The work undertaken by materials management experts can be broken down into five different types, as follows:
1. Material Requirements Planning
This important step in material management directly affects profits as the lower the amount of material used, the lower the cost of production and the more profit is delivered. Reducing material overspend has caused some industries to consider ‘Just in Time (JIT)’ strategies that require very small levels of inventory. However, this still requires careful planning to maintain without impacting production schedules.
Purchasing should be done economically and on time to maintain material supplies and increase final profits by lowering expenses.
3. Inventory Control
An inventory can include a range of goods being held including partially finished items, goods ready for sale and those used in production. Many industries try to time purchasing so that materials enter stores just ahead of production, although there is also a need to gauge supplier levels so items can be stocked before they become unavailable.
Inventories are required to control the flow of raw materials, purchased goods and finished parts and components.
4. Material Supply Management
Supply chain management can require materials to be distributed to different sites or production centres, each of which needs to be continuously supplied. Lack of stock can lead to financial losses through having to source replacement production materials or having to halt production schedules.
Poor storage can also lead to material supply disruptions through damaged or misplaced stock. Material management teams should be able to mitigate against these situations by using alternative supply systems.
5. Quality Control
Quality control of materials is also important, since good quality materials lead to good quality products. Factors such as durability, dimensional accuracy, dependability, performance, reliability and aesthetic value can all be important quality factors for materials management, depending upon the applications.
All five of these types need to work together for the successful management of materials from purchase and supply through to utilisation.
The overriding aim of material managers is to maintain a consistent flow of materials for production. This seemingly straightforward task has a range of potential difficulties to overcome including incorrect bills of materials, inaccurate stock-taking, shipping and receiving errors, unreported scrap, and production reporting issues.
Planning, organising and controlling the flow of materials means it is possible to manage purchasing and shipping to coincide with a manufacturing process and the final delivery of products. While material managers oversee the inventory management needs of a company, the actual procurement of materials may be undertaken by a separate purchasing team.
Material managers don’t just manage the flow of materials to ensure on-time delivery, but also seek to manage costs and quality through the supply chain. Keeping track of the availability of raw materials and products can also deliver cost savings and ensure a maximum return on working capital.
Materials are usually classified as either direct or indirect materials. Direct materials are those that are required for a finished product, while indirect materials are those that do not directly generate the final product.
In either case, inventory management is a vital aspect of material management. This can be broken down into three factors:
1. Maximum Stock
This is the maximum amount of material that is held in stock at any given time.
2. Minimum Security Stock
As stock levels fluctuate during production, there is also a need to ascertain a minimum stock level, bearing in mind supplier delivery times, cost of the orders and production requirements.
3. Re-Order Point
This is the point at which orders should be made so as to keep warehouse supplies aligned with supplier delivery times and production schedules.
Materials management is vital to ensure there is an unbroken chain of materials for production purposes to meet customer demands. Not only does it make sure production schedules can be met, but it can also save costs for a finished product while also maintaining quality through the materials that are purchased and used.
Materials management crosses the line between purchasing, logistics and inventory management, making it vital for processes reliant on raw materials, machinery, and maintenance, among others.
Materials management uses inventories and production requirements for planning and control to ensure materials are available as required to meet production schedules.
This material planning includes managing logistics, stock levels, materials quality, cost and more. This requires a step-by-step overview of processes and requirements.
Materials management has been an important part of industrial processes since the industrial revolution (if not before!), and is still used by modern companies across a range of industries to prevent any pauses in production.
With ties to other business areas, such as purchasing and warehousing, material managers need to interact with a supply chain to make sure materials are delivered where they are needed at the right time.