EDUCATION 101: Materials Management

Principles of Purchasing and Procurement

Procurement 1



Materials management developed from the realization that materials supply activities were independent and that changes in any of the activities in the materials flow chain would influence the other activities

Purchasing in large quantities for example saves transport costs due to full freight rates but inventory carrying costs are considerably increased. These facts have forced management to regard materials supply as a system and manage it as such

Materials management has been defined as the management process which integrates the flow of supplies into, through and out of an organization to achieve a level of service which ensures that the right materials are available at the right place, right at the right time, of the right quantity and quality and at the right cost. It includes the functions of procurement materials handling and storage, production and inventory control, packaging, transport and associated information systems and their application through the supply, manufacturing and service and distribution section.

Some aspects of MM (Materials Management ) that are included under five principal stages of materials flow channels are; planning, procurement, storage, production control and distribution



The term supply chain has been defined as “the network of organizations that are involved through upstream and downstream linkages, in the different process and activities that produce value in the form of products and services in the hands of ultimate consumer. The supply chain can be likened to a well-balanced and practiced relay team in which the entire team is co-ordinate to run the race to achieve desired results.

Supply chain are linked to value chains in which each activity within a value chain provides inputs after processing each input provides added value to the output which the ultimate customer receives in the form of product or service at the end of value chain.

Procurement expertise can add value by generating saving and offering improved services to internal customers savings can be achieved not only by price reductions or enhance value in the prices of bought-out items but such means as reducing the supply base and numbers of purchase orders and accounts payable.



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