2.

Introduction to Total Materials/Logistics Management

Materials/logistics (M/L) management is an organizational philosophy that has evolved through application of the systems approach to management, an approach that provides for integration of all management functions. A primary objective of this philosophy is to coordinate all business activities that are part of the materials cycle, from supplier through company operations and on to the customer. Materials/logistics management is an umbrella that integrates all the critical materials-related sub functions and, as such, is a major company function, among such others as engineering, finance, and manufacturing. According to Colton and ROhrs, materials management is "a wide spectrum of varied activities and is totally committed to providing a smooth flow from suppliers to production to finished goods inventory to customers. Total materials/logistics management can be defined as an organizational concept that fosters a total system approach to plan , acquire, store, move, and control materials in order to optimise all company resources and provide customer service consistent with company policy. The materials referred to in this definition are all materials that a company may control, including raw materials, supplies, work-inprocess, and finished goods. Company resources include materials, people, money, and facilities. Total Materials/Logistic Management Concept Neither the terminology nor the concept of a totally integrated materials organization has been accepted by all businesses throughout the world. Companies use different names, such as "materials management," "logistics," or "physical distribution" for similar organizations. Others have embraced the title but not the full organizational philosophy. Despite numerous names, however, the trend in recent years has been for companies to adopt the materials management or logistics management title." Business costs attributable to M/L area significant portion of the total cost of goods-and services. Increasingly, companies are recognizing the need to implement this type of organization to maximize profits, improve customer service, establish needed controls, and reduce costs. Terminology Some of the common terms and their definition by various authorities are listed below.

Materials Management. The American Production and Inventory Control Society (APICS) defines materials management as "The grouping of management functions supporting the complete cycle of materials flow, from the purchase and internal control of production materials to the planning and control of work in process to the warehousing, shipping, and distribution of the finished product. James R. Evans defines materials management as "planning, coordinating, and controlling the acquisition, storage, handling, and movement of raw, materials, purchased parts, semi finished goods, supplies, tools, and other materials that are needed in the production process." Logistics Management. Both the terms business logistics and logistics management are used. The definition of logistics adopted by the Council of Logistics Management (CLM) is "the process of planning, implementing, and controlling the efficient, effective flow and storage of goods, services, and related information from point of origin to point of consumption for the purpose of conforming to customer requirements." "The mission of logistics is to get the right goods or services to the right place , at the right time, and in the desired condition, while making the greatest contribution to the firm." The following paragraphs discuss groups that may be included in a materials organization. Planning Short- and long-term planning strategies are vital to every company. The primary objective is to maximize the use of company resources and provide for future customer demand. Major activities include: 1. Translating the marketing department's sales forecast into long-term production requirements for periods that generally range from one to ten years. 2. Projecting requirements for materials, manpower, money, and facilities . 3. Providing basic control information for planning company budgets, personnel, cash flow, inventory, equipment, and so forth. 4. Performing strategic planning for materials operations to provide rational solutions for future "what if' questions.

Inventory Control Inventory control includes activities and techniques required to maintain materials at desired levels. These materials generally include raw materials, work-in-process, and finished products. Major activities include: 1. Determining how much material will be required to satisfy company operational demands 2. Maintaining detailed records of all materials available, ordered, and consumed. 3. Determining optimum order quantities; issuing requisitions. 4. Providing appropriate reports to aid in decision making with regard to inventories. Production Control : Production control is directing or regulating the movement of materials through the entire manufacturing cycle, from raw material through finished product. Major activities include: 1. Utilizing long-term plans and sales forecasts to develop short-term requirements . 2. Preparing schedules for producing parts, subassemblies, and products; considering manufacturing lead times, material and part availability, special orders, spare part requirements, and performance capabilities. 3. Dispatching orders to various departments to fulfil production requirements, and maintaining good communication with operations regarding schedule variations. 4. Expediting production orders, when required, to ensure on-time schedule completions, and preparing timely reports to evaluate the efficiency of production and the status of various orders. Purchasing Purchasing is responsible for procurement of materials from outside suppliers, in accordance with purchase requisition requirements. Major activities include: 1. Selecting acceptable suppliers while negotiating to secure the lowest total acquisition costs. 2. Issuing purchase orders and expediting on-time receipt of materials, .where required. 3. Acting as liaison between company departments and suppliers to solve problems involved with purchased materials.

4. Maintaining an ongoing knowledge of current market conditions, new materials, new processes, and other procurement factors that can affect company operations and costs. Receiving and Stores Receiving and stores is responsible for activities related to receiving, storing, handling, issuing, and controlling materials. Major activities include: 1. Receiving materials, which includes verification that the order was made and that the quantity received is correct, and preparation of a receiving report. 2. Storing received and inspected materials in accordance with efficient operating procedures that optimize use of space, equipment, personnel, and control of locations . 3. Issuing materials with authorized requisitions and accepting returned materials . 4. Maintaining control of physical counts to assure materials availability and performing periodic and annual physical inventories. Materials Handling Materials handling involves both design and physical movement. It is the function of developing and implementing appropriate manual, mechanized, and automated systems to provide movement of materials throughout the company. Major activities include: 1. Analyzing company operations to determine the need for improved materials handling. 2. Designing and justifying new materials handling systems that will pro- vide increased production capacity, improved materials flow, reduced costs, improved working conditions, and reduced waste. 3. Providing user-oriented materials handling systems. 4. Transporting materials to and from storage areas and the point where they will be used. Physical Distribution Physical distribution encompasses all the operations involved in the movement and flow of finished products, from the time they are received to the time they are shipped to the customer. Major activities include: 1. Receiving finished goods from manufacturing departments or outside, suppliers , verifying quantity, and identifying and moving materials to

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the warehouse. The warehouse could adjoin a manufacturing facility or be a separate building (distribution center). Storing finished products in accordance with efficient warehousing procedures. Performing order assembly/picking and packaging while using techniques that provide for high productivity , elimination of errors, and minimum damage. Determining and arranging for the most economical method to transport incoming and outgoing materials and products . Loading trucks, freight cars, and so on for shipment to customers.