Material management is an
essential business function and it is concerned with planning, acquisition and
flow of materials within the supply chain. Material is one of the four basic
resources (labor, material, equipment and capital) of any industrial of
business activity. For a long time, it was regarded as a routine function with
less importance but over the years, with accelerating economic, technological,
societal and environmental changes, this function has become more important,
more complex and more professional.
The evolution of material
management can be grouped in three separate periods, early part of twentieth century;
the function of materials management was largely reactive and clerical. Its
contribution to profit was not perceived as significant and management did not
attach much importance to it.
In the second period, two
important developments took place. After second world was, demand for consumer
goods increased greatly. This created a shortage of raw material, leading to
innovative concepts like substitution of material and value engineering. Then
the oil crisis of the 1970s occurred. Petroleum products and their derivatives
become scarce. There was sharp rise in the cost of raw material and this led to
the increase in cost of inventory.
Purchase managers were
forced to adopt innovative and proactive measure such as looking for new
sources of supply, finding substitute products, applying value analysis in
purchased products, specification change that allowed use of less costly and
scarce materials, use of scientific methods of inventory control policies,
partnerships, involving carefully chosen suppliers at an early stage in design
and development, and increasing integration of information system.
All of the above action
allowed purchasing to fulfill its role as an expense controller for the
organization and helped to increase regard for the purchase department as a
contributor to profit. Towards the end of twentieth century firms believed in
purchasing fewer items. Generally, they were purchasing raw material and
converting these into end products. Consequently, the concept of outsourcing
emerged and firms tried to outsource items which did not fall under their core
competency. Responsibility of outsourcing fell on the purchase managers; this
responsibility makes material manager as key role player in all organizations.