Materials Management

A process that involves planning, sourcing, purchasing, moving, storing, and controlling
materials from raw stage to finished products.

Scope of Materials Management:

 Materials Planning – Determines raw material requirements.

 Purchasing – Acquiring goods/services to meet organizational goals.
 Stores Keeping – Safe custody and management of materials.
 Inventory Control – Managing stock levels efficiently.
 Value Analysis – Reducing unnecessary costs.
 Waste Management – Ensuring proper disposal and recycling of materials.

Purchasing Activities:

1. Selecting suppliers and issuing purchase orders.

2. Expediting delivery.
3. Liaison between suppliers and company departments.
4. Exploring new suppliers and materials.

Purchasing Systems:

 Forward Buying – Purchasing for future use.

 Tender Buying – Inviting bids for procurement.
 Blanket Order System – Bulk orders with multiple delivery dates.
 Zero Stock – Just-in-time ordering with no excess stock.
 Rate Contract – Standardized pricing for procurement.
 Reciprocity – Mutual business exchanges.
 Systems Contract – Exclusive supplier agreements.

Inventory Management & Control

Inventory refers to materials in stock, acting as an idle resource of an organization.

Why Keep Inventory?

 Stabilizes production.
 Takes advantage of price discounts.
 Prevents stockouts and loss of orders.
 Helps in uncertain market conditions.
Inventory Control:

A systematic approach to determining:

✅ What to order
✅ When to order
✅ How much to order

Inventory Control Techniques:

 ABC Analysis – Classifies inventory based on annual consumption value.

o A: High value, strict control.
o B: Moderate value, medium control.
o C: Low value, minimal control.
 HML Analysis – Classifies inventory based on price (High, Medium, Low).
 VED Analysis – Based on importance: Vital, Essential, Desirable.
 FSN Analysis – Based on movement: Fast, Slow, Non-moving.
 SDE Analysis – Based on availability: Scarce, Difficult, Easy.
 GOLF Analysis – Based on sourcing: Govt., Ordinary, Local, Foreign.
 SOS Analysis – Based on seasonality: Seasonal, Off-seasonal.

Inventory Models:

1. Economic Order Quantity (EOQ) – Balances ordering and holding costs.

o Methods:
 Tabulation Method – Organizes data for easy interpretation.
 Algebraic Method – Uses equations to determine order size.

Benefits of Inventory Control:

✅ Improves customer service with timely deliveries.

✅ Ensures smooth and uninterrupted production.
✅ Prevents excess stock and reduces waste.
✅ Helps in cost savings and better financial management.

Just-In-Time (JIT) Manufacturing

 Eliminates waste by producing materials only when needed.
 Reduces storage costs and improves efficiency.

Codification in Materials Management

 Assigns unique codes to materials for easy identification and control.
 Helps in standardization and avoidance of duplication.
Value Analysis Framework:
1. What is the item?
2. What does it do?
3. What does it cost?
4. Are there alternatives?
5. How much do alternatives cost?

1. Materials Management
Definition: A core function of supply chain management that ensures the planning and execution
of material requirements in a company.

Scope of Materials Management:

 Material Requirement Planning (MRP) – A computer-based inventory system for scheduling

and purchasing materials.
 Purchasing – Acquiring goods/services needed for operations.
 Procurement Department – Handles purchase requests and coordinates with suppliers.

2. Types of Purchasing
1. Standard Purchase Order – One-time order for immediate needs.
2. Planned Purchase Order – Similar to a standard order but without a fixed delivery date.
3. Blanket Purchase Order – Agreement for future purchases with unspecified quantities.
4. Contract Purchase Order – Defines only the terms and conditions between a business and
vendor.

Purchase Systems:

 Forward Buying – Buying in bulk and selling later.

 Tender Buying – Inviting bids from suppliers.

Special Purchasing Methods:

 Zero Stock – Orders only the exact quantity needed.

 Rate Contract – Standardized pricing for frequent purchases.
 Reciprocity – Exchange of goods/services between businesses for mutual benefit.
 Systems Contracts – Exclusive contracts with specific suppliers.

3. Human Engineering (Ergonomics)

  Definition: The study of designing work environments to fit human capabilities and limitations.
 Greek Origin:

o Ergon = Work
o Nomos = Natural Laws

Objectives of Human Engineering:

✅ Improves efficiency and productivity.

✅ Reduces errors, stress, and fatigue.
✅ Enhances safety and work quality.

4. Codification in Materials Management

 Assigns unique codes to items for classification, tracking, and standardization.
 Helps avoid duplication and simplifies identification.

5. Value and Waste Management

 Value is Relative: It changes over time and place based on demand and utility.
 Integrated Waste Management: Aims to reduce environmental harm by minimizing waste and
maximizing recycling efforts.

1. It is a total concept having its definite organization to plan and control all types of materials, its
supply, and its flow from the raw stage to the finished stage
A) Purchasing
B) Material Planning
C) Material Management
D) Purchasing Department

2. It solves a pair of linear equations with two variables. Includes substitution, elimination, and
graphing.
A) Tabulation Method
B) Algebraic Method
C) Inventory Model
D) ABC Analysis
3. It is a scientific technique of determining the requirement of raw materials, ancillary parts,
components, spares, etc., as directed by the production program.
A) Purchasing
B) Material Planning
C) Material Management
D) Purchasing Department

4. It is a business or organization attempting to acquire goods or services to accomplish its goals.

A) Purchasing
B) Material Planning
C) Material Management
D) Purchasing Department

5. Also called procurement department, buys materials based on the purchase requisition from user
departments and store departments and annual production plan
A) Purchasing
B) Material Planning
C) Material Management
D) Purchasing Department

6. It occurs when retailers purchase units during a particular period, hold some of them in inventory,
and then sell them in the subsequent period.
A) Blanket Order System
B) Tender Buying
C) Forward Buying
D) Zero Stock

7. It invites bids for a project to accept a formal offer.

A) Blanket Order System
B) Tender Buying
C) Forward Buying
D) Zero Stock

8. This is where a customer places with its supplier to allow multiple delivery dates over some time,
often negotiated to take advantage of predetermined pricing.
A) Blanket Order System
B) Tender Buying
C) Forward Buying
D) Zero Stock

9. This is a no-on-hand inventory stock or is to order the exact quantity that will be sold and receipt
goods into stock when they are needed.
A) Blanket Order System
B) Tender Buying
C) Forward Buying
D) Zero Stock

10. It is a procurement cost reduction strategy to standardize procurement prices for commonly
procured, homogenous, and price-varying inputs.
A) Reciprocity
B) Systems Contract
C) Rate Contract (RC) or rate of agreement
D) Stock Level
11. The production parts and materials are checked against blueprints and specifications.
A) Reciprocity
B) Systems Contract
C) Rate Contract (RC) or rate of agreement
D) Stock Level

12. These are exclusive contracts with designated suppliers for specific commodities of goods or
services, with pricing and other agreements.
A) Reciprocity
B) Systems Contract
C) Rate Contract (RC) or rate of agreement
D) Stock Level

13. The practice of exchanging things with business to other businesses for mutual benefits.
A) Reciprocity
B) Systems Contract
C) Rate Contract (RC) or rate of agreement
D) Stock Level

14. The material handling section is responsible for transporting materials to various departments.
A) Cost
B) Stock Level
C) Reciprocity
D) Systems Contract

15. Material managers are responsible for exercising control and coordinating with an overview that
ensures a proper balance of conflicting objectives of the individual function.
A) CEO
B) Material Managers
C) Purchasing Managers
D) Sales Managers