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THE IMPACT OF EFFICIENT MATERIAL MANAGEMENT IN MANUFACTURING COMPANY

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND TO THE STUDY

Material management is the branch of logistics that deals with the tangible component of supply chain specially, this covers the acquisition of spare parts and replacement quality control of purchasing and ordering such parts, and the standards involved in ordering, shipping and warehousing the said parts. It is the planning, directing, controlling and coordinating those activities which are concerned with material and inventory requirement from the point of their inception to their introduction into the manufacturing process, it beings with the determination of material quality and quantity and ends with its issuance to per the schedule and at the lowest cost. Material management can deal with campus planning and building design for the movement of materials or with logistics that deals with the tangible components of a supply chain.

The goal of material management is to provide a unbroken chain of components for production to manufacture goods on time for the customers base. The material department is charged with releasing materials to a supply base, ensuring that the materials are delivered on time to the organization using the correct carrier, material is generally measured by accomplishing on time delivery to the customer from the supply base, attaining a freight budget, inventory shrink management and inventory accuracy. The material department is also charged with the responsibility of managing new launches.

In some companies, materials management department is also charged with the procurement of materials by establishing and managing supply base. Other companies the procurement and management of the supply base is the responsibility of a separate department, the purchasing department is their responsibility for the purchase price, variance from the supply base. In large companies with multitudes of customer charges to the final product over the course to the final product over the course of a year these may be a separate logistics department that is responsible for all new acquisition launches and customers changes. This logistics department ensures that the launch material are procured for production and then transfer the responsibility to the plant material management. These are no standard for material management that are practiced from organization to organization. Most companies use Enterprise Resource Planning (ERP) system such as System Applications Products (SAP), Oracle, Business Planning and Control System (BPCS) Manufacturing Accounting and Production Information Control System (MAPIVS) and other system to manage materials control afford. Small concern that do not have or cannot afford EPR system use a form of spread sheet application to management material. Some other construction project use Barcode and Global Positing System (GPS) Material management System like Tranckum.

Material Management is not a science and depending upon the relevance and importance the organization officials place upon controlling material flow. The level of expertise changes some companies like materials management on a level whereby there is a logistic director, other companies see the importance level as managing at the plant level by hiring an inventory manager and still other companies employ the concept that the supervisors in the plant are responsible accompanied by the planners. Because there are no standard, there is only practices of any particular business sector, that are widely used for example the generation or release to the supply base comes in many forms from the level that requires sending facsimiles and Portable Document Format (PDF) files. The Electronic Data Interchange (EDI) in formation exchange to the ultimate practice of a supplier web base site.

1.1.1 HISTORY OF SKANA ALUMINUM INDUSTRY, OWERRI

Max aluminum industry is a private owned enterprise. The company leadership is dynamic and has strong worth and experience in commodity processing business with a proven track record of building growth and success. Skana Aluminum Industry is named after the tribal name for killer whales, Skana means killer demon, supernatural power, killer whales are known for their intelligence, strength in numbers and swift powerful movement like a killer whale the investor of Skana aluminum company look to move swiftly in numbers to revive a business that can be great asset to the mid west and to wis consin. With large capital commitment for year one and two the leadership team projects and extensive customer base with the potential for global exports, Skana aluminum project continuous a long history of aluminum manufacturing company and the establishment of the branded “MIRRO” cookware product line in 1918. In 1983 the company was sold to Newel Rubber main and today lives on a Skana aluminum. The revitalization of the company places an emphasis on producing aluminum coil and blanks in the open market. The art of aluminum manufacturing is bred in the talented employees of this community. Incorporated in 2009 Skana’s objective is to purchase, rehabilitate and operate the shattered willing mill bringing it back to life. We are continuing the legacy of aluminum manufacturing on the lake shore by building a company a community and friends.

1.1.2 FIRST LEADER OF SKANA ALUMINUM COMPANY 

Thomas R. Teswedie Snr, utilized his business skills and peoples skills to climb the corporate ladder through sales to chairman and CEO of Skana Aluminum of Sheboygan Wiscosin, Mr. Testwuide Snr, ran Skana Aluminum from 1971 until the sale of the company in 1988 during his time as the president, chairman and chief executive officer of Skana Aluminum, Mr. Testwuide Snr, led the company through two major subsidiary purchases of Prairie Malt Ltd of Saskatcheiran, Canada and CUC Malt Ltd of Nanying, China. During his career, Mr. Testwide Snr, has been recognized on an international scale for his business success. In 1994 he was the recipient of Winsconsin manufacturer of the year grand award and in 1996 he was the receipt of outstanding foreign investment Award, Nanjing, China. Mr. Testwuide Snr, has served on various industry, bank and charitable boards of director including. Barley Malt Institute, U.S. Brewer Association, Wisconsin manufacturer and commence security, financial service, bank and St. Nicholas Hospital. Mr. Testwuide Sr was a member of Young Professionals Organization until 1995. Currently, Mr. Testwuide Sr. is active with multiple business organizations including chairman and CEO of Plymouth Foam Products and chairman of the Board of Torginol, Inc as well as others most recently, Mr. Testwuide Sr. led a group of investors to purchase out if receivership and re-commission the Knoening and Vitas Aluminum Compoany now operating under the name Skana Aluminum Company in Manitowoc Wisconsin. Mr. Testwuide Sr. is serving as the chairman and CEo of the aluminum mill and will return 75-100 jobs to the community during 2010.

1.2 STATEMENT OF THE PROBLEM 

Problem related to managing the flow of materials can be found in every organization the efficient management of materials plays a key role in the successful completion of a project. The control of material is very important and vital subject of every organization and should be handled effectively for the successful completion of a project. Material account for a big part products and project cost. The cost represented by material fluctuates and may compromise between 20-50% of the total project cost and some times more some studies concluded that materials count for around 50-60% of the project cost (Stukhart 2007 and Bernold and Treseler 1991) materials are critical in operations in every industry since unavailability of material can stop production in addition, unavailability of materials when needed can affect productivity, cause delays and possible suspension of activities until the required material is available, it is important for an organization to consider that even for standard materials, there may be significant difference in the data that the materials was requested or data when the purchase order was made and the time in which the material will be delivered. These delays can occur if the quantities needed are large and suppliers is not able to produce those materials a the time or any other factors beyond the control of the organization.

The organization should always consider that purchase of material is a potential cause for delay (Willis, 2008). Unavailability of materials is not the only aspect that can cause problem, excessive quantities of materials could also create serious problem to manager. Storage of materials can increase the cost of production and the total cost of any project when these are limited areas available for storage. The managers have to find other alternative to organize the material until they are needed. Some of the alternatives might require re-handing of materials, which will increase the costs associated with them. Provisions should be taken to handle and organize the material adequately when they are to received, special attention should be given to the flow.

1.3 OBJECTIVES OF THE STUDY

The following are the objectives of the study:

i. Low price to be lowest – includes transportation enhance profit.

ii. High inventory turnover- value of inventory to be low relation to sale reduces storage costs.

iii. Continuity of supply-alternative sources, captive suppliers flexible suppliers.

iv. Low payroll cost- low operating cost of material management personnel

v. Favourable supplier relations-supplier development

vi. New material and product –working closely with design and research department for development of new material and products.

vii. Economic make-buy-coordinating and assisting other department in make-buy decisions.

viii. Standardization-coordinating with design departments in reducing number of items.

ix. Product improvement-contribution towards product improvement by giving appropriate inputs and assisting design department.

x. Inter departmental harmony-success of material management department depends on the success of other departments, items relations are to be harmonious. Forecast- forecast in terms of prices, availability and general market conditions are to be regularly monitored towards making important business decisions.

1.4 SCOPE OF THE STUDY 

The study focuses on the role of materials management of a manufacturing organization focusing attention on Skana Aluminum Industry Owerri, the study does not exceed the area of study.

1.5 SIGNIFICANCE OF THE STUDY 

Raw material form critical part of manufacturing as well as service organization, a considerable amount of material handling is done in one from or the other. This movement is either done manually or through an automated process. Throughout material handling process significance safety and health challenges are presented to workers as well as management therefore, manual materials handling ranges from movement of raw materials work in progress finished goods rejected, scraps, packing method of moving packing and storing of material in appropriate and suitable location. The main objectives of material handling are as follows:– It should be able to determine appropriate distance to be covered.– Facilitate the reduction in material damage as to improve quality.– Reducing overall manufacturing time by designing efficient manufacturing movement.– Improve material flow control
– Creation and encouragement of safe and hazard free work condition.– Improve productivity and efficiency – Better utilization of time and equipment

1.6 RESEARCH QUESTION 

The following questions are derived the course this study?

i. Effective material handling does it create any room for effective utilization of materials in the stores?

ii. It is not any use of any importance of apply proper documentation of stock inventory in any organization.

iii. Manufacturing being a government body. Which does not operate no profit motive does not require stock control and material management procedure

1.7 LIMITATION OF THE STUDY 

In the case of research work, the researcher has some limitations to carrying out this research work. The major constraints which served as limitations to the study are as follows:

a. Financial limitations: Finance was one of the major constraints due to limited finance the researcher was not able to travel far and wise to gather all information necessary for the research work. Also as a student having much work load which demands for money all served as limitation to the study.

b. Time constraints: The time frame given for the project work was very short. It also affected the researcher’s research work.

c. Lack of information: Lack of information from the respondents also served as limitation. The respondent refuse to give out information to the researcher thinking than the researcher is a government official who is gathering data for the collection of tax in the future.

1.8 DEFINITION OF TERMS

The following terms were defined for the course of this project work:

Inventory management: Inventory means stock of raw materials; semi finished and finished goods maintained by organization.

Inventory control: It means stocking adequate number and kind of stores so that the material are available whenever required, scientific inventory control results in optimal balance.

Raw materials: Material that the organization converts into processed parts this might include parts specifically produced for the organization and parts brought directly off the shelf (i.e. bolt, nuts)

Purchased parts: Parts that organization buy from outside sources (i.e. lower case for a computer).

Work in process: This is a semi finished product found at various stages in production (i.e. assembled mother board).

MRO supplies: Maintenance, repairing and operating supplies used I the manufacturing process but are not part of the financial products.

Bulk Materials: These are materials that are delivered in mass and deposited in container.

Bagged materials: These are materials delivered in bags for ease of handling and controlled use.

Palleted Materials: These are bagged material that are placed in pallets for delivery.

Packaged materials: These are materials that are packaged together to prevent damage during transportation and deterioration when they are stored.

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