Page 193 - DMGT525_MATERIALS_MANAGEMENT

Materials Management

Notes is done on a quarterly basis. This is because the materials planner, at the beginning of every
quarter, will find that some materials are in short supply and some in excess, owing to errors in
forecasting. Thus operating on a quarterly basis help to rectify these errors. At the same time,
since quarterly periods are sufficiently long enough in most cases, realistic ordering can be done
through suppliers.

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Caution Effective inventory control production plans should be converted into materials
plans. This enables the management to clearly define the quantity and time schedule of
the requirement.
In integrated materials management, production and materials planning get a pride of place.
Inventories consume a larger part of working capital. For best possible utilization of available
capital resources materials’ planning is resorted to. It enables the management to anticipate the
further materials needs, necessary capital requirement for meeting out such needs and external
and uncontrollable difficulties which may come in the way of fulfilling the future materials
demands. Such anticipation helps in managing the materials in a manner in which it enables the
organization to accomplish the given objectives. In fact, materials planning provide a mechanism
for inventory control.

14.4.1 Need for Materials Planning

Planning is the essence of any project. Nothing efficient can be visualized without sensible and
effective planning. Planning motivates people and serves as an effective control devices. Materials
planning cannot be an exception. Production Department asks for raw materials, components,
spares, consumables and other accessories to manufacture a product to be marketed. Materials
planning is done in order to keep the production department active and alive. Materials planning
help in effectively moving the whole organization in the right direction.
Materials planning is done at all stages and at all levels of the management. The top management
is usually engaged in planning for non-programmed decisions Such as import policy, foreign
exchange availability, credit squeeze and other monetary and fiscal policies. The middle-order
management engages itself in planning for programmed decisions which are usually of routine
nature such as hypothecating inventory for working capital, delivery schedules, quantity
requirements, etc.

Materials planning is however based on certain feedback information and reviews. Sales
forecasting, production programming and materials planning are interconnected. In fact sales
forecasting and production programming are two major functions which normally precede the
materials planning. There should be proper feedback information and periodic review in order
to have better materials planning.
“Materials planning,” say P. Gopalakrishnan and M. Sundaresam, “is the scientific way of
determining the requirement of raw materials, components, spares and other items that go into
meeting production needs within the economic investment policies”. As the definition goes
materials planning is a function and is a system which evolves methodology to plan the
requirements of materials in a scientific manner. But it cannot function in itself. Neither can it be
treated in isolation. It is positively related with production which follows market conditions
and sales forecasts. Further it cannot ignore the economy and the investment policy of the
organization.

14.4.2 Techniques of Materials Planning

The under mentioned two techniques are usually used for materials planning:

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