Materials Management:
The objective of materials management is to plan and control the materials inventory of the company. A manufacturing firm must have sufficient inventories on hand to meet its production needs and yet avoid excessive inventory levels. Every dollar invested in inventory is a dollar that is not earning a return. Furthermore, idle inventory can become obsolete, lost, or stolen. Ideally, a firm would coordinate inventory arrivals from suppliers such that they move directly into the production process. As a practical matter, however, most organizations maintain safety stocks to carry them through the lead time between placing the order for inventory and its arrival. We see from Figure 1-8 that materials management has three subfunctions:
1. Purchasing is responsible for ordering inventory from vendors when inventory levels fall to their reorder points. The nature of this task varies among organizations. In some cases, purchasing is no more than sending a purchase order to a designated vendor. In other cases, this task involves soliciting bids from a number of competing vendors. The nature of the business and the type of inventory determines the extent of the purchasing function.
2. Receiving is the task of accepting the inventory previously ordered by purchasing. Receiving activities include counting and checking the physical condition of these items. This is an organization’s first, and perhaps only, opportunity to detect incomplete deliveries and damaged merchandise before they move into the production process. 3. Stores takes physical custody of the inventory received and releases these resources into the production process as needed.
Production:
Production activities occur in the conversion cycle where raw materials, labor, and plant assets are used to create finished products. The specific activities are determined by the nature of the products being manufactured. In general they fall into two broad classes: (1) primary manufacturing activities and (2) production support activities. Primary manufacturing activities shape and assemble raw materials into finished products. Production support activities ensure that primary manufacturing activities operate efficiently and effectively. These include, but are not limited to, the following types of activities: Production planning involves scheduling the flow of materials, labor, and machinery to efficiently meet production needs. This requires information about the status of sales orders, raw materials inventory, finished goods inventory, and machine and labor availability. Quality control monitors the manufacturing process at various points to ensure that the finished products meet the firm’s quality standards. Effective quality control detects problems early to facilitate corrective action. Failure to do so may result in excessive waste of materials and labor. Maintenance keeps the firm’s machinery and other manufacturing facilities in running order. The manufacturing process relies on its plant and equipment and cannot tolerate breakdowns during peak production periods. Therefore, the key to maintenance is prevention—the scheduled removal of equipment from operations for cleaning, servicing, and repairs. Many manufacturers have elaborate preventive maintenance programs. To plan and coordinate these activities, maintenance engineers need extensive information about the history of equipment usage and future scheduled production.
Marketing:
The marketplace needs to know about, and have access to, a firm’s products. The marketing function deals with the strategic problems of product promotion and advertising.