Material Management is an essential function of an organization. In the past, material management was a topic strongly connected to manufacturing and trading organizations. However, today universities and even hospitals have realized the difference material management can do in an organization.
Organizations in many industries use many types of materials regularly. Thus, an effective material management system in place can help the organization in many ways. In this article, we dig deep into what material management is, it’s meaning, essential functions and more.
What is material management?
To put it in simple words, material management is planning, directing, handling, controlling and coordinating of raw materials and manufactured materials of an organization. Here all the activities related to fulfilling material requirements from the point of interception to delivery falls under material management.
Materials management in ERP
Material management is a critical service function of the ERP process of an organization. And ERP also plays a vital role in material management.
Material management affects the ERP operations of an organization on many levels. This includes production operations planning, requirement planning, inventory management, finances, supply chain and customer relationship management etc. The process is responsible for the acquisition, planning, purchasing, receiving and handling and storing of materials. Thus, even a small flaw in material management can hinder many ERP operations in an organization -Which is why material management should be well integrated into the ERP operations to ensure a smooth workflow. For an example, it’s important to have adequate systems and processes in place to identify and calculate the raw material required for the manufacturing schedules to avoid wastes, overstocking as well as to ensure smooth supply to fulfil the demand. So, the organization can reduce the wastage of materials as well as keep the raw material cost under control.
Plus, it will help the organization quickly identify right suppliers and vendors, high-quality materials, best rates and much more that will help improve the quality of the production process and the final products. Having a sound material management system in place will also ensure no congestions are manifested at different stages of the manufacturing process or in stores. This is due to an effective material management planning will always make sure of a smooth material supply while keeping track of moving materials to ensure effective movement.
That’s not it. Material management also helps with product life cycle planning contributing to the growth and the profitability of the organization. By continually monitoring and analyzing material management, it will let you know which products have a potential to sell more which products need a revamp and which products lose customer demand. Thus, you can optimize your manufacturing process accordingly, thereby avoid wastage of resources and make sure your focus is where its required and worth it.
By having effective material management in an organization will help optimize the material costs in every front. This also will help organizations deliver an effective service to their customers without any delays. Moreover, material management will ensure enough raw materials are available for the manufacturing process at all times, and manufactured materials are effectively delivered to the customers as promised.
Materials management & logistics
Material management and logistics management are two inseparable functions in an organization. The actual work of logistics is more of in supportive nature for material management. Thus to ensure smooth material management in an organization, effective logistic management in place is paramount. Here the logistic management includes planning, implementing and controlling the movement and the flow of raw-materials with efficiency and of work-in-process and finished products from the point of origin to consumption.
Logistics in material management is responsible for ensuring materials are moved with the least possible budget for maximized profits while ensuring material availability on time as scheduled. Here, logistics is an area that gives a significant competitive advantage for organizations. Thus, both inbound and outbound logistic activities should be managed strategically to keep the costs to the minimum and quality to the maximum. Here inbound logistics control the raw materials and other input materials from suppliers while the outbound logistics handles finish goods and additional information from the organization to the consumer. Since logistics will handle everything from raw material supply from suppliers to product distribution, organizations have to be very smart with their logistic system. Here the quantity of the materials and the frequency and speed should be taken into account.
Managing supply chain, ERP and logistics for material management
To ensure a smooth material management process, supply chain, ERP, and logistics have to work cohesively. Here the supply chain provides the guidelines for the material management department to plan their operations. The supply chain will handle everything from planning product manufacturing process, sourcing raw materials, manufacturing, delivery to returns thus giving precise data on materials required to ensure a smooth workflow in the manufacturing process and product levels in inventories and much more. With this, the material management department will be able to calculate the material requirements of the organizations without overstocking or understocking items.
ERP is another essential aspect that is essential for a smooth material management flow and to optimize the process. Integrating everything from accounting, manufacturing, customer relationships, procurement to business intelligence, ERP can help you optimize your material management flow in many ways.
To give you some examples, business intelligence will help identify future trends of customer behaviours and market trends for the manufacturing process so you can determine what products’ demand will increase and reduce in the near future; procurement will help find best suppliers and ensure the quality of the materials are up to the standards.
Logistics also place an essential part in the material management process as it provides the effective movement of all the materials. Thus, it’s critical for organizations to ensure all these three areas are well integrated, thus achieving an improved material management process for improved competitive advantage, profitability and customer satisfaction.
Materials management integration
By now, it should be clear to you that the success of material management depends on many other functions. Thus, it’s essential to ensure smooth integration between all the tasks that affect the material management process if you want to optimize your material management operations.
For this, the best solution is to adopt a sound ERP software with a comprehensive material management module. Or invest in a suitable material management system that can be seamlessly integrated with the ERP system. So it will be easy for your departments such as supply chain and logistics to effectively collaborate with the material management department in identifying, planning, controlling and fulfilling material requirements of the organization. With this you will be easily able to manage the material flow, information flow, as well as the financial flow in the supply chain process as the system, provide you with better visibility over your operations and transparent information on what’s going on in the stores, with customers, suppliers and finances etc.
Having such as system will also help you speed up your material sourcing operations helping you to avoid delays as you will always be one step ahead than the demand since you have all the information with you related to customer demand, market trends, supplier capacity,..etc.
When done right material management can deliver you profits and customer satisfaction rates of next level. Thus, it’s essential that you pay attention to material management in your organization and to it make more streamlines, fast and effective.
