Page 178 - DMGT525_MATERIALS_MANAGEMENT

Unit 13: Evaluation of Materials Management

variability of supply and demand (as the “Pull” system does) but which allows for orders Notes
to be placed in plenty of time for the goods to arrive before the stock is depleted. The
Reorder-Point takes into consideration lead-times for the creation of those materials so
that companies don’t wait until the last minute to reorder. Instead, when their stock
reaches a certain level (determine through complex mathematical computations), they
place an order.
As “Pull” systems were being refined by researchers, an additional advancement in
materials management was devised. This advancement was called Period Batch Control,
and it allowed businesses to set a fixed lead-time for their productions. Companies were
able to do this by scheduling the creation of the different components that went into the
finished product. For example, one week the supplies would arrive and two weeks later
the components would be completed and would be moving on to be turned into
sub-assembly parts.

Batch Control started off primitively, but in the 1970’s the automotive industry saw
incredible success by computerizing the scheduling necessary for developing these fixed
lead-times. Today, batch control is central to Materials Requirements Planning (MRP)
which uses software to determine these lead-times so that “Pull” systems can be more
effectively accommodated.
Obviously, materials management has had a long history that began with an inefficient
method of guessing how much stock would be needed. Today’s improved, technology-
based approach literally allows companies to tell vendors the moment they hit the reorder
point and thanks to improved batch control strategies those reorder points are more
accurate than ever as well. This combination of technology and proven effective materials
management strategies have been an important asset to businesses since their development.

Efficient materials management not only keeps the business running smoothly but also
helps companies maintain improved relationships with the members of their supply
chains, cut down on their costs, and satisfy the demands of their customers. All of which
have become increasingly important because of the competitive market most organizations
are faced with today. These benefits are not optional; they have become mandatory for
companies that have been successful in their fields.

Source: http://www.epiqtech.com/inventory_Materials-Management.htm

Self Assessment

Fill in the blanks:
4. In a controlled economy like …..............……….., it is increasingly difficult to procure
materials as per well-known principles.
5. The …..............……….. is invariably high because of administrative controls and procedures.
6. The concept of …..............……….. is used for goal setting and evaluation purposes.

13.3 Process and Criteria

The process of evaluation can be visualized on various measures, either on temporal comparison
basis, i.e., performance over financial or calendar years—or between similar companies—
interfirm comparisons—over the same year. The criteria of evaluation, obviously, depend on
the corporate objectives, company culture, functions of materials management, evaluation process
of other departments, etc., and hence could vary, and do vary, from company to company. The

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