Table of Contents
What is Material Management?
Raw materials are a crucial asset in the supply chain management process. Materials are any items used directly or indirectly in producing a product or service. As such, materials are defined as the lifeblood and heart of any manufacturing system.
Material management is the process it includes planning, organizing, and controlling the flow of materials to, through, and out of an organization in an integrated fashion.
Material management classifications
The following are the classifications of material management.
- Purchased materials – These are raw materials, components, spare parts, and items that are used and usually do not appear in the end product.
- Work-in-progress material – These are materials that are in the semi-finished stage.
- Finished goods – These are the final products that are ready for final delivery or distribution.
- Supplies – These are consumable goods.
Aim of material management
The Right Quality
Without suitable material for production, can not ensure the right quality of the production. Therefore, we should ensure that suitable materials are available for production. That is the first aim of material management. By ensuring that the right quality materials are available, companies can minimize threats or risks of production and enhance customer satisfaction.
Read More: Quality management in project management
Right Quantity of Supplies
The second aim of material management is to ensure that the right quantity of materials are available for production. Without the right quantity of materials for production, it will create many problems such as customer dissatisfaction, increasing the risk of stock shortages, increasing cost of storage and handling, and decreasing efficiency.
At the Right Time
The third aim of material management is to ensure that suitable materials are available at the right time. It mainly includes reducing lead times because time is money in the business world. As well as enhance the efficiency of delivery processes.
At the Right Place
The fourth aim of material management is to ensure that materials are purchased from the right places. By identifying the right places for purchasing materials, Companies can decrease the risk or threats of production, reduce the risk of faulty materials and ensure customer satisfaction.
For the Right Cost
The fifth aim of material management is to ensure that materials are purchased at the right cost. This process includes communicating with the suppliers to gain the most possible prices for minimizing waste of cost, time and improving production efficiency.
Elements of Material Management
- Demand estimation
- Identify the needed items
- Calculate from the trends in consumption during the last two years
- Review with resource constraints
Purpose of Material Management
- To gain economic purchasing
- Satisfying the demand during the period of replenishment
- Carrying reserve stock to avoid stock out
- To stabilize fluctuations in consumption
- To provide a reasonable level of client service
Objectives of material management
The objectives of material management can be categorized into two areas. Those are primary objectives and secondary objectives.
The primary objectives are,
Right Price
The first primary objective is to ensure that the materials are purchased at the right price. In this process negotiating with suppliers is crucial thing. And it will help the company’s existence and efficiency.
Low Procurement and Storage Cost
The second objective is to manage the store’s materials cost. It includes reducing costs and enhancing efficiency within store departments.
Continuity of Supply
The third objective is to ensure the continuity of the supply the raw materials. It includes reducing costs and continue holding the production process.
Consistency in Quality
The fourth objective is to ensure consistency in quality of materials. It includes minimizing wasting time and cost and enhancing customer satisfaction.
Good Suppliers Relations
The fifth objective is to maintain good relationships with suppliers. It includes acquiring the goods at low prices and timely from suppliers. It is a crucial thing. Because it will help decrease the cost of production. As a result, the company will be able to captivate more customers and enhance the competitiveness of the business.
Good Information System
The fifth objective is to maintain an effective information system for material management. It is a must. By maintaining an effective information system, companies can reduce cost, time and build strong relationships with suppliers.
The secondary objectives are,
Economic Forecasting
The first secondary objective is to analyze economic forecasting regarding the future prices and costs of materials. It is a crucial thing. By analyzing economic forecasts, companies can identify risks and threats.
Standardization
The second secondary objective is to ensure standardization of material management. It includes decreasing cost and time. And the process of materials management will be efficient.
Make or Buy Decisions
The third secondary objective is dealing with the supplier regularly. The material department will select the supplier considering many factors, such as price and quality.
New Materials and Products
The fourth secondary objective is to ensure the development of new materials or products through the material department.
Favorable Reciprocal Relationships
The last secondary objective is to maintain a balance between good and bad by using purchasing power as a tool to generate sales.
Activities of material management
The following are the six activities of material management.
Materials requirements planning
Purchasing
Holds the responsibility for procuring goods for the project in alignment with the specifications, standardization, and in compliance with the project schedule and budget.
The following are the functions of purchasing materials.
- Selecting the proper supplier for the materials requisitioned, before placing an order.
- Negotiating about the price of the materials from the suppliers.
- Assuring the quality of materials and should not be compromised with the best.
Inventory Control
This is the strategy where all stocks of goods are correctly and promptly issued, accorded, and preserved in the best interest of the firm. As well as monitor and control the stock of goods used for production, distribution, and captive (self) consumption.
Inventory is a physical resource that a firm holds in stock with the intent of selling it or transforming it into a more valuable state.
The following are the functions of inventory.
- Meeting anticipate demand
- Smoothing production requirements
- Protecting against stock outs
- Helping hedge against price increase
- Expediting
This process includes continuous monitoring, ascertaining, and maintaining the flow and supply of materials to prevent stock outs and stoppage of production.
The following are the factors that could be affecting expediting.
- Insufficient or zero inventories
- Failure of materials handling devices
- Uncertainty in demand and production quantity
Transportation
This process involves the use of the safest and most economical means to transport the materials to the site where they are needed.
Mode of Transportation
- Aviation
- Land transport
- Ship transport
- Pipeline
Material Handling
This process includes the movement of materials at the lowest possible cost through the use of proper methods and equipment and applies the movement of raw materials, parts in process, finishing goods, packing materials, and disposal of scraps.
The following are the importance of material handling.
- To reduce delays and damage.
- To promote safety and improve working conditions.
- To control inventory.
- To promote productivity.
- To decrease the total cost of production as materials handling uses about 20%-25% of the total manufacturing cost.
The following are the equipment of material handling.
- Industrial trucks
- Automated guided vehicles
- Monorails and other guided vehicles
- Conveyors
- Cranes, and hoists
Why firms have implemented materials management systems
The Construction Industry Institute concluded that labor productivity could be improved by 6% and can produce 4-6% in additional savings.
The following are the reasons for implementing material management systems in firms.
- Reduce the overall cost of materials
- Better handling materials
- Reduction in duplicated orders
- Materials will be onsite when needed
- Improvement in the project schedule
- Quality improvement
- Better relationship with suppliers
- Reduces materials surplus
- Better cash flow management
