Materials Management
Materials Management
Materials Management
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materials management
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Effects of Materials Management on the Productivity of an Organisation
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World Journal of Innovative Research (WJIR)
ISSN: 2454-8236, Volume-6, Issue-1, January 2019 Pages 16-22
organisation's revenue that the use of materials must be a 5. Better communication and cooperation between the
primary concern of management to achieve the objective. various departments.
The Classical definition of the objectives of material 6. It reduces duplication of efforts and also facilitates the
management is the acquisition of materials and services of the introduction of computerbased operations.
right quality, in the right quantity, at the right price, from the 7. It increases the morale of staff.
actual source and at the right time. Apart from these general 8. It reduces material obsolescence.
objectives, the following under listed points also constitute 9. It facilitates better records and information.
some of the objectives of materials management. 10. It improves control of quality and improves
i. To support the company operations with an profitability level.
undisturbed flow of materials and services. This Reference [14] explained that the question of managing
can be ascertaining through detailed procedure materials arises only when the company holds inventories.
of the supply of materials, parts and Maintaining the inventories involved trying to hold up to
components so that they are transported organisation's funds and incurrence of storage and handling
together at the right time and in the right work cost. He further explained three (3) motives for holding
location. inventories which are:
ii. To maintain inventory investment losses (due to Transaction/Production Motive: This motive emphasis
deterioration, obsolescence and theft) under the need to maintain inventories to facilitate smooth
control. Also making the maximum economical production and sales operations.
use of plant and equipment by smoothing out Precautionary Motive: This motive necessitate the
production procedures and scheduling to the holding of inventories to guide against the risk of
best of usage. unpredictable changes in demand and supply forces as well as
iii. To purchase wisely and competitively which include the growing level of globalization/computerization.
two different considerations, keeping in touch Speculative Motive: This motive influences the decision
the forces of supply and demand of elements to increase or reduce inventory level to take advantage of
that control prices and availability of materials; price fluctuation.
and a concurrent search for better values that D. Attaining Profitability through Materials
bring the best combination of competitive Management
buying and wise purchasing that attributes The major contributions of materials management to
mostly to maximizing a company’s profit. profitability are discussed below:
iv. To decrease the cost of transportation of moving i. Make or Buy Decision
materials by making right decisions on route to A construction company should be able to make prudent
follow, the means of transportation and the decision between buying raw materials and producing them.
vehicle to use. In taking this decision, the comparative advantage of making
v. To provide information service for regulating the in or buying out should be analyzed. According to [15], many
distribution of products, production factors have to be considered when arriving at make or buy
management, manufacturing, instruction, routes decision. Factors in favour of buying raw materials include:
and other background production information. a. When it is cheaper to do so.
vi. To have an advanced control of quality of company’s b. Quantities required are too small for economic
product and to provide needed level of customer production.
services. This can be done by maintaining c. Spread of financial risk between customers and
favorable relationship with supplier’s evenness suppliers. When source of supply can no longer be
of quality. guaranteed.
C. Importance of Material Management d. On the other hand, the decision to produce raw
In An Organization Material management represents an materials can increase profitability when carried out
important asset and it is the largest single item of costs in under these circumstances:
almost every business organization. It is an important aspect e. Chance to use up idle capacity and resources.
of factory and industrial process which covers the entire f. Possibility of scrap utilization.
spectrum of function such as material handling, material g. Greater purchasing power with large orders of a
acquisition, assembly line management, storage, as well as particular material.
material transport. Material management and control include h. Ability to manage resources
several smaller components that work side by side to ensure ii. Materials acquisition
the organization is more efficient and cost effective. Economic buying is the aim of any firm but the
Reference [13] outlined the importance of introducing inexpensive materials may not necessary be qualitative.
material management and control in organizations as follows; Therefore, a material manager will struggle for the
1. Better coordination of the people and activities inexpensive and qualitative raw material. Materials
dealing with materials. acquisition function starts with the receiving of the purchase
2. Elimination of bulk-purchasing. requisition from the store. The purchase order is therefore
3. Low price of material and equipment. arranged based on the contents of the requisition form. The
4. It hastens inventory turnover. most significant thing to bear in mind while planning for
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Effects of Materials Management on the Productivity of an Organisation
profit is to purchase the right quality at the right price. which were not wholly consumed in the production. To
Procurement in high technical areas requires skill and achieve profitability in disposal of scrap and surplus, it
experience on the part of the buying manager. involves managerial decisions in the areas of return to
Cost improvement is simply the result of learning effect suppliers, selling to suppliers, selling to other firms, selling to
amongst workers, reflecting the development of skill and dealers, etc
handiness that occurs when a task is performed concurrently. vii. Transportation
According to [16], acquisition circle involves the recognizing The traffic section, which is involved in the physical
and describing the need; transporting the need, investigating movement of materials throughout the entire production
and selecting the supplier, order, receipt and inspection of stages, is important for profitability and cost reduction.
good supplied, auditing the invoicing and closing the order. Materials movement could be in - house or external. The
The result of acquiring substandard materials can be reduced in-house are determined by the nature of the materials by the
by buying from the right suppliers at the right price without layout of the factory and by the type of product made. It
negotiating quality. makes use of such devices as cranes, pipelines, trucks, forklift,
iii. Receipt of materials and other forms of vehicles.
One significant aspect of receipt of materials is to check viii. Profits as Business Objective
the source of good supplied and to make sure they conform to Profit means different things to different people. To some
the specification as contained in the purchasing order. Spoilt organization, they are called profit while to some they are
and sub-standard materials are rejected thereby preventing referred as surplus. Reference [19] defines profit as income
the firm from sustaining unnecessary cost and thus promoting occurring to the equity holders, in the same sense as wages
profitability. The effect of mediocre materials to both the accrue to the labour, rent to the owners of rentable assets, and
machine and the profitability of the organization must be put interest accrue to money lenders.
up with as they cause production hold up which may direct to Reference [14] stated that, the figure of profit in
substantial losses to the firm. accounting is the result of the application of General
iv. Material storage Accepted Accounting Principle (GAAP) which uses the
This includes a careful handling of the stock and account's judgment that is based on arbitrary assumption for
maintaining a perfect control over them. Handling of material measurement. It considers profit as a surplus of revenue over
is one of the events performed by materials managers and can and above all paid out costs including both manufacturing
be an efficient tool for saving cost and holding up profit. and overhead expenses. He further arrived that economic
Storage of materials hinged on the nature and how they are profit would mean net increase in the wealth viz-a-viz cash
used in the manufacturing procedures. Coal and iron ore are flow plus change in the value of the firm's asset. Therefore,
usually stored on the ground Liquids. Chemicals, paints and for an organization to obtain maximum profit in its
oils are kept in tanks. Profits can be achieve if managers production there is need for the organization to ensure
successfully manage issues relating to stores location, layout adequate and efficient utilization of its resources through its
and equipment inspection, protection of stores, issues to management of materials.
production, stock records and disposal of obsolete materials. Reference [20] opined that, a firm can also keep adequate
v. Inventory control inventories on materials in various forms to ensure profit for
Reference [17] suggests that inventory control improves the organization. Thus, inventories serve as a link between
profitability by reducing costs involving storage and handling the production and consumption of goods. With these
of materials. Inventory control is a means by which materials categories of inventories held, there is the need for adequate
of the right quality and quantity are made available as when utilization of these resources to achieve the objectives of the
needed with due regards to the economy of shortages, organization that becomes the essence of management.
ordering cost, purchase price and working capital. Inventory
control determines the extent of stock holding of materials. It VII. TEST OF HYPOTHESES
equally makes it possible for materials manager to carryout Hypothesis one
accurate and efficient operation of the manufacturing H1: There is a relationship between the effective management
organization through decoupling of individual segment of the of materials and the level of productivity in an organization
total operation and it entails the process of assessing of stock H0: There is no relationship between the effective
into the store house and the issue of stock. Comparatively, management of materials and the level of productivity in an
shortage of materials can lead to disruption of products for organization
sales; customer relations are hurt, while machines and
equipment becomes underutilized. Therefore, a company can
only realize substantial savings by using a rational procedure
for inventory control.
vi. Scrap and surplus disposal
Removal of scrap and surplus are very important feature of
material management function, and if efficiently done can
attribute to the profitability of the firm. Scrap, according to
[18] is the residue of process materials left behind during
production while surplus is the materials from purchases
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World Journal of Innovative Research (WJIR)
ISSN: 2454-8236, Volume-6, Issue-1, January 2019 Pages 16-22
Table I: Table of correlation between effective material management and level of productivity
Correlations
Effective material Level of
management productivity
N 250
**. Correlation is significant at the 0.01 level (2-tailed).
According to above calculations it is observed that amount of correlation coefficient between level of productivity and
effective material management is equal to 53.6 per cent and considering that a significant level is less than 5%. Then we can say
that there is a positive relationship between effective material management and level of productivity. This implies that one
percent increase in effective material management will lead to 53.6% increase in level of productivity.
Table II: Regression analysis test of level of productivity and effective material management
Model Summary
Model R R Square Adjusted Std. Error of
R Square the Estimate
a
1 .965 .716 .586 3.79952
a. Predictors: (Constant), effective material management
Regression coefficient of R = .965 or 96.5% indicate that relationship exist between independent variables and dependent
variable. The coefficient of determination R2 = 0.716 which show that 71.6% of variation in level of productivity is explained
by effective material management. The adjusted R-square in the table shows that the dependent variable, (level of productivity)
is affected by 58.6% by independent variable (effective material management). It shows that effective material management is
responsible for level of productivity for the construction company.
Table III: Coefficientsa
Model Unstandardized Standardized t Sig.
Coefficients Coefficients
B Std. Beta
Error
(Constant)effective 12.310 .901 13.656 .002
material management
1.056 .085 .536 12.426 .000
a. Dependent Variable: level of productivity
The coefficient of determination for effective material management is positive (1.056) and is highly significant (0.001) in
ensuring level of productivity. The p-value of 0.000 is less than the t-statistic value of 12.426 and the standard error value of
0.085. This implies that a unit increase in effective material management will lead to 1.056 increases in level of productivity.
Therefore, the null hypothesis is rejected and alternate hypothesis is accepted,which means that there is a relationship between
the effective management of materials and the level of productivity in an organization.
Hypothesis two
H2: there are positive effects of materials management on improving the company productivity.
H0: there are no positive effects of materials management on improving the company productivity.
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Effects of Materials Management on the Productivity of an Organisation
Table IV: Table of correlation between material management and improving the company productivity
Correlations
Materials Improving the
management company productivity
Pearson Correlation 1 .473**
Materials management Sig. (2-tailed) 200 .000
N 250
Improving the company Pearson Correlation .473 ** 1
productivity Sig. (2-tailed) .000 200
N 250
**. Correlation is significant at the 0.01 level (2-tailed).
According to above calculations is observed that amount of correlation coefficient between materials management and
improving the company productivityis equal to 47.3 per cent and considering that a significant level is less than 5%. Then we
can say that there is a positive relationship between materials management and improving the company productivity. This
implies that one percent increase in materials management will lead to 47.3% increase in improving the company productivity
Table VI: Regression analysis test of materials management and improving the company productivity
Model Summary
Model R R Square Adjusted Std. Error of
R Square the Estimate
a
1 .773 .624 .722 3.96426
a. Predictors: (Constant), materials management
Regression coefficient of R = .773 or 77.3% indicate that relationship exist between independent variables and dependent
variable. The coefficient of determination R2 = 0.624 which show that 62.4% of variation in improving the company
productivity is explained by materials management. The adjusted R-square in the table shows that the dependent variable,
(improving the company productivity) is affected by 72.2% by independent variable (materials management). It shows that
there are positive effects of materials management on improving the company productivity.
Table VII: Coefficientsa
Model Unstandardized Standardized t Sig.
Coefficients Coefficients
B Std. Error Beta
1(Constant) 15.036 .806 18.644 .000
materials 1.319 .125 .473 10.520 .000
manageement
a. Dependent Variable: improving the company productivity
Prudent management of materials reduces depreciation,
The coefficient of determination for materials management pilferage and wastages and ensures availability of materials.
is positive (1.319) and is highly significant (0.000) in We would like to re-emphasize that for a firm to achieve
improving the company productivity. The p-value of 0.000 is profitability the goal of materials management should be
less than the t-statistic value of 10.520 and the standard error properly planned.
value of 0.125. This implies that a unit increase in material It is clearly significant to manage all materials from the
management will lead to 1.319 increases in improving the creation stage to the construction stage. The waste of
company productivity. Therefore, the null hypothesis is materials should also be minimized throughout the
rejected and alternate hypothesis is accepted, which means construction stage in order to avoid loss of profit. Failure in
that there are positive effects of materials management on managing site material and inventory will result in cost
improving the company productivity. overrun, postponements in project completion and reduce
overall project performance. Better management among
VIII. CONCLUSION purchase and finance department will help in attaining greater
This research paper found out that there is a significant efficiency in Inventory management. Firm, employing proper
relationship between materials management problems and the and efficient material management system can have increased
frequent breakdown of the plant. This can be expected since their overall efficiency by 35%.
the existence of materials management problems result in the
breakdown of the plant. Out-of stock and lack of spare parts IX. RECOMMENDATIONS
interrupts production and hinder profitability. Based on the findings from the study is on the effect of
This research has shown how profitability can be achieved materials management on the productivity of an organization
via effective management of materials with particular and in light of data collected by personal observation and
attention to sourcing, receiving, storing and issuing materials. though the questionnaire conducted in the organization; it is
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World Journal of Innovative Research (WJIR)
ISSN: 2454-8236, Volume-6, Issue-1, January 2019 Pages 16-22
necessary to offer the following recommendations. [17] Lyson, K. (1996), Purchasing and Chartered Institute of Purchasing
and Supply, London: Pitman Publishing.
[18] Carter R.J. (2006). Stores Management and Related Operation, (2nd
i. Material supply should be optimum to avoid "stock Edition.), MacDonald Evans Ltd. pp. 67-85
out" while work in process. [19] Joel, D. (1990), Management Economic (6th Edition) New Delhi:
Vikas Publishing House, PUT.
ii. Organizations should always take into knowledge the [20] Adeniyi, A. (2004). Management Accounting (3rd Edition), Lagos:
cost of production or price of raw materials before Shomolu Publishers.
arriving at selling price
iii. There should be good and effective record system of
materials for the operations of the organization
especially as it affects production.
iv. Rate of spoilage and wastages should be minimized as
much as possible and ensure that products pass
quality control. Cross Ogohi Daniel is a Head of Department of
Public Administration/ Banking & Finance at Nile
v. There is the need to train staff in the area of material University of Nigeria, Abuja. He is a seasoned
management to further enhance the knowledge of Human Resources Manager with over 15 years of
the job. experience in human resource management. He has
had the opportunity to transform the mundane
vi. Organizations should computerize their material activities of human resources for various
management system in line with the global changes organizations across the globe. He holds an MBA
in order to be able to track the movement of degree in management and a PhD degree in management from the
prestigious university of Nigeria, Nsukka. His research interests are
materials in the store. primarily in the areas of Human Resource Management, Quantitative
vii. It is also recommended that further studies be Techniques, Management Theories, Entrepreneurship Development,
carried out in the area of material management Strategic Management, Feasibility Study and Market Research and
Organizational Justice. He is widely published in reputable national and
considering the importance to profitability of an international journals.
organization.
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