5 Ms Men Machines Methods Money Materials Reasons

5 M’s • • • Men Machines Methods Money Materials

Reasons for popularity of materials • The amount spent on materials is higher than other inputs • Materials offer considerable scope for reducing cost and improving profit • Improving return on investment depends on the effective utilisation of materials. • Materials add value to product • Quality of end product depends on materials • Materials management assumes responsibility for whatever happens in purchasing, storing, inventory or any other area connected with materials. • Need for preservation of scarce resources for posterity • Increasing demand for ensuring environmental safety • The efficiency of any organisation depends upon the availability of right materials, in right quantity, at right time and at right price. • Materials are life-blood of man’s development

• Materials management involves planning, programming, organising, directing, controlling, and co-ordinating the various activities concerning the materials. The production managers found it necessary to develop an organised body of knowledge on this subject. The resulting set of related disciplines is known as materials management.

Materials Management • Materials are any commodities used directly or indirectly in producing a product such as raw materials, component parts or assemblies. • Materials management is the grouping of management functions supporting the complete cycle of material flow, from the purchase and internal control of production materials to the planning and control of work in process to the warehousing, shipping, and distribution of the finished product. – Thomas F. Wallace & John R. Dougherty

• Materials management is the management of the flow of materials into an organisation to the point, where, those materials are converted into the firm’s end product(s) – Bailey & Farmer The executive who engage in materials management are concerned with three basic activities: buying, storage of materials and movement.

Functions of Materials Management • • • Materials planning and programming Raw material purchase Receiving, store keeping, and warehousing Issuing of material Inventory control Transportation of materials Vendor development Vendor rating Disposal of scrap and surpluses

Focus of Material Management • To procure right materials – In – Of – At – From – At Right Quantity Right Quality Right Time Right sources Right prices – 5 R’s, principles of purchasing

Primary Objectives • Buying the best item at the lowest cost • Reduction in inventory cost and High inventory turnover • Maintaining the flow of production • Maintaining the consistency of quality • Optimisation of acquisition and possession, resulting in lower cost • Cordial relationship with suppliers • Maintaining good records • Contribution towards competitiveness • Personnel development

Secondary Objectives • Promotion of standardisation with suppliers • Development of reciprocal relations with customers • Committees to decide on economic make –orbuy decisions • Development of inter departmental relationships • Can undertake acquisitions

Advantages or benefits of M M • Material cost can be lowered ( Sales price can be brought down to a reasonable level) • Controlling of indirect cost (such as materials movement) • Risk of inventory loss minimised (theft, pilferage ) • Cost of material used in different department ascertained • Control of manufacturing cycle • Material congestion in storage places avoided • Improvement in delivery of the product

Main depts. Of M M • • Materials planning Purchase Stores Inventory control

Purchasing • Purchasing is to procure the materials, supplies, tools, equipment etc. • 5 R’s – Material, Quantity, Source, Time, Price – Procurement – purchase, material supervision and management as inventory control, receiving and salvage operations.

Importance of Purchasing • Purchasing function provides materials to the factory without which the machines cannot move • Purchasing manager is the custodian of his firm’s purse as he spends more than 50% of his company’s earnings on purchases • Increasing proportion of one’s requirements are now bought instead of being made. • Can contribute to import substitution and can save foreign exchange

Objectives of Purchasing • Procurement of required quantity and quality of materials at the most economical price • Procuring the material well in advance to meet the needs of the production dept. , to save production losses from lack of materials • Buying an optimum quantity, neither too much nor too less, not affecting capital or holding up production. • Improvement of the product with reference to quality by means of selection of adequate material • To develop fullest cooperation, coordination and maintenance of internal relationship with departments in the company. • To initiate, if necessary, and cooperate in cost