OBJECTIVES OF MATERIALS MANAGEMENT
There are at least nine objectives of materials management, each in some way or the other contributes to the achievement of some overall company objectives. If the contribution is direct, the objective may be called â€˜primaryâ€™. If the contribution is indirect (materials department assisting some other department), the objectives may be called â€˜secondaryâ€™. Primary or secondary, the main focus of materials management is to procure right materials of right quantity, the right quality, at the right time, bought from the right source and at right prices.
There are at least nine primary objectives. These are low prices, high inventory turnover, low cost acquisition and possession, continuity of supply, consistency of quality, low payroll cost, favorable relations with supplier development of personnel and goods records.
Obtaining the least possible price for purchased materials is the most obvious purchasing objective and certainly one of the most important. If the purchasing department reduces the prices of the items it buys, operating costs are reduced and profits are enhanced. This objective is important for all purchases of materials and services, including transportation.
High inventory turnover:
When inventories are low in relation to sales, less capital is tied up in inventories. This in turn, increase the efficiency with which, the companyâ€™s capital is utilized, so that, return on investments is higher. Also, storage and carrying costs of inventories are lower when the turnover is high.
Low cost acquisition and possession:
If materials are handled and stored efficiently, their real cost is lower. Acquisition and possession costs are low, when the receiving and stores departments operate efficiently. They are also reduced when shipments are received in relatively large quantities (thereby reducing the unit cost of handling) but they are increased if the average inventories are boosted with the large shipments.
Continuity of supply:
When there are disruptions in the continuity of supply, excess costs are inevitable. Production costs go up, excess expediting and transportation costs are likely, and so on. Continuity of supply is particularly important for highly automated processes, where, costs are rigid and must be incurred even when production stops because of unavailability of material.
Consistency of quality:
As pointed out earlier, quality of the end product depends on materials that go into it. When materials purchased are homogeneous and in a primitive stage (e.g. sand and gravel), quality is rarely a problem for purchasing personnel. When a variety of items of different qualities are needed and meeting rigid specifications becomes a challenge to suppliers (example components for a satellite) quality may become the single most important materials management objective.
Favorable supplier relations:
Maintaining cordial relations with suppliers benefits the buying company in more than one way. In the first place, a company with good reputation in supplier relations is more likely to attract customers than the one with a bad name. Secondly, the product development and research efforts of suppliers are passed on to the company provided the latter maintains good relations with the former. Thirdly, the materials manager is often faced with the problem of last minute cancellation of existing commitments because of a sudden shift in the demand for materials. Co-operative suppliers can do much to help the manager solve such problems.
Development of personnel:
â€˜If you want to plan for a year, plant corn, if you want to plan for 30 years, plant a tree. But, if you want to plan for 100 years, plant men.â€™ So goes a Chinese proverb. Every head of every department should understand this saying and take personal interest in developing the personnel working under him. Each department head should spot the potential leaders among the men and women employed in his department and encourage them to develop into future executives, and the companyâ€™s future profits will depends on the talents of its manager.