|
सामग्री प्रबंधन विभाग |
|
पूर्वोत्तर सीमांत रेलवे: मालीगाँव , गुवाहाटी - 781011 , असम , भारत |
MATERIALS MANAGEMENT DEPARTMENT |
MATERIALS MANAGEMENT DEPARTMENT |
NORTHEAST FRONTIER RAILWAY : MALIGAON |
| GUWAHATI - 781011, ASSAM, INDIA |
| CHAPTER 1 |
| 1.1.0 | Introduction to integrated concept and objective of material management |
For running any industry or business, we need a number of resources. These resources are popularly known as 5 M's of any Industrial activity i.e.
1.1.1 Achieving this task of making materials available may not be difficult if they are available in plenty and there are no constraints as regards to cost at which they are arranged.
1.1.2 Basic goals of any industry are survival and earning profits to make an adequate returns on capital employed (investment). The profitability of any organization can be judged by a ratio known as 'Rate of Return on Investment' which is defined as profits earned for unit investment ; Rate of Return (ROI) = Profit / Capital Employed (Investment) where, Profit = Total Receipt - Total Expenditure and Capital Employed = Fixed Assets + Current Assets 1.1.3 Different strategies for improving profitability (ROI) may be as under:- (i) To increase total receipts : For this either sales have to be increased or the prices of the products sold have to be increased. Both these alternatives are very difficult to achieve in present competitive market. (ii) To Reduce Expenditure : Majority of the expenditure of any industry is either on men or materials. The relative expenditure on men and materials vary from industry to industry but in most of the industries expenditure on materials is 45% to 70% of total expenditure while expenditure on men will be around 45 to 15% (assuming 15% as miscellaneous expenditures).
(iv) Reduce Investment in Current Assets : Current assets consist of mainly working capital and inventory. As a rough estimate, about 40% of current assets are generally tied up in inventories of raw materials, consumables, materials under different stages of production and finished goods. If we could reduce stocks of these different types of inventories. We can very well reduce investments in current assets and improve profitability.
| |
| 1.2.0 | Integrated Concept Of Materials Management |
| Traditionally,various activities related to managing materials were looked after by various departments. While purchases were generally arranged by top management with the assistance of a Purchase Agent or Purchase Officer, store keeping and stock control was the responsibility of the production head with the assistance of a store keeper or Stores Officer. Apart from these two main activities, distribution of materials (mostly finished goods) was the responsibility of marketing. 1.2.1 After realizing the profitability potential of Materials Management function, when attempts were made to exploit this potential , it was realized that there were many problems in achieving the objectives due to inherent conflicts amongst various departmental objectives. when a purchasing personnel wants to purchase in bulk to get price discounts, inventory of the stores personnel becomes high. Similarly desire of marketing personnel to have adequate stocks of finished goods in order not to loose any opportunity of sale resorts in high inventory.
| |
| 1.3.0 | Objectives Of Materials Management |
1.3.1 Primary Objectives: Following may be identified as primary objectives which are to be achieved.
1.3.2 Secondary Objectives:
| |
| 1.4.0 | Possible Conflicts Between Departmental Objectives |
| As already mentioned ,it is difficult to achieve all the objectives fully at a given time .Many times we have to sacrifice one objective to achieve the other in the interest of the organization. Thus our objective is to optimize various objectives. 1.4.1 These conflicts are listed below. It will be seen that to achieve one primary objective other objectives are adversely affected. (a) When we attempt at purchasing the material at lower prices, many times we may have to purchase larger quantities and this will adversely affect our objective of achieving high inventory turnover. Some times we may have to place orders on new suppliers and therefore the quality may not remain consistent and also favorable relations with the suppliers may be adversely affected. Sometimes depending upon price forecasts we may have to wait for purchasing and this will affect continuity of supply. (b) If we try to achieve high inventory turnover we have to manage with low stock. For this we may have to buy in small lots more frequently and due to many unforeseen circumstances, we may face more often out of stock situation. Obviously our objectives of buying at minimum prices with minimum administrative expenditure and continuity of supply will be adversely affected. (c) Attempt to keep administrative and other allied expenditure low, may result in poor record keeping and frequent out of stock situations. If we try to reduce expenditure on Inspection organization, this may affect quality if incoming goods. Low expenditure on chasing organization & review system may result in stockouts and overstocks, which will affect our objectives of continuity of supply and high inventory turnover respectively. (d) For maintaining continuity of supply we have to provide adequate safety stocks and purchase materials at right time irrespective of prices to be paid. This will affect our objective of achieving high inventory turnover and buying at minimum prices respectively. To ensure timely deliveries of stores we may have to provide for penalty clauses in our contracts and this may affect relations with the suppliers. Sometimes when the stocks are very low we may have to relax Inspection-standards for fresh supplies which will affect consistency of quality. We may also have to provide for a proper review system which may affect our objective of achieving low pay-roll costs. (e) To achieve consistency of quality, we may have to sacrifice on prices and also relations with the suppliers. Tight Inspection procedures may also affect continuity of supply, low pay-roll cost and low administrative costs. (f) In an attempt to keep wage bill of 'Materials Management' Department low, we may have to sacrifice on all the primary objectives to some extent. (g) Maintaining good relations with the suppliers may affect buying at lower prices and sometimes continuity of supply, high inventory turnover and consistency of quality also. (h) Objective of development of personnel may adversely affect the wage bill of the department. (i) Keeping good records may also affect the objective of keeping wage bill low. 1.4.2 It will be seen from the above discussions that it is not easy task to manage various activities related to management of materials. In order to decide, which objective is more important in a particular situation, we require managerial skills and decisions have to be taken keeping overall interest of the organization in mind. This is reason why all the functions related to managing materials should be dealt by one department. | |
 |
Pages best viewed in internet explorer 6.0 & above with screen resolution 1024x768 |
 |
| 1 |
|
