a brief accurate reference facilitating entry, collation and analysis”.
Codification Techniques:
There are various widely used techniques for coding materials. These techniques
include alphanumeric, decimal, numerical, mnemonic, alphabetical, and colour coding.
Alphabetical Coding of Things:
As the name suggests, this technique uses alphabetical letters as codes to make it
simple and quick to identify materials. The simplest method is to codify materials
alphabetically, although this method lacks flexibility.
Codification using mnemonics:
This is an adaptation of the alphabetical scheme. It entails using alphabetical letters to
generate memory-enhancing codes. Because it aids personnel in memorising the items at a
store, mnemonic codification is easy to use. However, the technique is rigid and might cause
confusion if the same codes are given to numerous things.
Numerical Codification:
Numbers are employed in numerical codification, often referred to as straight number
codification, to represent various things in a store. To store items of a similar nature, a string
of numbers may be assigned. Due to its versatility, numerical codification of materials is the
most straightforward and popular way in manufacturing businesses.
Decimal Codification:
Another numerical method of codification, with the distinction that decimals are
utilised here rather than whole numbers. It is typically employed in firms that employ a
computerised accounting system. This method uses whole numbers to represent the primary
group or the master group and decimals to represent the sub-groups.
This approach has the benefit of adaptability and infinite scalability. Additionally, the
numbers are simpler to read and recall when decimal points are used. The intricacy of
decimal codification is, however, its fundamental drawback. Additionally, there is a chance
that decimals will be missed or entered incorrectly.
Alphanumeric Codification:
This method, also referred to as the alpheno-serial system or the combined coding
system, employs both alphabetical letters and digits to code storage objects.
The more general categories of shop goods are denoted by alphabetic characters,
whereas the specific categories are denoted by numbers.
Colour Codification:
As the name suggests, this system uses coloured marks to convey code numbers.
Codifying metals, cables, tiny component pieces, oil drums, and several other materials is
possible with this technique. This strategy allows for a quick way of identification at a glance
if the colours being utilised are not too intricate. Color coding can be used, for instance, as
follows when referring to metal:
Iron for Green
Steel for Blue
Red denotes copper
Though straightforward, this approach isn't flexible. In other words, it becomes
impossible to add more colours as the number of store items rises.
Advantages of Codification:
An appropriate codification needs to be developed in order to achieve the following
benefits: Accurate identification, avoidance of duplication of things, cost savings from labour
and time, ease of location, and proper operation of the storehouse.
1. To stay away from wordy and lengthy descriptions.
2. To be correctly and logically identified.
3. To avoid repetition.
4. To uniformly define objects.
5. To limit the variety.
6. To have a productive purchasing division.
7. To improve accounting and recording efficiency.
8. To make mechanical recording easier and more convenient.
9. To make pricing simpler and easier.
10. To have a suitable indexing and locating system.
11. To guarantee a thorough and accurate inspection.
12. To carry out production as scheduled.

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