Objectives
of this lesson are to know
- the functions of materials management
- how critical materials management is for a company’s success
- how to find suitable suppliers in the procurement market
- how to organise materials logistics
- how to optimise the outbound flow of goods and materials
Materials management and control are critical for businesses because the costs of goods, materials and storage are highly significant cost factors. These costs amount up to 80 % in trading enterprises, up to 40-60% of the sales turnover in manufacturing companies.
It’s easier to increase profit by reducing procurement costs than by increasing sales.
The main function of materials management is to provide the necessary goods and services to a company in the following way: the goods and services have to be available
- in the desired quality
- in the right quantity
- at the right time
- at the right location < and
- at minimal costs.
The following activities have t be performed:
- procurement
- storage
- distribution
- disposal
To optimise the flow of material many decisions have to be coordinated.
Examples:
- Buying more means better prices. Higher stock levels cause higher costs of storage space, capital and obsolescence.
- On the contrary lower stock levels cause the problem that certain materials are not available when needed; and production and sales get stuck but storage costs tend to be lower.
In large firms materials management functions are usually carried out by different departments (procurement, inventory etc.). It’s vital to coordinate and fine-tune those departments.