Summary Chapter-4 Organizing for Materials Management

SUMMARY CHAPTER-4 ORGANIZING FOR MATERIALS MANAGEMENT

Someone in every organization must make materials management decisions and since materials objectives are inter-related, it is desirable to give one-person authority overall activities concerned with materials management.

There are some organizations where materials authority is dispersed in a number of departments in the organization, which means duplication of efforts and is considered a wasteful exercise.

A materials manager is needed, since Inventory management is a key process and requires tough decisions and as such must understand the inventory process.

Purchasing managers of manufacturing companies also work frequently as materials managers, particularly if there are no major materials management problems.

In majority of organizations, the purchasing manager makes an excellent and effective materials manager provided he has the skills and authority.

There are number of problems being faced in such a situation.

One quite common arrangement is to group together all materials management activities under a materials manager who in turn report to manufacturing manager.

There are various arguments such as expediency, indivisibility and span of control which can be advanced for the role of materials manager as junior partner to manufacturing manager.

ORGANIZATION-The materials manager requires a staff to help him achieve his objectives the feasibility of a materials management organization are division of work by

1-Organization by function-The principal behind this that jobs should be organized so as to promote maximum specialization of skills. Each employee is an expert in some highly specialized area. This type of organization has various advantages such as-Economic use of skills, efficient operations, more flexible organization and concentrated buying power. however this may lead to Employee dissatisfaction, Bureaucratization etc.

2-Organization by Location-In a large organization with many plants ,the need for some application of the principals of organization by location is self evident.

This leads to personnel work more closely with other departments of the organization, they become more familiar with the plant problems, but the buying power gets diluted. however Shipping and receiving are essential in such type of organizations. 3-Organization by Product\Project-a Product\Project organization is an organization with finite life. Project organizations are set up to carry out a particular mission..When the job is done ,they are either disbanded are are merged with some permenent organization.

The advantages of this type of organization is that it permits personnel to become familier with the problems of a single group of product.As such the work gets done more effectively.But this type of organization tends to disperse the overall material effort.

SPAN OF CONTROL-It includes

1-FLAT ORGANIZATION PURCHASING AGENT WITH BROAD SPAN OF CONTROL-In this type of organization,people are much closer to the top echelon,better grasp of problems and to large extent it is democratic,individual skills are greater and is a training ground for future top executives.

2-DEEP PURCHASING ORGANIZATION WITH NARROW SPAN OF CONTROL- Here supervisors have more time to train and counsel of their subordinates on individual basis and it is possible to have tighter control

3-FLAT ORGANIZATION WITH BROAD SPAN OF CONTROL-Conditions

a-Job objectives are clearly spelt out b-Job performance can be measured c-Job supervision is similar and repetitious d-Supervisors\Supervised are above average in skills e-Errors are not serious

LEVEL OF ORGANIZATION-When an organization has both Materials and purchasing managers,the purchasing manager is almost sub-ordinate to materials manager.

Because of the limits of span of control,only primary functions of the business – marketing,materials,engineering,finance,manufacturing and personnel report to the chief executive ,while purchasing,materials control,and traffic report to the materials manager.

THE DECENTRALIZED ORGANIZATION-Management of large corporations lick the problem of size with decentralization.They break up the corporation into a number of smaller divisional units,each of which operates as a semi-independent business..This brings managers closer to the objectives of business,permits tighter control of costs and provides a better environment for traininmg future managers.Decentralization however creates a major materials management problem,diluted buying power

Most major companies make a compromise and try to get the advantages of both centralized and decentralized organization.This is done through staff and line type of organization.Here the division of responsibility is by function.Here the corporate materials manager supervises the plant materials managers directly and has a small staff under him. And provides major services to units such as

1-Value analysis

2-Administrative Planning 3-Economic analysis 4-Electronic Data Processing as also other specialists such as Vendor relations problem etc.In this type of organization,skilled specialists can be hired to serve the entire materials department.

The computer has made it easier for large organizations to centralize materials management decision-making. This may bring in conflict with the decentralized divisional management.