Integrated Material Management
Material management is a very wide term and includes store keeping and purchasing a wide variety of activities like materials planning, inventory control, value analysis’
standardization, production control and pre-design value analysis, So as to work efficiently and to ensure the effective progress of the particular enterprise, all such activities should be chained together, i.e. they must be linked with some related
activity that is Material Management. This is the reason it is known as Integrated Material Management.
The following sub-headings can explain the concept of integrated material management:
(a)The three basic segments.
(b) Material Management all pervasives.
(C) Material Management and cost reduction
(d) Material Management Integrates & co-ordinates.
(a) The Three Basic Segments- The 3 basic segments act in a way from arranging of funds to the final distribution of product. This comprises of the complete activities
of an organization. Whenever an organization is formed, the arrangement of funds is the basic thing that comes to mind as maximum of the loans and own funds are invested in the assets building. So when the requirement of working capital comes that again has to be financed by the bank. This is how the first problem is solved. When we arrange the funds and place the order, the most important part is the storage function. We should store the material and at such a place that it can be taken to the process house in an easy manner whenever it is required.
This will help in the smooth functioning of the various departments.When material reaches process houses the only left thing is finished material or the end product. Quite a lot of
times, some by product also get manufactured along with the main product. A proper arrangement should be done to ensure that these products reach the consumers, without the gap being formed of non-availability of raw materials. When these three basic activities are performed, there is no reason that the organisation will fail.
(b) Material Management all pervasives- This means that material management is a very pervasive field. The various departments are either directly or indirectly related with
the success of the material department.
Let begin with a department that has no direct relation to the material department i.e. design department. This department has no relation with finance, production or sales
department cither. It designs the product on the basis of the requirement in the market, without taking the funds & raw material availability of the department into consideration.The materials have to be obtained on the basis of the design formulated. Now the materials procured should be the same as the requirement of production schedule i.e. the material should always be ready with the store department in order to issue to production department whenever required. This
helps in the smooth and constant running of the company.
This is how design, production & sales department are inter-related. That is why this is called the integrated material management.
(C) Material Management & Cost Reduction- This is the sole objective for which this department is formed. This department also has number of options for the cost reduction or profit maximization. Suppose there is a company that is handling its activities and functions smoothly. Now, if the material department is asked by the upper management to increase the profitability of the enterprise, in that case, the material management has two options, one of them is by arranging reduced cost of material and the other is with the help of the production department. It would try to increase its production and sales. Now the material management has to make a suitable choice for the maximization of the profit.
In the first case if the profit needs to be increased by increasing production and thus sales, the company needs to make extra effort in sales, additional funds have to be arranged, extra expenditure on advertising has to be done to make sure that all these extra expenses reduce the percentage increase in profitability. So this option is not feasible.
The second option that is left with the material de partment is through reduction minimum cost of production.
As a general trend we see that every management feels that reducing expenses means the retrenchment of staff and workers. But besides these they ignore a very essential thing i.e. they can reduce cost by making the raw materials available at lower rates. A little change or reduction in price can
lead to a major increase in profitability since material forms a major portion of the company’s expenditure. That is why it is known as material management basic concept is cost reduction.
(d) Material Management Integrates & Co-ordinates- This is the only department where all other related department activities either start or end. All these activities need to be linked in such a manner that the flow of information, material, other resources do not block. In order to have such a smooth flow of activities, a material management department needs to be formed. This is a place where all the activities move in to & fro direction.