Notes
MATERIALS MANAGEMENT
According to bailey and farmer materials management is the “management of the flow of materials into an organization to the point where, those materials are converted into the firm’s end product.”
Objectives of materials management
Low Prices:
Obtaining the least possible price for purchased materials is the most obvious purchasing objective and certainly one of the most important. If the purchasing department reduces the prices of the items it buys, operating costs are reduced and profits are enhanced. This objective is important for all purchases of materials and services, including transportation. High inventory turnover:
When inventories are low in relation to sales, less capital is tied up in inventories. This in turn, increases the efficiency with which, the companies capital is utilized, so that, return on investments is higher. Also, storage and carrying costs of inventories are lower when the turnover is high.
Low cost acquisition and possession:
If materials are handled and stored efficiently, their real cost is lower. Acquisition and possession costs are low, when the receiving and stores departments operate efficiently. They are also reduced when shipments are received in relatively large quantities (thereby reducing the unit cost of handling) but they are increased if the average inventories are boosted with the large shipments.
Continuity of supply:
When there are disruptions in the continuity of supply, excess costs are inevitable. Production costs go up, excess expediting and transportation costs are likely, and so on. Continuity of supply is particularly important for highly automated processes, where, costs are rigid and must be incurred even when production stops because of unavailability of material.
Consistency of quality:
As pointed out earlier, quality of the end product depends on materials that go into it. When materials purchased are homogeneous and in a primitive stage (e.g. sand and gravel), quality
According to bailey and farmer materials management is the “management of the flow of materials into an organization to the point where, those materials are converted into the firm’s end product.”
Objectives of materials management
Low Prices:
Obtaining the least possible price for purchased materials is the most obvious purchasing objective and certainly one of the most important. If the purchasing department reduces the prices of the items it buys, operating costs are reduced and profits are enhanced. This objective is important for all purchases of materials and services, including transportation. High inventory turnover:
When inventories are low in relation to sales, less capital is tied up in inventories. This in turn, increases the efficiency with which, the companies capital is utilized, so that, return on investments is higher. Also, storage and carrying costs of inventories are lower when the turnover is high.
Low cost acquisition and possession:
If materials are handled and stored efficiently, their real cost is lower. Acquisition and possession costs are low, when the receiving and stores departments operate efficiently. They are also reduced when shipments are received in relatively large quantities (thereby reducing the unit cost of handling) but they are increased if the average inventories are boosted with the large shipments.
Continuity of supply:
When there are disruptions in the continuity of supply, excess costs are inevitable. Production costs go up, excess expediting and transportation costs are likely, and so on. Continuity of supply is particularly important for highly automated processes, where, costs are rigid and must be incurred even when production stops because of unavailability of material.
Consistency of quality:
As pointed out earlier, quality of the end product depends on materials that go into it. When materials purchased are homogeneous and in a primitive stage (e.g. sand and gravel), quality