The Effects Of Integrated Material Management On The Profitability Of An Organisation In Cameroon
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Materials management is a total concept involving organizational structure unifying into single responsibility the systematic flow and control of material from identification of need, through customer delivery. Included within this concept are the materials functions of planning, scheduling, buying, storing, moving and distributing. (Oyeoku, 2001). These are logically represented by the disciplines of production and inventory control, purchasing and physical distribution (I FPM M-1984).
The function “Materials management” represents an organizational concept that provides for more efficient planning, coordination, and control of all material activities occurring prior to the actual use of materials. For this reason, the scope of materials management is broad. It involves the activities of planning, and anticipating materials requirements, introducing materials into the organization and monitoring their status as current assets, and providing materials at the right time and place so as to meet operational requirements of the organization or company (Oyeoku, 2001).
Materials management/control in the Cameroonian construction industry is of universal importance. According to Koontz and others (1992), the surest way of achieving a construction company’s objectives (profit maximization) is through effective materials management. Effective materials management can make a construction company to grow or prosper while ineffective materials management can lead to demise.
Monks (1987) in his own contribution looked at materials management in the construction industry as the planning, organization and controlling of the flow of materials, from the initial purchase (input) to the distribution/consumption, to produce a complete project (output).
His contribution therefore embraces planning, purchasing, production and inventory control, storage, material handling and physical distribution. The objective of materials management is to optimize performance in meeting customer service requirements at the same time adding to profitability by minimizing cost and making the best use of available resources.
In the earlier years, materials management was treated as a cost centre since purchasing department was spending money on materials, while store was holding huge stock of materials, blocking money and space (Ramakrishna, 2005). However, with the process of liberation and opening up of global economy, there has been a change in outlook in the business environment, resulting in manufacturing organizations exposed to intense competition in market place.
In Cameroon for instance, materials constitute a major cost component for any industry. Sturkhart (2007), states that the total cost of purchased materials or value of materials may be 60% or more. In many cases, the cost of materials exceeds 50% of the total cost of goods produced. Such a large investment requires considerable planning and control as as to minimize wastage which invariably affects the performance of the organization (Ramakrishna, 2005).
Majority of the companies attain significant savings from effective materials purchasing and management, which amounts between 50%-60% of total costs, (Song et al., 2006). Effective management of materials can lead to a reduction in cost, resulting in a significant saving.
A potential 6% saving on total cost through effective material management is achievable (Bell & Sturkhart, 1987), the various types of materials to be managed in any organization include purchased materials, work-in-progress (WIP), materials and finished goods (Banjoko, 2009).
Ogbadu(2009), identified basic price, purchasing cost, marketing cost, obsolescence and wastages as the various costs involved in these materials. Thus, the management of these materials so as to reduce the costs associated is what it is referred to as material management.
Previous researches (Whyback & William, 1986; Evanet al., 1987; Ramakrishna, 2005; Ogbadu, 2009; Ondiek, 2009) have shown that materials account for more than 50% percent of the annual turnover in manufacturing firms. This shows clearly that priority should be given to management of materials in organizations to avoid unnecessary costs.
Cameroon production and manufacturing firms, and especially businesses in the brewery industry are facing competition in the current markets which has led to the need for coming up with better ways and strategies of managing material resources hence eliminating wastage in the value chain and thus enhancing organizational profitability.
According to a survey carried out by the researcher on why some brewery and construction company collapsed, it was discovered that they suffered so much over the past years due to lack of adequate commitment to timely funding of materials procurement, poor material planning, poor inventory control, purchasing problems, quality control problems, stores control problems, material movement and even surplus disposal problems. Therefore, this study became inevitable in view of the developing and changing nature of the Cameroon economy given the nature of the environment: Economics, Political, changes in technological environment, government regulations, multiple taxation, environmental degradation and reduction in quality of raw materials as a result of re-cycling and stiffer competition. Thus, materials management should no longer be viewed as a drain-pipe, but as a serious stabilizing and economic growth potential factor. Unfortunately, few studies exist yet on the impact of materials management on organizational performance and therefore the study attempts to fill this knowledge gap.
1.2 Statement of The Problem
Most organizations especially in manufacturing and in production does not have materials management department. Management in those organizations are of the view that any department within could be a material or purchasing manager. They assume that, it is a matter of making sure materials comes into the organization and are issued to production as and when it’s needed.
The company of Cameroon is therefore of no exception. But, according to Zenz (1996:14), ‘the materials management concept, which incorporates all functions involved in obtaining and bringing materials into the plant, is now being viewed as the answer to many coordination and control problems. Since there is an absence of materials management concept in these organizations, the departments that are in charge of materials handling report directly to accounts department.
According to Carter et al (1993:271), “the materials management concept has often been neglected when it comes to involvement in forward planning discussions and meetings, and many companies have found to their cost the error of leaving out a major part of the organization so directly involved with operations”. Zenz (1996:15-16), explained that, management expect to find purchasing and materials personnel who have the expertise necessary to organize and administer all the activities involved in the materials management functions. He went on to state that but some may lack the in-depth knowledge of specific techniques, particularly in areas of inventory and production control”.
According to Carter et al (1996:28) “many organizations training is not seen in its invested light, rather as another cost which reduces profits “. The training must therefore be seen as investment in terms of time, money and energy on the part of the organisation and its management.
Carter et al (1996:28) further explained that, this harmful mindset is very common in relation to a material which is an indication of neglect by managers of materials as an important factor of the total operations In most organizations within the country (Cameroon), materials management has been relegated to the background without any proper control.
This means that companies are investing heavily in materials than they need to. The research question is how integrated materials management minimize the cost of supplies and increase the profitability of an organisation
The research questions to which answers are attempted in this study are:
(i) Are materials managed very well in the Cameroon construction industry?
(ii) Are the right/skilled professionals heading and controlling the materials departments in the Cameroon construction industry?
1.3 Objectives of The Study
This main of objective of study is examines the effect of Materials Management on the profitability of Manufacturing firms in Cameroon.
The specific objectives of this study include:
- What organizational factors promote Materials Management in the company
- What are the constraints to Materials Management in the company