Materials Management and Logistics

Introduction

Over the past decades more and more attention has been given to the concept of supply chain management (SCM). Steven (1989) looks at the supply chain as the connected series of activities which is concerned with planning, coordinating and controlling materials, parts and finish goods from suppliers up to the customers. This author extends the concept of business logistics to other tiers in the supply chain. Cooper and Ellram (1993) who present supply chain management as an integrative philosophy to manage the total flow of a distribution channel from suppliers to the ultimate user.

Lately, there has been a lot of research conducted in the area of supply chain and logistic management (Briscoe et al 2004; Kumaraswamy et al 2004; Wang and Xue 2004). Most of these studies emphasized the importance of close collaboration with various project parties in order to streamline the supply chain using e.g. partnership (Dey 2002), outsourcing (Rabinovich, Windle, Dresner and Corsi (1999), agent-based system (Tah 2005; Xue 2005), constraint-based planning (Chua et al 2003) and etc.

In relation to the case scenario (Appendix 1) which indicate that, many organization develop products or services in foreign countries and sell world wide. This strategy is known as global sourcing and is defined by Monczka and Trent (1991) as the integration and coordination of procurement requirements across worldwide business units, looking at common items, processes, technologies, and suppliers. Hence, this project is to analyze the role of materials management; function of logistics; inventory systems and JIY which follow by the case scenario.

Materials Management

The objectives of materials logistics management which are to reduce inventories while maintaining strategic stocks, improve product quality, minimize the total cost of operations and procurement, ensure service levels to customers and minimize variance materials flow (Naim and Towil 1994). Materials management was pointed out by Compton (1985) as management of materials; storage, selection and issue; handling and distribution and stores management. Johnson (1999) has defined the important role of materials management as continues replenishment programs, vendor managed inventories programs, joint managed inventories programs, and collaborative planning, forecasting and replenishment business models. For that reason, most organization has re-developed and re-implemented planning system, which allow organizations to manage procurement activities effectively in order to meet customers’ needs and requirements (Stadtler and Kilger 2000).

Some of the important features of materials management system have been classified by Sidwell (2005) as follows:

• Integrate front-office function (estimating and construction) and back office functions (accounting and purchasing)

• Integrate cost control, project scheduling, and material quantities measurement functions

• Utilize world-wide-web technology to facilities communications and data transfer

• Provide a common database of price, project information, productivity, etc. across the company

• Allow verifications and approvals to be made

• Provide tracking of stockpile and consumption of materials

Conventional materials management is no longer effective with respect to today’s business perspective. An overall organizational approach is necessary for successful material within management function the organization (Dey 2001). In the modern organization, computerized the materials management system has become necessary on this competitive market force. Many authors suggested that the materials management should implement along with materials requirements planning (Guide and Srivastava 2000), information technology (Bell and Stukhart 1986), quantitative methods (Tavakoli and Kakalia 1993) and Just-in-time (Schonberger 1982)..

Materials requirements planning (MRP) originated in the early 1960s in the USA as a computerized approach for the planning of materials acquisition and production (Aghazadeh 2003). Buzacott and Shanthikumar (1994) studied the influence of lead times and safety stocks on the performance of MRP systems and they concluded that safety stocks are more robust than safety lead times in coping with changes in customer requirements, when forecasts are unreliable. Furthermore, MRP is an extremely powerful technique on inventory data, material cost, capital cost or virtually any resource. The main functions of MRP system (Aghazadeh 2003) are illustrated as follows:

• Receive an order electronically from a customer in different countries

• Issue the necessary purchase orders to suppliers in different countries

• Change inventory levels

• Notify shippers on both ends of the transaction

• Provide files for updating payables and receivables, and

• Convert all transactions in the proper currency.

Information technology is an indispensable tool in business management nowadays.

With internet as a collaborative working platform, management information can be transferred or shared effectively to allow collaborative decisions to be made (Sidwell 2005). A special form of logistics by consumption is Just-In-Time (JIT) materials management, where emphasis is also placed on overall planning undertaken by management together with day-to-day operations carried out on the shop floor (Bertelsen and Nielsen, 1997).

In relation to the case, materials management plays an important role on controlling the production operation from raw materials to end the users. As discussed above, it been proved that, the using of materials management in logistics process of organization will improve the performance on inventory control, reduce lead time, stock handling and others. Furthermore, MRP system combined with JIT using in materials management will provides the best words for organization. This is because MRP system provides a good master schedule and an accurate picture of requirement, and JIT reduces WIP inventory. This perfect combination properly will reduce the risk on logistics