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Materials Management and Organizational
Effectiveness
Abstract
The study examined the contributions of
Materials Management to organizational effectiveness, determined all the areas
covered in the materials management functions, ascertained the level of
attention given to the materials management functions in the telecom industry,
and found out how appropriate materials management strategies could lead to
cost savings and profitability. To realize the stated objectives of the study,
the researcher sought to answer six research questions. Three hypotheses were
formulated to guide this study. Correlation co-efficient and Chi-square were
used to test the Null hypothesis. The researcher prepared and distributed a
total of fifty five (55) questionnaires comprising of twenty four (24) open
ended/close ended questions each. Out of these, fifty (50) ere received and
analyzed. At the end of the study, it was found that effective and efficient
materials functions contributes to the improvement of performance, leads to a
significant reductions in the total materials cost, and helps to enhance the profitability
of the telecom industry. It was recommended that the organizational structure
of the Telecom industry should be redesigned to consolidate the existing
Materials Management department, The Materials Manager should be given the free
hand to carry out his functions, He should be made to report to an officer not
below the rank of General Manager, The process of competitive bidding should be
made more transparent, and various cost reduction strategies should be used
where necessary.
Chapter One
1.0 Introduction
Materials are all the things we use for
production of goods and services. e.g. raw materials, spare parts, stock items.
The management of materials refers to all the functions of the various
departments that coordinate materials in and out of the organization. Materials
Management is the branch of logistics that deals with the tangible components
of a supply chain. Specifically, this covers the acquisition of spare parts and
replacements, quality control of purchasing and ordering, the standards
involved in ordering, shipping and warehousing situation, the demand for raw
materials, components, sub-assemblies, is dependent on the production plan for
the final product. It is therefore, possible to determine how many parts or
components will be needed in each future time period in the planning horizon.
Materials management method also known as materials planning, uses this
information about dependence of demand in managing inventories and controlling
the production lot sizes of the numerous parts that go into the making of a
final product. The management objectives of material management is to avoid
inventory stock-out and overstocking, so that production runs smoothly
according to plan, and investment in raw materials and work-in-process
inventories are achieved at a reduced cost. Materials Management systems in
part or in whole, are used in manufacturing firms both large and small. The
reason is that it provides a logical and ready understandable approach to the
problem of determining the number of parts, components and raw materials needed
to produce each end product. Material management also provides the time
schedule specifying when each of these materials, parts and components should
be ordered or produced. Materials Management and the need for it to be more
efficient became more pronounced because materials now account for three
quarters of the total amount of money invested by many manufacturing service
Industries. Telecommunications firms manufactures recharge cards and other accessories
as well as procure generators and other items used for its numerous
basestations, which enables it to provide quality services to its millions of
customers. Materials in this case must be effectively managed or taken care of
to avoid incurring losses and administrative costs, which affect the
organizational profitability. According
to Monk (1987), as production activities became highly automated and use less
direct labour was required, the materials proportion of the product cost tends
to increase. For this reason, effective and efficient materials management
procedures are used to control the flow of materials. Another factor in the
success of any business as a whole in attaining efficiency is the application
of the concept of materials management activities under one department, headed
by a materials manager. It also assigns materials management activities to all
major departments in the organization that contribute to materials cost. This
if carried out effectively, forces control and coordination between purchasing,
production control and all other functional units that contribute to materials
cost. Efficient performance of the materials management functions is vital to
the smooth operation of the organization. It is the basic responsibility of the
materials management function to plan, organize and control the flow of
material distribution of finished goods. All the major departments under
materials management should strive to perform their own functions diligently so
as to create and develop awareness for the critical area of operations and the
need to be responsive to timing.
Despite the significance of materials
management, its functions have been continuously neglected, both in the public
and the private sectors of the economy. This normally stems from the wrong
notion of non-professionals. To a non-professional, materials management is
simply the functional responsibilities of all the units of the organization
together, without each having a specified or defined function or role to play,
thereby creating disorganization, confusion and inefficiency in its management.
An effective and efficient management of materials goes beyond the profit
earning contributions to the organization. Materials management functions
should be unified and coordinated to enable the entire process achieve its
target of minimum cost. According to
Monk (1987), for there to be a good materials management system in any
organization, it is necessary that there should be an officer at a very senior
level who takes responsibility over the control of materials from the point of
leaving the suppliers, passing through the organization and finally reaching
the customers. He ensures that the right materials are available at the right
time, at the right place and in the right quantity and quality. This will help
avoid holding excess stock and its attendant costs. Apart from this an
efficient materials management helps in the effective utilization of storage
space and avoids shortage “out of stock syndrome” which might cause production
stoppage especially when the process is automated. Suffice it to say at this
point that effective and efficient use of materials has been the bane of both
the public and private sectors. But the realization of the fact that materials
cost between 50-70% of the entire expenditure in the public sector and the
realization in the
private sector that materials costs
account to a very high extent to the profitability or otherwise of any
organization. Further being aware that an item well bought is an item well
sold, has changed the entire perception organizations have about the management
of materials. This reason formed the basis for the passage into law of the
public procurement act of 2007 by the National Assembly and its subsequent
passage of the same law by some states and the setting up of the Bureau of
public procurement popularly known as “Due process office”, to supervise
procurement activities in the various levels of government. The private sector
on its part, having realized the profit centre of materials are now
reorganizing and restructuring their systems to accommodate a functional
purchasing/procurement, materials/supply chain department, to manage the entire
materials activities of their organizations. Thus, this department is usually
headed by a manager or director depending on who he/she reports to in the
organizational structure. According to Lee and Dobler (1977), the paramount
objective of materials management is to reduce cost. More precisely, the total
costs associated with the acquisition and management of materials. They also
referred to materials management as a confederacy of traditional materials
activities bound by a common idea, and of an integrated, management approach to
planning, acquisition, conversion, flow and distribution of production
materials from the raw materials state to finished product state. From the
above definition, for materials management to be efficient, it cannot be
performed in isolation.
Materials management may be said to be
an activity, integrated, coordinated and concerned with such widely dispersed
functions of management as budgeting, purchasing, production scheduling,
receiving inventory, manufacturing maintenance and materials quality control.
An effective and efficient materials management system is concerned with the
whole process from a need for material services, right through to the supply of
them to the users and in many cases, the product thereby being made available
to the customer. It encourages the final disposal of scraps, obsoletes and
decisions such as ‘make or buy’, value analysis and value engineering,
standardization, optimum specification, product development and new product
pricing, quality of materials and continuity of supply. The implications are
that materials management must be prepared to play a number of different roles.
The fortunes of a company may be affected adversely, depending on how well
these roles are played. So the materials manager is required to cope with
technological development, new material and process as well as economic
conditions. In line with the above reasoning, Compton (1981), averred that the
materials manager is essentially a leader, an organizer and an administrator
and must have a sound management training, as this would enable him to
effectively and efficiently manage the organization towards achieving set goals
and objectives.
1.1 BACKGROUND
OF THE PROBLEM
In Nigeria, being a developing country,
management of various aspects of our live have been haphazard. So also is our
industry which has been operating in an environment characterized by risks and
uncertainties resulting from the downturn present in the economy.
This was the situation in the
telecommunication industry which was originally weighed down by monopolistic
tendencies whereby only Nigeria Telecommunications Ltd (NITEL) was solely in
charge in the rendering of all Telecommunications Services within the country.
The fact that NITEL was able to sustain its services to the entire country was
as a result of government patronage and yearly budgetary allocations as well as
not having any form of competition. Thus, the need to attain effectiveness and
make profit from its operations was absent. The liberalization of the
telecommunication sector and the subsequent entry of other firms such MTN Nig
Ltd, Econet (now Zain Nig Ltd), Glo Nig Ltd, visafone, etisalat etc, whose objectives
are to attain effectiveness and efficiency in the rendering of quality services
to numerous customers and make reasonable returns on investment a sine quo non,
has now brought the need to manage every material well so as to enhance the
achievement of set goals.
1.2 Statement
of the Problem
Materials management as perceived has
not been widely recognized in Nigeria by all and sundry, as a management
activity which is capable of enhancing the effectiveness of organization as
well as contributing to its overall profitability. This belief has inspired the
researcher into conducting this work on the materials management effectiveness
in the telecommunication industry.
Against this backdrop, the problem of
effective management of materials in the telecommunication industry is as
follows:
i) Wrong
interpretation of materials management concept.
ii) The
profit potential of materials management has not been fully realized.
iii) There
is the lack of separate materials management department in the telecommunication
industry.
iv) There
us the problem of use of non-professionals to handle materials management
functions.
v) Materials management has not been given its rightful place as a management activity in the telecommunication industry.
Materials Management and Organizational Effectiveness
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