Page 13 - DMGT525_MATERIALS_MANAGEMENT

Materials Management

Notes Close cooperation is required above all in:

 Planning production and materials requirements;
 Coordinating production control and materials scheduling;
 Solving bottleneck problems by subcontracting measures;
 Deciding about call-off inventories to be held by suppliers and consignment inventories
kept in-house.
By means of effective cooperation between materials management and production, one can
succeed in reducing the level of capital tied up in inventories as well as reducing materials costs.
This sort of cooperation is an imperative prerequisite for total control of the flow of materials
from the suppliers to the user within the company and via the processing points in production
to the users within allocation for marketing and thus for fast order processing.

1.4.3 Materials Management and Sales

Integrated materials management is not least of all a supply system for sales. It is oriented
towards fulfilling the customer orders obtained by the sales department, at the lowest possible
cost. If one regards materials management in this light, then it in fact exhibits manifold connections
with sales which necessitate close cooperation here as well, indeed in several respects:
 In deciding on customer service towards the market;
 In formulating the sales plan and pursuing fulfillment of the plan;

 In deciding about transport facilities and also transport and traffic processing;
 In the administration of customer orders which must be linked with materials management;
 In deciding about commissioning, packaging and dispatching to the customers.
Effective cooperation between materials management and sales is a prerequisite on the one
hand for the lowest possible level of capital tied up in stock, and on the other hand, for high
customer services in the face of a nowadays volatile market demand and for flexibility in
supplying customers. Examples from practical experience show that close cooperation between
sales and materials management and the latter being geared towards the company’s marketing
strategy can provide a company with important competitive advantages.

1.4.4 Materials Management and Finance & Accounting

Connections between materials management and the finance and accounting departments arise
as a result of the fact that materials management is mostly responsible for the greatest bulk of
costs within a company and has a considerable influence on the level of its current assets. From
this importance of materials management to the company profitability and liquidity and hence
to the key factors of finance and accounting, comes the necessity for coordination with both
departments. In details, this involves:

 Planning justifiable levels of inventory investments for the purpose of annual budgeting;
 Controlling inventory status during the course of the years;
 Implementing inventory reduction projects;
 Carrying out analysis for make or buy decisions;

 Deciding on investments in transport and storage facilities;

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