Materials Management The objective of materials management is to plan and control the materials

inventory of the company. A manufacturing firm must have sufficient inventories on hand to meet its
production needs and yet avoid excessive inventory levels. Every dollar invested in inventory is a dollar
that is not earning a return. Furthermore, idle inventory can become obsolete, lost, or stolen. Ideally, a
firm would coordinate inventory arrivals from suppliers such that they move directly into the production
process. As a practical matter, however, most organizations maintain safety stocks to carry them
through the lead time between placing the order for inventory and its arrival. We see from Figure 1-8
that materials management has three subfunctions: 1. Purchasing is responsible for ordering inventory
from vendors when inventory levels fall to their reorder points. The nature of this task varies among
organizations. In some cases, purchasing is no more than sending a purchase order to a designated
vendor. In other cases, this task involves soliciting bids from a number of competing vendors. The nature
of the business and the type of inventory determine the extent of the purchasing function. 2. Receiving
is the task of accepting the inventory previously ordered by purchasing. Receiving activities include
counting and checking the physical condition of these items. This is an organization’s first, and perhaps
only, opportunity to detect incomplete deliveries and damaged merchandise before they move into the
production process. 3. Stores takes physical custody of the inventory received and releases these
resources into the production process as needed. Production Production activities occur in the
conversion cycle in which raw materials, labor, and plant assets are used to create finished products.
The specific activities are determined by the nature of the products being manufactured. In general they
fall into two broad classes: (1) primary manufacturing activities and (2) production support activities.
Primary manufacturing activities shape and assemble raw materials into finished products. Production
support activities ensure that primary manufacturing activities operate efficiently and effectively. These
include, but are not limited to, the following types of activities: