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Materials Management




                      Notes         to the price. These costs are called ‘cost in materials’ as distinct from ‘cost of materials’. When we
                                    speak of materials management, we are not merely referring to the control of the cost of materials
                                    but of each and every type of cost that is incurred on materials, as indicated above, which have
                                    to be reduced and controlled.

                                    1.1 Meaning and Scope of Materials Management

                                    Materials management is an essential business function. It is concerned with planning, acquisition
                                    and flow of materials within the supply chain. Material is one of the four basic resources.


                                           Example: Labor, Material, Equipment and Capital of any industrial or business activity.
                                    For a long time, it was regarded as a routine function with less importance. But over the years,
                                    with accelerating economic, technological, societal and environmental  changes, this function
                                    has become more important, more complex, and more professional.





                                       Notes  Materials management creates a competitive edge by delivering quality product(s)
                                       or service on time  and offering lower cost by cutting its own  cost as well as  cutting
                                       purchased item costs, which  account for over fifty  per cent of the sales revenue, thus
                                       imparting superior  value.

                                    However, it is complex as it confronts various issues including outsourcing, global sourcing,
                                    size of supply base, shorter Lead time, smaller  lot size, price determination, mode/carrier
                                    selection, maintaining  long-term relationship  with  suppliers,  choosing the  right  type  of
                                    information technology, legal issues, etc. The following definition of Materials Management
                                    has been accepted by the International Federation of Purchasing and Materials Management.
                                    “The materials management is a total concept involving an organizational structure unifying
                                    into a single responsibility, the systematic flow and control of material from identification of
                                    the need through customer delivery.”
                                    Included within the concept are the material functions of planning, scheduling, buying, storing,
                                    moving and distributing. These are logically represented by the disciplines of production and
                                    inventory control, purchasing and physical distribution. The objective of materials management
                                    is to contribute to increased profitability by coordinated achievement of least materials cost.
                                    This is done through optimizing capital investment, capacity and personnel, consistent with the
                                    appropriate customer service level.
                                    Another definition adopted by  the National  Association of  Purchasing Management  (USA)
                                    reads as follow:
                                    Materials Management: It is an organizational concept in which a single manager has authority
                                    and responsibility for all activities principally concerned with the flow of materials into an
                                    organization. (Purchasing, production, planning  and scheduling, incoming traffic, inventory
                                    control, receiving and stores normally are included.)

                                    In these definitions of materials management one will notice the concept that all authority and
                                    all responsibility for the acquisition and control of materials should be coordinated through
                                    one executive authority, the materials manager. The different scopes of materials management
                                    can be viewed from three perspectives as discussed below:







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