Page 9 - DMGT525_MATERIALS_MANAGEMENT

Materials Management

Notes  To achieve the above objective in an efficient and economical manner;

 To effect economies in the cost of materials by purchasing materials of the right quality, in
the right quantity, at the right time, from the right source, at the right price;

 To affect economies in the costs incurred on materials after they have been purchased,
through storage, processing and warehousing, till the finished goods ultimately reach the
customer. These economies contribute towards cost thereby leading to higher profits;

 To reduce working capital requirements through proper and scientific inventory control;
 To be alive to the changes in the market in respect of new products; and consequently;
 To improve the quality of manufactured goods by use of better raw materials or components
and thereby the increase the competitiveness on such goods put of sale;
 To increase the competitiveness of manufactured goods by making it possible to reduce
their prices through cost reduction, especially by value analysis;

 To save foreign exchange through import substitution and economizing on foreign
purchases;
 To ensure cooperation among all departments of the enterprise to meet materials
management objectives both at the corporate and functional levels and to ensure proper
coordination in respect of such activities;

 To conserve materials resources within enterprise, thereby contributing to the conservation
of national resources.

Self Assessment

Fill in the blanks:

5. Materials management’s effect on profits demands that its objectives be derived from the
general business objectives …………………… and ……………………. .
6. Material management’s objective is to save ………………. through import substitution
and economizing on foreign purchases.

1.3 Significance of Materials Management

The importance of materials management cannot be overemphasized in this complex industrial
world. It affects not only a particular industry but the entire economic activity of a whole nation.
Material contributes to the quality of the end product. The amount spent on materials is increasing
in relation to the expenditure on other inputs. Materials add value to a product.

Did u know? The margin between the values of raw materials and the finished products is
known as the value added by production.
Conservation of materials and their availability for prosperity is one of the social responsibilities
of business hence, materials management is one of the centers of accountability for performance.
Reduction in the materials cost by about 5 per cent is always possible through an efficient
management of materials. Evidence is there to prove that skilful and imaginative management
had been able to save even more than 5 per cent of the total cost of the final product.

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