Interaction of materials with other departments


Materials management as a prime corporate function: Where materials management holds a key role in the management of the organization and is considered as a prime or top-level corporate activity, it is placed in charge of the materials Manager who directly reports to the Chief Executive. Like production, marketing, finance and personnel, it is treated as an important area of management; e.g. in process industries where little layout is added to the raw materials for their conversion into finished products, the cost of the materials may be as high as 80% to 90% of the product cost. In such a situation financial considerations are greater than manufacturing responsibilities, and hence instead of considering the materials manger subordinate to the works manager, he is put at par with him.

Materials management as an operating function:

Under this, the function of materials management is considered subordinate to the production. The materials manager acts as a subordinate to the works manager. Materials management is considered as a service function to operations and is regulated with the other operations under the control and superintendence of the works manager. The splitting of the materials management department will largely depend on the quantum of the work of each section and the need of the organization. Whether the materials management is treated as a prime function or an operating function, the nature of splitting of the activities will be more or less the same. The usual splitting of the materials under the prime consideration is given as under:

1. Production department: Regarding the flow of materials, selection of the supplier etc.
2. Marketing department: For converting the sales forecast into production schedule and giving delivery dates to customers etc.
3. Finance department: For maintaining the level of the stock, locking up of funds into inventory, tapping cash discount and quantitiy discounting, pledging or hypothecating the materials for working capital needs etc.
4. Engineering department: For the specification of materials, quality requirements, product research etc.
5. Personnel department: For manning the material[s management department, vendor relationships, advertising, public relations etc.
6. Top management: As an important profit center, top management has a great concern for materials management.

Production and materials have very close interaction which is treated separately. Just as production depends upon the other departments in the organization, these other departments also derive useful information from the production department. Marketing and sales come to realize the productive capacity of the firm to make their plans. Human Relations need the data about the changes in production capacity to do the manpower planning.