INTEGRATED MATERIAL MANAGEMENT

Integrated Materials Management Definition “ Materials Management is a function responsible for -coordination of planning, sourcing, purchasing, moving, storing & controlling the materials in an optimum manner -so as to provide a pre-decided service level to the customer at a minimum cost”

 The concept of Integrated Materials Management evolved as a rationale for bringing all the materials related activities under one common head viz. the Materials Manager to permit uninterrupted flow of raw materials, components & parts from the suppliers to the corporation, to all consumer points in the organization & distribution of finished goods at minimum cost.

Broad Functions Materials Planning & Programming -Purchasing -Inventory Control -Receiving -Storekeeping -Materials Handling and Transportation -Scrap & Surplus Disposal - Disposal Cost Reduction Techniques like Value Analysis - Standardization - Variety Reduction - Forecasting & Market Analysis

 Integrated MM also encompasses Production Planning on one hand & Distribution of finished goods to customers on the other. Companies which have these activities transferred under the Integrated MM set-up, have found encouraging results by the way of improved coordination & reduced inventories.

Objectives of Integrated Material Management: The fundamental objectives of an integrated material management approach can be viewed as: (a) Procuring better value (b) Obtaining better yield (c) Reducing investments in stock through Inventory control and material flow.

Advantages of Integrated Material Management: 1. Better Accountability:  By effective centralization of authority and responsibility for all aspects of materials function, a clear cut accountability is established.  This helps in evaluating the performance of materials management in an objective manner. 2. Better Co-Ordination:  When the materials manager is responsible for all functions it results in better support and co-operation in the accomplishment of the materials function.  Better co-ordination create an atmosphere of trust and better relation be­tween the user departments and the materials management department.

3. Improved Performance:  As all the inter-related functions are integrated organizationally, better performance and effectiveness is achieved.  The need for materials is promptly brought to the notice by materials planning and purchase department is supplied with stock levels and orders status by stores department. 4. Adaptability to Computerization:  The Centralization of materials functions has made it possible to design data processing systems.  The integrated materials management facilitates the collection, process and analysis of data, leading to better decisions. Computerization can be economically introduced under an integrated set-up.

Organization structure of materials functions As subordinate function reporting to other functional Head Chief Executive Production Manager Also Production Control & Stores Purchasing Manager Also Stock Control Sales Manager Also Transportation Other Manager

Organization structure of materials functions As independent management function at par with any other management function reporting to Chief Executive Chief Executive Production Manager Materials Manager Purchasing Stores Stock Control Transportation Sales Manager Other Manager

Which of the two organizational structure to be adopted depends on the factors: - How important are MM activities to the unit and for that matter to organization? - Will Unit suffer substantially if MM does not perform effectively as it ought to? - How much funds blocked in inventory and constraints of working capital?

Which of the two organizational structure to be adopted depends on the factors: - How important it is that MM activities be closely coordinated with O&M, others & Accounts Department? - Is it essential that materials cost be controlled tightly and effectively? - What is absolute value of purchases? - What is the range and variety of materials purchased?

Advantages of integration of materials management functions:  Better coordination and reduction of inter- departmental conflicts. This is accomplished by eliminating buck passing between sub-functions and providing a Central Figure (Head of MMD) to balance conflicting objectives.  Reduction of inventory level and greater assurance of materials availability by better coordination and communication with user departments and among sections of MMD

Advantages of integration of materials management functions:  Improved supplier relation results from ensuring delivery schedule on the basis of latest inventory position and production requirements  Paper work and duplication of work reduced through better coordination and proper communication among persons performing the related functions.

Advantages of integration of materials management functions:  Improved customer services often results from reduced delivery time.  Reduced overall cost of materials as a result of using more scientific and economical methods in planning, acquisition, storage and control of materials.

Centralization Versus Decentralization of Materials Functions:  A company with several operating plant faces one additional organizational problem. - To what extent should materials management functions be centralized at corporate level?  There may be complete centralization or complete decentralization or develop an organization somewhere between these two extremes.

Centralization Versus Decentralization of Materials Functions: Factors to be considered:  Similarity of the classes of materials used in each of plant. If a firm’s plants use different materials, centralization offers only minimal benefits,  Size of each individual materials department. Centralization is more advantageous when a firm’s individual plants do not have large materials department.

Centralization Versus Decentralization of Materials Functions:  Geographical dispersion of plants: Closure the firm’s plant are located geographically, the feasible centralization becomes.  No and size of plants: If there are large No of plant of fairly big size, centralization will become difficult & create more problems in availability of materials than any gains.

Centralization Versus Decentralization of Materials Functions: Advantages of Multi-plant Centralization:  Scope of greater specialization.  Consolidation of materials requirements and economy through bulk purchases.  Better coordination with suppliers  Lesser buying cost.

Centralization Versus Decentralization of Materials Functions: Advantages of Multi-plant Decentralization:  Better coordination with operating departments.  Greater flexibility with operating departments.  Effective use of local suppliers and facilities.

Centralization Versus Decentralization of Materials Functions:  Greater autonomy and accountability.  Lesser lead- time and resultant reduction in inventories.  Faster decision on purchases and clarifications to vendors.

Centralization Versus Decentralization of Materials Functions:  Faster payment to the supplier.  Lesser stock-out and rush purchases.