It depends somewhat on the size of the company, although you'll find materials management being applied in smaller companies all the time. You've got to think of what the objective of the production inventory control function is, that is, to maximize the customer service levels, to minimize inventory investment, and to maximize manufacturing efficiencies. The only problem with those objectives is that they are all in conflict with one another. In my opinion, if production inventory control is a part of one functional area, such as the manufacturing, or the marketing, or finance departments, it tends to slight the other areas. For instance, if production inventory control is responsible to manufacturing, it tends to look at manufacturing efficiencies. That means large lot sizes. Large lot sizes mean a lot of inventory and a very poor mix, so you get a lot of dollars in inventory and usually a poor customer service level. If it's part of marketing, it tends to give emphasis, of course, to the customer service level. It tends to pay little attention to the manufacturing efficiencies, so you get small lot sizes. Any marketing manager will tell you that you can't sell from an empty wagon, so you carry lots of inventory. There's the conflict. Of course, if it's part of finance, inventory would be at zero. If inventory is at zero, the lot sizes are small, manufacturing costs increase, and very poor customer service levels are achieved. Obviously I'm very biased in my opinion of materials management. I don't think it should report to any one of those organizations, although I personally report to the vice-president of manufacturing.
I report to the marketing vice-president, and warehousing and inventory control report to me. We have six distribution centers that report to a distribution center manager who, in turn, reports to the marketing manager. My position evolved over the last ten years as the company set up a materials management organization. The materials management concept includes distribution, warehousing, production scheduling, and purchasing, and it has since evolved beyond that.
We deal most frequently with people in production scheduling and warehousing. Although we meet with production scheduling only once a week, it is our most important relationship. We're going to have a problem if we can't get along with the production people!
There are two positions-inventory coordinator and inventory controller. An inventory coordinator would be writing purchase orders, expediting purchase orders, reviewing inventory reports, making suggestions for replenishment, but would not have the production contracting responsibility or authority except at very low levels.
An inventory controller makes purchase decisions or replenishment decisions based on rather well-defined minimum-maximum guidelines except in the new product areas where everyone is guessing. Even there, there is a lot of discussion, and the inventory manager, being much closer to the financial aspects of inventory and what the company is trying to achieve, will set those guidelines.
Materials management at this company includes purchasing, warehousing, shipping, production, and inventory control activities. It also includes all distribution centers located throughout the United States and our order control center. Once an order is entered through the order entry center, which is a part of marketing, it becomes part of the materials management responsibility to follow it through to completion. We make certain that it is shipped on time, and we provide updated information should the order be delayed. There are a couple of hundred people in the materials management organization here.
Question - How do people move up through your organization?
Answer - Most people in materials management come up through the production inventory ranks. I would say that a lot of people in production inventory actually come off the manufacturing floor. So they get started, become a foreman, progress to a manufacturing planner, and then from the planner to a supervisor, supervisor to manager, and so on.
A person coming into our organization right now straight out of school would start in the warehouse learning about the product, the control of the inventory, that kind of thing.
They would probably start out loading trucks. We load our route trucks out of each warehouse, and we also load the semitrailers that are going to our individual distribution centers. So they would see how route trucks are loaded and how the product affects the route trucks. They would also see the other part of it, the "pile it in, pile it out" situation.
They would probably work there not more than a month. We put them out there about a month and then we just let them ride a route sales truck for a week before we bring them into the office and put them into what we really want them to do. We want them to know the company a little bit.
Trainees who then come to my department spend time looking over my shoulder, and come to production meetings with me for the first two or three weeks. Then I begin to get them involved with my warehouse manager in terms of traffic scheduling. We have our own fleet, and we let them talk with each center about truck loading. The centers load their own semitrailers using a reorder point system. Trainees probably spend quite a bit of time doing that, about three or four months, really becoming familiar with how each center operates versus how we operate here. In working with warehouse scheduling, they would primarily be working up the loads on paper, the kinds of loads that they physically loaded before. Then we would probably get them into production scheduling. What we did with one young man was to make him my backup; he learned all phases of what I was doing. He has since moved over to the plant where he does production scheduling. But, my next step with trainees is to get them involved in production and sales, the management part of it.
