Materials Management
Summary
TLDRThe script discusses the pivotal role of materials management in the manufacturing sector, emphasizing its impact on organizational costs and supply chain efficiency. It highlights challenges like fluctuating markets, supply discontinuity, and inventory issues. The objectives of materials management include cost reduction, inventory turnover, supply continuity, quality maintenance, staff development, and forecasting to balance future risks and opportunities.
Takeaways
- 🌐 The manufacturing sector is a significant driver of global economies, with materials management playing a crucial role in organizational expenditure and supply chain control.
- 📈 Materials management costs can account for 50-60% of total organizational costs, highlighting its impact on financial metrics.
- 🔄 In the face of fluctuating demands, costs, and globalization, materials management is essential for survival and growth in the manufacturing industry.
- 🛒 The function of materials management has expanded beyond manufacturing to service organizations and non-trading entities like hospitals and schools.
- 📉 Effective materials management is vital for reducing costs, improving profits, and maintaining a competitive edge in the market.
- 🚧 Materials management faces challenges such as supply discontinuity, inaccurate forecasting, and inventory issues in a complex global supply chain.
- 🎯 The primary objectives of materials management include low-price buying, high inventory turnover, supply continuity, and maintaining material quality.
- 🤝 Building strong relationships with external parties like vendors and freight forwarders is a key objective to ensure supply chain reliability.
- 💼 Development of staff within the materials management department is essential for handling diverse responsibilities and contributing to the company's future profits.
- 📊 Keeping accurate records is crucial for materials management to avoid errors that can lead to excess orders and increased costs.
- 🔮 Secondary objectives include assisting in product development, supporting make-or-buy decisions, ensuring material standardization, and cooperating with internal departments.
Q & A
What is the impact of materials management on an organization's financial metrics?
-Materials management significantly impacts an organization's financial metrics as it is responsible for a large portion of the total costs, ranging from 50 to 60 percent. Effective materials management can lead to reduced expenditure, improved profit margins, and better control over the supply chain.
How has the global context influenced manufacturing and materials management?
-The global context has influenced manufacturing and materials management by introducing high competition, global business models, diverse customer requirements, fluctuating markets, and extensive use of internet and communication technologies. This has made supply chains more complex and vast, increasing the importance of effective materials management.
What are the primary objectives of materials management?
-The primary objectives of materials management include obtaining materials at the lowest possible cost without compromising quality, maintaining high inventory turnover, ensuring supply continuity, maintaining material quality, enhancing the firm's goodwill, developing staff, and keeping accurate records.
Why is inventory turnover important in materials management?
-Inventory turnover is important because it indicates how efficiently a company is managing its inventory. A higher turnover rate means that inventory is being sold and replaced more frequently, which can lead to better cash flow and reduced storage costs.
What challenges does materials management face in a global scenario?
-Materials management faces challenges such as supply discontinuity, breakdown of information flow, inaccurate forecasts, demand and supply uncertainty, excess and obsolete inventory, lower inventory turnovers, and poor information flow and data management.
How does materials management contribute to an organization's profit?
-Materials management contributes to an organization's profit by identifying and implementing cost reduction programs, profit improvement programs, and integrated function approaches. It also ensures efficient use of resources and minimizes wastage, which directly impacts the bottom line.
What is the role of materials management in supply continuity?
-Materials management plays a critical role in ensuring supply continuity by managing lead times, safety stocks, advanced planning, and continuous monitoring of supply. It helps prevent stock-outs and maintains a steady flow of materials, which is essential for production and customer satisfaction.
Why is maintaining quality of materials important for materials management?
-Maintaining the quality of materials is important because it ensures that the materials meet customer demand and service requirements. Consistent good quality helps in maintaining the reputation of the organization and can lead to customer loyalty and repeat business.
How does materials management assist in the development of new materials and products?
-Materials management assists in the development of new materials and products by working closely with suppliers, understanding market needs, and collaborating with internal departments like engineering and research and development. It helps in identifying profitable opportunities and ensuring the efficient use of resources.
What is the significance of forecasting in materials management?
-Forecasting is significant in materials management as it helps in managing future demands and risks. It includes forecasting requirements, prices, sales, and competition, which allows organizations to plan ahead and balance their operations with future market conditions.
How does materials management support the 'make or buy' decision?
-Materials management supports the 'make or buy' decision by evaluating all feasible solutions, considering factors like cost, time, expertise, and quality. It provides data and insights that help the organization decide whether it is more efficient to produce materials in-house or to purchase them from external suppliers.
Outlines
🌐 Global Impact of Materials Management
This paragraph emphasizes the critical role of materials management in the manufacturing sector, which significantly influences global economies. It discusses how global business models have evolved due to increased competition, diverse customer requirements, and the widespread use of internet and communication technologies. Materials management is highlighted as a key function that contributes to organizational expenditure and internal costs, with costs ranging from 50 to 60 percent of total costs. The importance of materials management is expanding beyond manufacturing to service and non-trading organizations, necessitating effective purchasing, storage, and usage of materials to minimize costs and wastage, directly impacting profits. The paragraph also outlines the challenges faced in global supply chains, such as discontinuity, information flow breakdowns, inaccurate forecasts, and inventory issues, and sets the stage for discussing the objectives of materials management.
📈 Objectives and Strategies of Materials Management
Paragraph 2 delves into the objectives and strategies of materials management, focusing on primary and secondary goals. Primary objectives include low-price buying to reduce costs without compromising quality, maintaining high inventory turnover for efficient stock management, ensuring supply continuity to avoid production and customer penalties, and maintaining material quality to meet customer demands. It also stresses the importance of enhancing firm's goodwill through good relationships with vendors and developing staff skills for diverse responsibilities. Secondary objectives cover assisting in new material and product development, supporting make-or-buy decisions, ensuring material standardization, cooperating with internal departments, and accurate forecasting to manage future demands and risks. The paragraph underscores the importance of these objectives in achieving a smoothly running business with continuous growth and expansion.
🎯 Summary of Materials Management Goals
This brief paragraph serves as a conclusion, summarizing the primary and secondary objectives of the materials management department discussed in the previous paragraphs. It encapsulates the comprehensive approach required for effective materials management, emphasizing the need for a strategic balance between cost reduction, quality maintenance, supply chain continuity, and staff development to ensure the overall success and profitability of an organization.
Mindmap
Keywords
💡Materials Management
💡Global Supply Chain
💡Inventory Turnover
💡Supply Continuity
💡Quality of Materials
💡Cost Reduction Programs
💡Inventory Accuracy
💡Forecasting
💡Materials Standardization
💡Staff Development
💡Goodwill
Highlights
Materials management is a key function in organizations, influencing 50-60% of total costs.
Global competition and internet technologies have made supply chains more complex.
The manufacturing sector's ongoing influence drives global economies.
Service organizations and non-trading entities are recognizing the importance of materials management.
Materials management involves planning, acquiring, storing, and controlling resources and materials flow.
Global scenario challenges include supply discontinuity, information flow breakdown, and demand-supply uncertainty.
Materials management aims for low-price buying without compromising quality.
High inventory turnover is crucial for good inventory management performance.
Maintaining supply continuity is essential to avoid production and customer penalties.
Quality of materials must meet customer demand and service requirements.
Materials management focuses on developing staff skills and leadership qualities.
Good records are necessary to avoid errors in planning and transactions.
Materials management assists in designing and developing new materials and products.
Supporting make or buy decisions is a significant objective of materials management.
Material standardization and simplification are key for efficient manufacturing.
Collaboration with internal departments is vital for enhancing the firm's goodwill.
Forecasting future demands, prices, and market trends is crucial for business balance.
Transcripts
friends now we will focus discussion on
the materials management before we go to
actual concepts we all know that in a
global context manufacturing sector has
ongoing influence in driving global
economies aspects like globally business
models have undergone radical changes in
recent years due to high competition
globally reached networks diverse
customers with their diverse
requirements fluctuating markets and
also extensive use of internet and
communication technologies the supply
chain is becoming much complex and vast
function for each manufacturing
organization while materials management
is identified by many experts as one of
the key contributing function which is
playing an important role in
organizations expenditure growth
internal costs and keeping right control
in overall supply chain the cost
involved in materials management is
ranging from 50 percent to 60 percent of
the total costs and it depends on the
industry to industry and product nature
thus financial metrics of organizations
have major impact from materials
management function in today's
manufacturing scenario demands are not
constant but viable based on flexible
requirements of industry thus it is very
important to survive in fluctuating
demand costs and increased globalization
in a supply chain environment the need
for materials management was first felt
in manufacturing industry however
service organizations like retail stores
also started feeling the need for this
control and now into the era
globalization even non-trading
organizations like hospitals
universities schools and colleges have
realized the importance of materials
management functions thus every
organization uses a number of materials
hence it is necessary that these
materials are properly purchased stored
and used for business operations in this
process any avoidable amount spent on
materials or any lust due to wastage of
materials increases the cost and impacts
directly to the profit materials manager
don't have responsibilities of profit
but all materials management employee
must have a clear understanding of the
profit while bottom line of company's
profit and loss is considerably improved
by materials man
by identifying and successfully
implementing cost reduction programs
profit improvement programs and
integrated function approach in the next
portion we will see definitions of
materials management materials
management is defined by many authors in
different way let's define it in simple
language materials management is the
function or department of the
organization that plans acquires stores
moves and controls the resources and the
flow of materials required for
production assembly or for direct use of
customer or another way of defining it
is material management is the planning
directing controlling and coordination
of all those activities concerned with
material and inventory requirements from
the point of their inception till their
availability into manufacturing process
in a complex supply chain network
materials management in the global
scenario faces many challenges which are
supplied discontinuity and also referred
as stock-outs
breakdown of information flow throughout
supply chain partners and planning
systems in accurate forecasts demand and
supply uncertainty excess and obsolete
inventory lower inventory turnovers
inventory holding costs inflexible
capacity inventory accuracy wrong
inventory assortment and classification
methods and wrong inventory decisions
concerned with replenishment planning on
time deliveries from supplier poor
information flow and data management
every profit centered manufacturing
business in the world want to have
smoothly running processes benchmarking
operations profitable sales continuous
growth and expansion as a prime motto
but what if the functions like materials
planning procurement inventory planning
forecasting and distribution planning
goes wrong certainly no one would like
to have those interdepartmental pitfalls
occurring frequently and no one would
like to have high operating costs
customer loss customer dissatisfaction
and related business challenges let's
see what are the objectives of materials
management in accordance to overcoming
challenges that we have just seen there
are two
types of objectives of materials
management which are bifurcated as
primary objectives and secondary
objectives
let us discuss key primary objectives of
materials management first one is low
price buying it means obtaining
materials at lowest possible cost
without hampering customer requirement
in terms of quality this indirectly
helps reducing prices and keeping more
profit margins for the organization this
objective can be expanded as incurring
minimum possible expenditure on
administrative and other allied
activities related to purchase of
materials and also to keep the materials
in stock next is keeping high inventory
turnover inventory turnover is the
number of times a verage inventory is
turned into the sales
hence inventory turnover has to be more
and more to have good performance of
inventory management function next is
keeping supply continuity in case if
supply continuity fails it leads to cost
of production also cost of customer
penalties also it leads to customer loss
and idle production activities hence
this is one of the objectives where
intelligence is a prime factor of
materials personal to manage supply flow
effectively
this may include managing lead times
safety stocks advanced planning and
continuous monitoring of supply overview
next objective is maintaining quality of
the material to conformance of
requirements to ensure that material has
consistent good quality that meets
customer demand and service requirements
next objective is enhancing firm's
goodwill materials Department has one of
the major objectives to keep good
relationship with external parties like
vendors freight forwarders this
ultimately helps sufficing urgencies
critical situations and also trust
factor plays an important role next
objective is development of the staff it
is necessary to keep developing on skill
sets of the staff for any function in a
similar way materials management leaders
should also focus on developing staff
since materials management person is
diversely working on major areas
including external suppliers global
suppliers customs freight forwarders
insurance inventory controls
forecasting techno commercial aspects of
products hence it is necessary to
develop the staff in multiple ways and
also necessary to build the leadership
qualities within personnel and this
helps building the talent as well
developing company's future profits
another objective of materials
management function is keeping good
records many activities within materials
are dealing with a large data that
includes stock on hand demand and supply
figures each wrong error transaction
affects planning taking an example if we
have physical stock of 100 pieces and
system shows 95 pieces which was an
error by a concerned person but this
will allow the MRP to create new supply
of 5 pieces which is an excess order on
supplier and it incurs cost of not only
order values but transportation storage
custom admin cost and majorly lead time
thus it is one of the primary objectives
of materials department to keep all
transactions up to date in ERP or any
local systems that are used to monitor
or track the data along with those
primary objectives as materials
department is the department which is
external focused and it can help many
other departments in many ways and hence
this department also has certain
secondary objectives including first one
is to assist in designing and developing
new materials and products which may be
profitable for the organization then
next objective is to support make or buy
decision make or buy decision defines
either to make material in-house or to
buy it from external suppliers looking
at all feasible solutions like cost time
expertise quality and other parameters
next and one of the important object is
to ensure material standardizations as
manufacturing organization deals with
multiple parts some time even part has
major specifications very closely
similar but due to few other features
black design color or material they
become different items and
standardization fails in those cases
even it is necessary to have different
part numbers for closely similar
products there is always a scope for
standardization and simplification like
material coding storage assembly
planning keeping stock of similar
material and combining
requirements of similar sub assemblies
and many more opportunities even lies
with value analysis and value
engineering next objective of materials
function is to cooperate with an
internal department as mentioned in
primary objective enhancing firms
goodwill since materials management team
deals with external parties but they
also deal with in the organization with
department like customer service
production finance engineering and many
other and hence it is required to have
approach of good understanding
collaboration coordination with external
as well internal parties with whom
materials department works are last but
not the least objective is forecasting
it is always important to manage well in
future demands hence it is always
beneficial to forecast on timely basis
forecasting doesn't only mean forecasts
of requirement but forecasts of prices
forecasts of sales forecasts of new
customers competitors after doing a good
forecasting it helps organization to
keep business balanced with future risks
and opportunities so these are few
primary and secondary objectives of the
materials management department
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