Material Management
Contents:
- Definition,
- Objective,
- Principle of Material Management,
- Element of Material Management,
- Functional Areas of Material Management,
- Advantage of material management,
- Phases of material management,
- Department of material management – EPO ABC VAD
Definition:
Materials management involves planning, programming, organizing, directing,
controlling, and coordinating the various activities concerning the materials.
Materials management is the management of the flow of materials into an
organization to the point, where, those materials are converted into the firm’s
end product(s) –Bailey & Farmer
Materials management is the grouping of management functions supporting the
complete cycle of material flow, from the purchase and internal control of
production materials to the planning and control of work in process to the
warehousing, shipping, and distribution of the finished product. –Thomas F.
Wallace & John R. Dougherty
Objective
- To gain economy in purchasing
- To satisfy the demand during period of replenishment
- To carry reserve stock to avoid stock out
- To stabilize fluctuations in consumption
- To provide reasonable level of client service
Functions of Material Management
- Materials planning and programming
- Raw material purchase
- Receiving, store keeping, and warehousing
- Issuing of material ✓ Inventory control
- Value engineering ✓ Transportation of materials
- Vendor development ✓ Vendor rating
- Disposal of scrap and surpluses Functions of Materials Management
Principle of Material Management
- Effective management & supervision: it depends on managerial functions of:
- Planning
- Organizing
- Staffing
- Directing
- Controlling
- Reporting
- Budgeting
Sound purchasing methods
Skillful and hard poised negotiation
Effective purchase system
Should be simple
Must not increase other costs
Simple inventory control programs
Element of Material Management
- Demand estimation
- Identify the needed items
- Calculate from the trends in Consumptions during last 2 years
- Review with resource constraints
Functional Areas of Material Management
- Purchasing
- Central service supply
- Central stores
- The print shops
- The pharmacy
- Dietary & Linen services
Advantage of material management
- Material cost can be low.
- Better handling of materials.
- Reduction in duplicate orders.
- Materials will be on the side when need.
- Risk of inventory loss minimize.
- Stock reduction.
- Improvement in labor productivity.
- Reduction of loss of time of direct labor or labor saving.
- Quality control.
- Better relations with supplier.
- Better cash flow managements.
- Control of manufacturing cycle.
- Material congestion in storage places avoided.
- Improvement in delivery of product.
Phases of material management
- Planning
- Material
- Utilization Physical
- Control/ Follow up
Department of material management Economical Order Quantity (EOQ)
We want to determine the optimal number of units to order so that we
minimize the total cost associated with the purchase, delivery and
storage of the product.
- Basic EOQ model
- Production quantity model
Assumptions of Basic EOQ Model
- Demand is known, constant, and independent
- Lead time is known and constant
- Order quantity received is instantaneous and complete
- No shortage is allowed
Department of material management
Classifying Inventory Items ABC Classification (Pareto Principle)
In any Retail organization there are large numbers of inventories to be maintained. It is
not practical to have very stringent inventory control system for each & every item. So
with the modus of having an effective Purchase & stores control we implement ABC
Inventory Classification model Known as Always Better Control (ABC) based upon Pareto
rule ( 80/20 rule).
ABC Analysis Divides inventory into three classes based on Consumption Value
Consumption Value = (Unit price of an item) (No. of units consumed per annum) Class
A - High Consumption Value Class B - Medium Consumption Value Class C - Low
Consumption Value
VAD
- Based on critical value and storage cosr of and item, it is a subjective analysis.
- Vital – Shortage can not be tolerate
- Essential - Shortage can be tolerate for short period
- Desirable – Shortage will not adversely affect, but may be using more resource.These must be strictly scrutinized
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