Mba 2nd Sem Mlm Notes (Materials Management)

Topics: Management, Inventory, Quality control Pages: 12 (3657 words) Published: June 26, 2012


Putting in the simplest terms materials management is about moving the materials within an organization. What do “materials” mean? Materials can basically be defined as those objects or things that are to be moved in order to produce goods. Material is one of the 5M’s that a manager has at his command, the other being Men, Machine, Methods and Money. Materials could be in the form of raw materials, paperwork, messages or information etc. So materials can be both tangible and intangible. You see the newspaper boy delivering the newspaper to your doorstep everyday or the milkman delivering the milk packets to you. These are tangible materials. There is also some material moved when you watch a movie on your television or when you receive a phone call. These are the intangible materials that are moved. So materials management is an important function of every business. The better is the materials management in a company the better is the health of that company.

Materials can be put in three categories. First category is purchased materials like the raw materials, components, spare parts and items that are used and do not appear in the end product. The second category is of in-process materials or the materials in the semi-finished stages and lastly the finished goods that are ready for customers. One has to manage these materials. The aim of this management is to obtain the materials at the minimum possible price while maintaining quality also and to maintain the inventories in such a way that minimum cost is incurred while maintaining adequate materials for the production process.

Let us see what materials management actually means. It is defined as a function that integrates purchasing, storage, inventory control, materials handling and standardization etc in an organization to achieve its objective of reducing the costs. Every organization wishes to maximize its profit by maximizing its production and minimizing the cost of production. The average material cost in a manufacturing setup is around 50-70% of the total expenditure, which further goes up if one takes into account the inventory costs, storage, waste and other factors etc. It is therefore imperative for an organization to have a sound materials management with an objective to reduce material costs, control inventories, ensure uniform flow of materials and maintain good relations with suppliers. Materials Management has to do activities related to planning, accusation and utilization of materials. Materials Management as a subject started picking up form early sixties and has gained importance thereafter. Since the amount of money incurred on materials is higher than the cumulative amount for machines, men and methods, one has to give high importance to the materials. It is the most feasible area that can offer opportunities for reduction of costs and improvement of profits. Materials add value to the product, as the product quality is directly dependent on the materials used. Materials Management thus can be seen as a system that assures the availability of products to the customers at minimum cost. In a nutshell, we can say that materials management is about making available the right materials in right quantity at a right price on the right time. The functions of the materials management are materials planning and control, purchasing, inventory control, store keeping, material handling, warehousing, standardization & simplification and organization & appraisal of materials. This course has been designed in such a manner so that you get a feel of these functions in the subsequent blocks. Let us discuss them briefly.

1) Materials planning and control: Material requirement lies at the core of successful material management. This function is at the core of all the material requirements in any manufacturing process. 2) Purchasing: This function identifies the sources of...
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