Materials Management

Materials Management has always been an area of scrutiny for organizations. This has become a central focal point as trends from the supply chain arena have indicated that substantial operating cash can be freed with leaner and more efficient handling of inventory.

As organizations examine the state of their inventory, they often find that visibility across locations and warehouses are inadequate, stock levels are inconsistent, demand is uncertain, and communication between stocking locations or warehouses may be minimal or non-existent. Among other things, the lack of an integrated interaction between peripheral systems and materials managers leads to unnecessary purchasing and overstocking.

The concepts of “materials management,” “physical distribution management,” and “logistics management” are the primary materials organizational tools-tools which have been used successfully in the past and will be used increasingly in the future to achieve closer coordination and control of a firms various materials activities.

In general materials management is concerned with bringing materials from outside of an organization to the point of production and moving in processes inventory. It deals with moving material inputs from suppliers into the organization and within the organization. The materials management concept advocates the assignment of all major activities, which contribute to materials’ cost to a single materials management department. This includes the primary responsibilities which are generally found in the purchasing department, plus all other major procurement responsibilities, including inventory management, traffic, receiving, warehousing, surplus and salvage, and frequently production planning and control. Some companies also include customer service, scheduling, shipping, materials handling, and physical distribution in their definition of materials management.

It’s clear that top management and materials management personnel focus their attention sharply on material costs and there is no doubt that reliable long term supply of materials is an increasingly important materials.

Physical Distribution Management is related to marketing in a manner similar to the way materials management is related to production. Advocates of the physical distribution organization traditionally refer to it as “the other half of marketing.” This view divides marketing into two parts: (1) conventional marketing (market research, product development, sales promotion, advertising, and selling) and (2) physical distribution. To people holding this view, physical distribution consists of the following minimum functions:
· Sales order processing, Traffic and transportation, Production control, Inventory control, Materials handling, & Sales planning

Physical distribution can also include additional functions such as customer service and technical service.

Many of these materials function are plainly the same functions claimed by materials management. For the most part, however, the functions are concerned with different materials and are performed at different points in time in the materials system (cycle). For example, the inventories controlled by physical distribution management are finished goods inventories. The warehouses controlled by physical distribution are primarily finished goods warehouses, field warehouses, or distribution centres; those controlled by materials management are the raw materials and production stores warehouses. On the other hand, traffic and production control frequently constitute points of contention between physical distribution management advocates and materials management advocates. In the case of both of these functions, each organizational group can lay legitimate claim to them. The optimum location for traffic and production control will vary from one company to another, depending on specific operating and organisational factors within each firm.

Logistics management is a combination of materials management and physical distribution management. On the basis of the preceding discussions of the latter two concepts, it is clear that a number of similarities exist between them. Not only are the activities involved in both concepts a part of the same overall materials system, many of the skills required to perform the respective operating activates are also similar. The same skills required to perform the respective operating activities are also similar. The same skills and knowledge required to control production inventories are also those used to control finished goods used in traffic, materials planning, and materials handling are identical skills. Although physical distribution is the final stage of the marketing process, the training and orientation of physical distribution personnel is much more akin to that of the materials management personnel. These factors have combined to produce the logistics management concept.

Historically, these similarities and relationships were first recognized by military officers, and the organizational concept of logistics was initially developed in the armed forces. In industry today, logistics management includes all of the functions of both materials management and physical distribution management. In the broadest sense, logistics management views a firm as a single operating system; it seeks to minimize total costs associated with the acquisition and handling of materials from the inception of materials requirements to the final delivery of finished products to their users.

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