Materials Management

Materials Management Materials are the physical items that are needed for producing goods and services. Materials can be raw materials, components, sub-assemblies, parts, tools, consumables, services, or any other type of item. Materials are one of the main inputs to a process, and typically account for a major portion of the  costs. The significance of materials to the efficient operation of organizations is increasing more than ever. Shortages of raw materials, components, and products have been experienced on a global scale. With demand exceeding supply, the price of many materials has increased significantly. Every organization requires raw materials and other materials for its operation that must be acquired, stored, and handled, and there is always necessity for enough stocks of materials and equipment to be maintained for immediate consumption and for short and long term requirements. These stocks or inventory are cash in kind that need utmost care. Therefore the safe custody, up keep and maintenance, handling and proper supply of the materials are of great importance. Materials management is simply the process by which an organization is supplied with the goods and services which it requires to achieve the objectives of buying, storage and movement of materials. It is concerned with the flow of materials from suppliers to the organizational stores and to the user in the production department. It is related to planning, procuring, storing and providing the appropriate materials of right quality, right quantity at right place in right time so as to coordinate and schedule the production activity in an integrative manner in the organization. It includes activities of purchase of various types of materials, manage and control of their storage, and flow and supply of these materials to various places. The materials planning, purchasing, inventory planning, storage, inventory control,...

Cost Control during Production...

Cost Control during Production  The broad definition of costs is related to the economic resources necessary to accomplish work activities or to produce work outputs. Usually, costs are expressed in terms of units of currency. Therefore, costs are the amount of money representing the resources spent for the production of output. A resource is a physical entity that is required to be able to execute a certain operation. Resources can be e.g. machine and equipment, raw materials, utilities, tools, fuel and energy, but also operators and consumables. Outputs are the products and byproducts. The success of an organization largely depends on the profit that it can realize. The profit is determined by the costs that are made and the extent to which these costs are recovered. Therefore, it is essential for the organization to know all the costs so that it is able to control them. Cost control is a managerial effort to attain cost goals within a particular environment. Cost control is not a specific program. Rather, it is a routine activity carried out continuously. Cost must be controlled; otherwise, there will be wastage and misappropriation. Cost control is an important activity for any efficient organization since it has a major impact on the profitability of the organization. The costs throughout the entire organization are to be known to the management so that it can be used for the purpose of decision making. Therefore, it is necessary to integrate the cost information in the management process. For this a system is needed that can support the management with the cost data and hence in controlling the cost. According to Liebers the cost control component can be broken into four functions namely cost estimation, production monitoring, cost calculation and evaluation, and cost modeling. The...

Steel industry and cost control...

  Steel industry and cost control  The cost control process in a steel plant is a multivariate system which is subjected to a large number of inter- influencing variables affecting the cost performance of the steel plant. It is necessary to isolate the inter influence of the variables to understand the role played by the each variable on the cost performance of the steel plant. Major variables affecting the cost performance of a steel plant are discussed below. Productivity – It is the specific rate of production. Higher is the productivity of the units of a steel plant, lower will be the cost of production. Higher productivity results in better utilization of plant and machinery. Production – Production is the physical output from a unit. For good cost control, it is necessary that each unit of the steel plant should run to its maximum capacity. When production from a unit is lower than its capacity then there is an increase in the specific consumption levels. Also when any unit is underutilized then it will result into higher fixed cost (over heads, depreciation, interest etc.) per unit output. Further It is needed that the capacity of each succeeding unit should match with the preceding unit so that there is no under utilization of any unit. Raw materials – In the present day scenario, raw materials contribute to major cost of production. Hence specific consumption of the raw material should not be more than what is required by the technology employed. Any wastage of raw materials and their deterioration during storage should be totally avoided. Further raw material quality plays very important role in cost control. Lower quality raw materials though cheaper per ton results into higher consumption of not only of its own but also of other raw...