Inventory Management & Materials Management: Planning, Functions, Objectives

Inventory Management

Inventory Management must be designed to meet the dictates of market place and support the company’s Strategic Plan. The many changes in the market demand, new opportunities due to worldwide marketing, global sourcing of materials and new manufacturing technology means many companies need to change their Inventory Management approach and change the process for Inventory Control.

Inventory Management system provides information to efficiently manage the flow of materials, effectively utilize people and equipment, coordinate internal activities and communicate with customers. Inventory Management does not make decisions or manage operations; they provide the information to managers who make more accurate and timely decisions to manage their operations.

Define Inventory

Inventory  is defined as the blocked Working Capital of an organization in the form of materials. As this is the blocked Working Capital of organization, ideally it should be zero. But we are maintaining Inventory. This Inventory is maintained to take care of fluctuations in demand and lead time. In some cases, it is maintained to take care of increasing price tendency of commodities or rebate in bulk buying.

Inventory Management and Inventory Control must be designed to meet the dictates of the marketplace and support the company's strategic plan. The many changes in market demand, new opportunities due to worldwide marketing, global sourcing of materials, and new manufacturing technology, means many companies need to change their Inventory Management approach and change the process for Inventory Control. Despite the many changes that companies go through, the basic principles of Inventory Management and Inventory Control remain the same. Some of the new approaches and techniques are wrapped in new terminology, but the underlying principles for accomplishing good Inventory Management and Inventory activities have not changed.

The Inventory Management system and the Inventory Control Process provide information to efficiently manage the flow of materials, effectively utilize people and equipment, coordinate internal activities, and communicate with customers. Inventory Management and the activities of Inventory Control do not make decisions or manage operations; they provide the information to Managers who make more accurate and timely decisions to manage their operations.

The basic building blocks for the Inventory Management system and Inventory Control activities are:

• Sales Forecasting or Demand Management
• Sales and Operations Planning
• Production Planning
• Material Requirements Planning
• Inventory Reduction

Materials management

Materials management can deal with campus planning and building design for the movement of materials, or with logistics that deal with the tangible components of a supply chain. Specifically, this covers the acquisition of spare parts and replacements, quality control of purchasing and ordering such parts, and the standards involved in ordering, shipping, and warehousing the said parts.

Material Planning functions and objectives

1. Translation of the sales projections into long term requirements.
2. On the basis of updated production plan adjusted to the latest sales demand to adjust the materials accordingly.
3. To project the facilities required for the materials management.
4. Setting up of consumption standards, for working out requirements.
5. To perform value analysis to determine the intrinsic worth of materials.
6. To keep inventories as low as possible.
7. To procure parts as & when needed by the production/assembly schedule.
8. To decide where to make or buy

Factor that affects the Material Planning 

There are many factors, which influence the activity of material planning. These factors can be classified under two categories as macro factors and micro factors.

1. Macro factors: Some of the micro factors which affect material planning, are price trends, business cycles Govt. import policy etc.
2. Micro factors: Some of the micro factors that affect material planning are plant capacity utilization, rejection rates, lead times, inventory levels, working capital, delegation of powers and communication.

Materials Management Campus Planning and Building Design

Materials management plans and designs for the delivery, distribution, storage, collection, and removal of occupant generated streams of materials and services. It is usually an additional service that is offered as part of a campus planning process or a building design project. It is most beneficial for university, health care, and corporate environments. Materials management looks at the planning and design considerations needed to support the efficient delivery and removal of goods and services that support occupant activity. The streams of occupant-generated materials and activity include mail, office supplies, lab supplies, food, special deliveries, custodial services, building supplies, waste and recycling, and service calls.

A materials management plan may include planning guidelines or full design for the following:

• Truck delivery and service vehicle routes, to reduce vehicle / pedestrian conflict
• Loading docks and delivery points, to increase accommodation and reduce queuing and vehicle idling
• Recycling, trash, and hazardous waste collection and removal, to increase waste diversion and reduce costs
• Service equipment and utility infrastructure relocation or concealment, to improve aesthetics and realize landscaping goals
• Regulatory and operation planning

Benefits of materials managements

1. The effective materials management plan builds from and enhances an institutional master plan by filling in the gaps and producing an environmentally responsible and efficient outcome. An institutional campus, office, or housing complex can expect a myriad of benefits from an effective materials management plan. For starters, there are long-term cost savings, as consolidating, reconfiguring, and better managing a campus’ core infrastructure reduces annual operating costs. An institutional campus, office, or housing complex will also get the highest and best use out of campus real estate.
2. An effective materials management plan also means a more holistic approach to managing vehicle use and emissions, solid waste, hazardous waste, recycling, and utility services. As a result, this means a “greener,” more sustainable environment and a manifestation of the many demands today for institutions to become more environmentally friendly. In fact, thanks to such environmental advantages, creative materials management plans may qualify for LED Innovation in Design credits.
3. And finally, an effective materials management plan can improve aesthetics. Removing unsafe and unsightly conditions, placing core services out of sight, and creating a more pedestrian-friendly environment will improve the visual and physical sense of place for those who live and work there.

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Sandeep Ghatuary

Finance & Accounting blogger simplifying complex topics.

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