Material Management

1. MATERIAL MANAGEMENT & INVENTORY MANAGEMENT
 Material management is simply the process by which an organization is
supplied with the goods & services that it needs to achieve its objectives of
buying, storage & movement of materials.
 The material requirements planning, purchasing, inventory planning,
storage, inventory control, material supply, transportation & material
handling are the activities of materials management.
 Before the production begins it is necessary to ensure availability of all the
types of materials needed for production & its supply at the various
production centers.
Importance of Material Management
1) Greater promise as a cost reducing device.
2) Result in improved production capacity of plants.
3) Saving of labour time.
4) Reduction in inventories & storage space.
5) Reduction in damage to materials.
6) Smooth flow of production.
7) Easier production control.
8) Reduced employee fatigue.
Scope of Material Management
1. Material planning & control.
2. Purchasing Function.
3. Stores Management Function.
4. Inventory Control Function.

2. 5. Other related activities.
Functions of material management
(A)PRIMARY FUNCTIONS :
(1) Materials Requirements Planning (MRP) :-
Planning of materials requirements in manufacturing is a necessary function in
any organization, as inventory of materials involves about 60% of the total
investment of the organization.
The MRP is a technique used to plan the materials starting from the raw
materials, finished parts, components, sub-assemblies and assemblies as per Bill
of Materials (BOM) to procure or produce them to support a Master Production
Schedule (MPS).
(2) Purchasing :-
All the organizations need an efficient & economic purchasing and procurement
of its various supplies of materials from the suppliers.
The Purchasing function can be stated as follows :-
1) The requisition of material is necessary by proper authority to initiate its
purchase.
2) To select proper supplier for the materials requisitioned, before placing an
order.
3) To negotiate about the price of the material form the supplier & it will be
purchased at the cheapest price.
The quality of material must be assured & should not be compromised with the
cost of the material.
Inventory Planning & Control :-
(4) Finished parts & components :-

3. (5) Ascertaining & Maintaining the flow & supply of materials.
(6) Quality Control of Materials.
(B) SECONDARY FUNCTIONS :-
(1) Standardization & Simplification :-
(2) Design & Development of the Product :-
(3) Make & Buy Decision :-
(4) Coding & Classification of Materials :-
(5) Forecasting & Planning :-
Inventory management
 Inventory management is primarily about specifying the size & placement
of stocked goods.
 Inventory management is required at different locations within a facility or
within multiple locations of a supply network to protect the regular &
planned course of production against the random disturbance of running
out of materials or goods.
 It is a systems & processes that identify inventory requirements, set
targets, provide replenishment techniques and report actual and projected
inventory status.
 It involves a retailer seeking to acquire & maintain a proper merchandise
assortment while ordering, shipping, handling and related costs are kept in
check.
Inventory control
Inventory control is a planned approach of determining what to order, when to
order and how much to order & how much to stock so that costs associated
with buying and storing are optimal without interrupting production and sales.

4.  Inventory control basically deals with two problems :-
(i) When should an order be placed ?
(ii) How much should be ordered?
 The scientific inventory control system strikes the balance between the
loss due to non-availability of an item and cost of carrying the stock of an
item.
Reasons for keeping inventories
1) To stabilize production.
2) To take advantage of price discounts.
3) To meet the demand during the replenishment period.
4) To prevent loss of orders.
5) To keep pace with changing market conditions.
Importance of inventory control
1) Improvement in customer’s relationship because of the timely delivery of
goods & service.
2) Smooth & uninterrupted production and hence no stock out.
3) Economy in purchasing.
4) Eliminate the possibility of duplicate ordering.
Objectives of inventory control
1) To make sure that financial investment in inventories is minimum.
2) Efficient purchasing, storing, consumption and accounting for materials is
an important objectives.
3) To ensure timely action for replenishment.
4) To provide a reserve stock for variations in lead times of delivery of
materials.

5. Managing Facilitating Goods
Wholesaler Distributor Retailer
Production
Delay
Wholesaler
Inventory
Shipping
Delay
Shipping
Delay
Distributor
Inventory
Retailer
Inventory
Factory Customer
Replenishment
order
Replenishment
order
Replenishment
order
Customer
order