Page 177 - DMGT525_MATERIALS_MANAGEMENT

Materials Management

Notes Self Assessment

Fill in the blanks:
1. The evaluation of ……………...........… can either be done by external agencies or internally.
2. The user-departments evaluate the materials function in terms of the number and the
duration of the ……………...........…
3. External consultants evaluate the materials management systems to suggest
……………...........…

13.2 Difficulties

Before proceeding to discuss the process of evaluation, it is desirable to understand the
background in which the materials manager operates. While all the managerial functions like
production, marketing, etc., as well as a large number of other professions in the world are
evaluated on the basis of their achievements, materials management is one of the few professions
which is judged by failures or stock-outs. It should also be emphasized that the integrated
concept of materials management is hardly a decade old and hence there could be misjudgments
on the part of the materials manager. In a controlled economy like India’s, it is increasingly
difficult to procure materials as per well-known principles. The lead time is invariably high
because of administrative controls and procedures. What is worse in some firms, the materials
manager is held responsible for the total inventory, including raw material, work-in-progress,
finished goods and obsolete items, even though he can control only the raw materials. In view
of all this, goals are difficult to set, hard to achieve and hence impractical to measure, as the ideal
conditions do not exist in practice. The concept of MBO or management by objectives can also be
used for goal setting and evaluation purposes.



Caselet Materials Management

hen manufacturing was in its infancy, companies found it difficult to keep a
steady supply of the materials needed to keep the machines roaring and the
Wproducts rolling off the assembly line. Some companies chose to order an
abundance of stock which cost them more in warehouse space and sometimes left them
holding a large quantity of unused inventory or they tried to predict accurately when they
needed to re-order based on current production levels. While both methods sometimes
paid off, neither took into consideration the variability of supply and demand. These
situations were known as “Push” systems and were common up until World War II.
The opposite of “Push” systems are “Pull” systems. In a “Pull” system, reorders are based
on need not on anticipation. For example, if a grocer has twelve cartons of orange juice for
sale on the shelf and all but three of them are sold, he knows to go back into the warehouse
and bring out another 9 cartons. He doesn’t try to determine how long those cartons will
last nor does he put out 30 cartons just in case. In manufacturing, “Pull” systems allow
companies to save money on excess inventory and so they were popular, but they weren’t
full-proof. Delays in communication and slow lead-times sometimes prevented them
from getting their supplies before they ran out.
During World War II, the concept of the reorder-point was developed. Researchers
recognized the need for a materials management strategy that took into consideration the

Contd...

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