Materials Management Links to Profitability (Effectiveness)

Organisations do not want to have too much stock or inventory on hand as this means that capital (finances) is tied up in stock when it could be used elsewhere. Overstocking of perishable materials such as food can lead to waste. More waste means a higher cost price for the product or service and less profit for the organisation. The aim of materials management is to ensure that the correct amount of stock or raw materials is available at the right price and at the right time to allow a smooth production process.