Page 8 - DMGT525_MATERIALS_MANAGEMENT

Unit 1: Materials Management: An Introduction

As a Basic Function of the Firm: Materials management is one of the following six functions Notes
performed by any firm:
Design : Converts concept into specification
Finance : Acquires and controls capital

Personnel : Manages human resources
Materials : Planning, acquisition and logistics of materials, service and equipment
Production : Converts materials into goods and services
Marketing : Distributes goods and services to buyers

The contents, supervision and importance of materials management differ from industry to
industry.
As a Manager of Outside Manufacturing: The parts that go into making of end products can
come from two sources: in-house production or purchase from outside. Earlier, firms themselves
produced most parts that they needed for assembly of end products. Gradually, firms started
identifying, cultivating and exploiting their core competencies “doing the things they knew
how to do the best” and outsourcing the rest. This marked a significant increase in the percentage
of purchased parts.

Notes Materials manager is answerable for purchase of items manufactured outside just
as production manager is answerable for parts produced in-house. Hence, materials
manager is rightly called manager of outside manufacturing.

As a Controller of Cost: Major costs related with material include ordering or set-up costs,
carrying costs, logistics costs (transportation and warehousing) and shortages or surpluses costs,
besides the cost of purchased items. Historically these costs were not accounted separately and
were generally included in overheads. As such, their impact was not felt. But now their combined
contribution is measured, which is quite significant and provides good scope for cutting cost.

Self Assessment

Fill in the blanks:
1. Materials management is an essential …………….. function.
2. Materials management creates a competitive edge by delivering ……………. product.

3. Material is one of the four basic ……………….. of any industrial or business activity.
4. It is an organizational concept in which a single manager has …………….. and
…………………. for all activities principally concerned.

1.2 Objectives of Materials Management

Materials management’s considerable effect on profits demands that its objectives be derived
from the general business objectives “maintaining competitiveness” and “satisfactory
profitability”. The main objectives of materials management are as follows:
 To ensure continuous uninterrupted production or operation or project work by
maintaining a steady flow of materials;

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