Integrated Materials Management

Definition
Materials Management is a function
responsible for
- coordination of planning, sourcing,
purchasing, moving, storing & controlling
the materials in an optimum manner
- so as to provide a pre-decided service level
to the customer at a minimum cost

Broad Functions
Materials Planning & Programming
- Purchasing
- Inventory Control
- Receiving
- Storekeeping
- Materials Handling
- Scrap & Surplus Disposal

Objectives of Materials Management
Primary Objectives

- Right Price

- High Turn-over

- Low Procurement & Storage Cost

- Continuity of Supplies


Objectives of Materials Management

- Consistency in Quality

- Good Supplier Relations

- Development of Personnel

- Information System

Objectives of Materials Management
Secondary Objectives

- New Materials & Products

- Make or buy decisions

- Standardization & Variety Reduction

Objectives of Materials Management


- Product Improvement

- Forecasting

- Inter-department Harmony

Organization structure of materials functions
As subordinate function reporting to other functional Head
Chief Executive
Production
Manager
Also
Production Control
& Stores
Purchasing
Manager
Also
Stock Control
Sales Manager
Also
Transportation
Other Manager

Organization structure of materials functions
As independent management function at par with any
other management function reporting to Chief Executive

Chief Executive
Production
Manager

Materials
Manager
Purchasing
Stores
Stock Control
Transportation
Sales Manager Other Manager
Which of the two organizational structure
to be adopted depends on the factors:

- How important are MM activities to the
unit and for that matter to organization?

- Will Unit suffer substantially if MM does
not perform effectively as it ought to?

- How much funds blocked in inventory and
constraints of working capital?
Which of the two organizational structure to
be adopted depends on the factors:
- How important it is that MM activities be
closely coordinated with O&M, others &
Accounts Department?

- Is it essential that materials cost be
controlled tightly and effectively?

- What is absolute value of purchases?

- What is the range and variety of materials
purchased?
Which of the two organizational structure to
be adopted depends on the factors:
- What is the percentage of materials cost
in total production cost?

- What are the market conditions

- And last but not least, do we intend
to develop a professional team of
Materials personnel to effectively
contribute in overall organizational
objectives?

Which of the two organizational structure to
be adopted depends on the factors:
- Organization will certainly be benefited
from a higher caliber, creative MMD,
should it be treated as a profit- making
centre that receives close attention
of general management.

- It is, however, realized that Accounts,
Production, Engineering or Maintenance
Deptts have their own priorities, which
are in conflict with basic objectives of
sound Material Management
Which of the two organizational structure to
be adopted depends on the factors:
- Modern tendencies as such are to de-link
materials functions from these Deptts.
Integrated Materials Management function
is recognized as top management
function and Head of MMD reports directly
to head of unit or organization.

Even if Materials is primarily treated as
service activity, it should report to that
service head that it serves most

Which of the two organizational structure to
be adopted depends on the factors:
Integrated Materials Management
Approach:

This is essentially an organizational
concept that brings together, under one
organizational component i.e. Materials
Management Department, the
responsibility for planning, purchasing,
transportation, storing, disbursing and
controlling materials.
Advantages of integration of materials
management functions:
Better coordination and reduction of inter-
departmental conflicts. This is
accomplished by eliminating buck passing
between sub-functions and providing a
Central Figure (Head of MMD) to balance
conflicting objectives.

Reduction of inventory level and greater
assurance of materials availability by
better coordination and communication
with user departments and among
sections of MMD

Advantages of integration of materials
management functions:
Improved supplier relation results from
ensuring delivery schedule on the basis of
latest inventory position and production
requirements

Paper work and duplication of work
reduced through better coordination and
proper communication among persons
performing the related functions.

Advantages of integration of materials
management functions:

Improved customer services often results
from reduced delivery time.

Reduced overall cost of materials as a
result of using more scientific and
economical methods in planning,
acquisition, storage and control of
materials.

Centralization Versus Decentralization of
Materials Functions:
A company with several operating plant
faces one additional organizational
problem.

- To what extent should materials
management functions be centralized
at corporate level?

There may be complete centralization or
complete decentralization or develop an
organization somewhere between these
two extremes.
Centralization Versus Decentralization of
Materials Functions:
Factors to be considered:
Similarity of the classes of materials used in each
of plant. If a firms plants use different materials,
centralization offers only minimal benefits,

Size of each individual materials department.
Centralization is more advantageous when a
firms individual plants do not have large
materials department.

Centralization Versus Decentralization of
Materials Functions:
Geographical dispersion of plants: Closure
the firms plant are located geographically,
the feasible centralization becomes.

Geographical dispersion of plants: Closure
the firms plant are located geographically,
the feasible centralization becomes.

No and size of plants: If there are large
No of plant of fairly big size, centralization
will become difficult & create more
problems in availability of materials than
any gains.
Centralization Versus Decentralization of
Materials Functions:
Advantages of Multi-plant
Centralization:

Scope of greater specialization.
Consolidation of materials requirements
and economy through bulk purchases.

Better coordination with suppliers
Lesser buying cost.
Centralization Versus Decentralization of
Materials Functions:
Advantages of Multi-plant
Decentralization:

Better coordination with operating
departments.

Greater flexibility with operating
departments.

Effective use of local suppliers and
facilities.
Centralization Versus Decentralization of
Materials Functions:
Greater autonomy and accountability.

Lesser lead- time and resultant
reduction in inventories.

Faster decision on purchases and
clarifications to vendors.



Centralization Versus Decentralization of
Materials Functions:
Faster payment to the supplier.

Lesser stock-out and rush purchases.



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