ASSIGNMENT

Name:- Rituparna Bhowmick

Roll no. :- 53 , Section – H (Jan batch 2010-2012)

Subject :- Production and Operations Management

Materials Management

What is materials management?

According to Bethel “Material management is a term used to connote controlling the kind, amount, location,
movement and timing of the various commodities used in and produced by the industrial enterprise.”

Materials are the most important resources for any company since no goods can be produced without them.
Materials management controls the procurement, storage, amount, movement and consumption of materials
that can be used by the company for production purpose. It covers various aspects of materials and supplies
the necessary materials when required for converting them into finished goods.

Activities involved in Materials management(Integrated approach):-

1) Materials planning:
Determines the needs of the consumers in advance, translates sales projection into
production requirements and makes accurate estimation of materials that are required for
production.
2) Purchasing:
Provides constant supply of raw materials , parts, components and consumables to meet
the target of production.
3) Make-or-buy decisions:
Decides which items to be produced at the home plant and which should be obtained from
the outside sources based on the total cost available for the production.
4) Receiving and inspection:
Collects materials and inspects them to ensure their quality.
5) Storage:
Provides right place to store the materials, use proper methods of preservation and also
provides proper security against theft and malpractices.
6) Inventory control:
Maintains optimum investment in inventories and also ensures supplying materials, which
are required for production, at the right time.
 7) Distribution of materials:
Ensures the fastest and efficient supply of materials to the customers.
8) Transportation:
Ensures efficient transportation of incoming and outgoing materials.
9) Disposal of surplus, obsolete and scrap materials :
Analyze the requirement of materials and select the most economical channel to dispose
off the materials that are surplus and are not required.
10) Developing new sources of supply:
Locate, select and develop new sources to supply materials for improving the product
quality and reducing the total cost of production.

11) Import substitution:

Reduces purchasing cost by developing native sources of supply for imported materials
and therefore, saves foreign exchange.
12) Materials research:
Analyses all the factors such as economic analysis, market analysis, price analysis,
transportation analysis etc. that affects the function of materials management.
13) Waste management:
Minimizes wastage of materials by determining the causes for rejection and scrap of
materials.

Objectives of materials management:-

 Maintains steady flow of materials to ensure that the production of the products does not get
interrupted.
 Maintains record of purchase, stores, etc.
 Adopts cost reduction techniques like MRP and value analysis to manage the total cost
required in proper management of materials.
 Provides right materials, for right quality, in the right quantity and at the right to ensure
production of high quality product.
 Implements scientific inventory control techniques to reduce inventory investment.
 Preserves stocks so that any loss of material caused due to deterioration, pilferage can be kept
at minimum.
 Improves product-consumer relationship by producing high quality products.
 Improves firm’s strength in the market by producing the best quality product at lower possible
cost.
 Minimize wastage of materials and therefore reduce operating cost.
 Dump surplus materials that are not required for production process.

Function of material management:-

I. Planning and programming of materials -
Determines the needs of the customers in advance, estimates the materials required
and the time when they are required for production process.
II. Purchasing of materials-
It ensures the uninterrupted supply of raw materials to achieve the production goal.
 III. Inventory control-
It maintains the sufficient inventory level of material to meet customer needs.

IV. Store keeping-

It manages the physical storage of materials.
V. Stores accounting-
It maintains the record of materials to determine the reorder level.
VI. Transportation-
It manages the proper handling and transportation of incoming and outgoing materials.

VII. Materials economics-

It helps reduce the cost incurred while purchasing, tendering, packaging, handling,
moving, storing and inspecting materials.
VIII. Waste management-
It minimizes the wastage of materials by determining the causes of rejection of
materials.

Costs involved in materials management:-

a) Basic :
Cost of material paid by the company to the supplier.
b) Government levies and taxes :
Cost paid to the government like excise duty, sales tax by company.
c) Ordering:
Cost like tendering, stationary, postage, receiving, inspection and bill payment, staff and the
delivery that incurred while purchasing material.
d) Inventory carrying:
Costs such as loss due to deterioration, insurance premium and storage and preservation
expenditure that incurred for maintaining inventory of materials.
e) Packaging:
Cost incurred while packaging of products.
f) Material handling:
Cost incurred while moving and storing the materials.
g) Shipment:
Cost incurred while transporting materials from suppliers to buyers.
h) Insurance:
Premium cost incurred for insuring materials.
Benefits of material management:-
1) It helps in co-ordination between various departments.
2) It helps in the reduction of cost of materials.
3) It helps in optimal decision making and maintains right balance among various conflicting issues.