1-Integrated Materials Management

8/11/2019 1-Integrated Materials Management

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Integrated Materials Management

Definition

“ Materials Management is a function

responsible for- coordination of planning, sourcing,

purchasing, moving, storing & controllingthe materials in an optimum manner

- so as to provide a pre-decided service levelto the customer at a minimum cost”



Broad Functions

Materials Planning & Programming- Purchasing- Inventory Control- Receiving- Storekeeping- Materials Handling

- Scrap & Surplus Disposal



Objectives of Materials Management

Primary Objectives

- Right Price

- High Turn-over

- Low Procurement & Storage Cost

- Continuity of Supplies




- Consistency in Quality

- Good Supplier Relations

- Development of Personnel

- Information System




Secondary Objectives

- New Materials & Products

- Make or buy decisions

- Standardization & Variety Reduction




- Product Improvement

- Forecasting

- Inter-department Harmony



Organization structure of materials functions As subordinate function reporting to other functional Head

Chief Executive

ProductionManager

AlsoProduction Control

& Stores

PurchasingManager

AlsoStock Control

Sales ManagerAlso

TransportationOther Manager



Organization structure of materials functions

As independent management function at par with anyother management function reporting to Chief Executive

Chief Executive

Production Manager

MaterialsManager

PurchasingStores

Stock ControlTransportation

Sales Manager Other Manager



Which of the two organizational structureto be adopted depends on the factors:

- How important are MM activities to theunit and for that matter to organization?

- Will Unit suffer substantially if MM doesnot perform effectively as it ought to?

- How much funds blocked in inventory andconstraints of working capital?



Which of the two organizational structure tobe adopted depends on the factors:

- How important it is that MM activities beclosely coordinated with O&M, others &Accounts Department?

- Is it essential that materials cost becontrolled tightly and effectively?

- What is absolute value of purchases?

- What is the range and variety of materialspurchased?




- What is the percentage of materials costin total production cost?

-What are the market conditions

- And last but not least, do we intendto develop a professional team ofMaterials personnel to effectivelycontribute in overall organizationalobjectives?




- Organization will certainly be benefitedfrom a higher caliber, creative MMD,should it be treated as a profit- makingcentre that receives close attentionof general management.

- It is, however, realized that Accounts,

Production, Engineering or MaintenanceDeptts have their own priorities, whichare in conflict with basic objectives ofsound Material Management




- Modern tendencies as such are to de-linkmaterials functions from these Deptts.Integrated Materials Management functionis recognized as top managementfunction and Head of MMD reports directlyto head of unit or organization.

Even if Materials is primarily treated asservice activity, it should report to thatservice head that it serves most




Integrated Materials ManagementApproach:

This is essentially an organizationalconcept that brings together, under oneorganizational component i.e. MaterialsManagement Department, theresponsibility for planning, purchasing,transportation, storing, disbursing andcontrolling materials .





Advantages of integration of materialsmanagement functions:

Improved supplier relation results fromensuring delivery schedule on the basis oflatest inventory position and production

requirements

Paper work and duplication of workreduced through better coordination andproper communication among personsperforming the related functions.



Advantages of integration of materialsmanagement functions:

Improved customer services often resultsfrom reduced delivery time.

Reduced overall cost of materials as aresult of using more scientific and

economical methods in planning,acquisition, storage and control ofmaterials.



Centralization Versus Decentralization ofMaterials Functions:

A company with several operating plantfaces one additional organizationalproblem.

- To what extent should materialsmanagement functions be centralizedat corporate level?

There may be complete centralization orcomplete decentralization or develop anorganization somewhere between thesetwo extremes.




Factors to be considered: Similarity of the classes of materials used in eachof plant. If a firm’s plants use different materials,centralization offers only minimal benefits,

Size of each individual materials department.Centralization is more advantageous when afirm’s individual plants do not have largematerials department.




Geographical dispersion of plants: Closurethe firm’s plant are located geographically,the feasible centralization becomes.

Geographical dispersion of plants: Closurethe firm’s plant are located geographically,the feasible centralization becomes.

No and size of plants: If there are largeNo of plant of fairly big size, centralizationwill become difficult & create moreproblems in availability of materials thanany gains.




Advantages of Multi-plantCentralization:

Scope of greater specialization.Consolidation of materials requirementsand economy through bulk purchases.

Better coordination with suppliersLesser buying cost.




Advantages of Multi-plantDecentralization:

Better coordination with operatingdepartments.

Greater flexibility with operatingdepartments.

Effective use of local suppliers andfacilities.




Greater autonomy and accountability.

Lesser lead- time and resultantreduction in inventories.

Faster decision on purchases andclarifications to vendors.




Faster payment to the supplier.

Lesser stock-out and rush purchases.

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1-Integrated Materials Management