Materials Management

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Description of Material Management. Explanation.

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  1. Summary
  2. Forum
  3. Best Practices
  4. Expert Tips
  5. Resources
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Materials Management (MM) is a grouping of the organizational functions responsible for the planning, sourcing, stocking, manufacturing, control and distribution activities of materials used in the internal and external fulfillment of demand.


Typically the term includes all logistical activities that controls the transmission of tangible, physical materials through the value chain such as shipping and transport, distribution and warehousing, quality control, work in progress and manufacturing.


Why Materials Management?

The goal of MM is to ensure an unbroken chain of components for production to manufacture goods on time for the customer base. The materials department is charged with releasing materials to a supply base, ensuring that the materials are delivered on time to the company using the correct carrier.


The effectiveness of MM is generally measured by:

  • Accomplishing on time delivery to the customer
  • Accomplishing on time delivery from the supply base
  • Attaining a freight budget
  • Inventory shrink management
  • Inventory accuracy

MM is not a science. Depending upon the relevance and importance that company officials place upon controlling material flow, the required level of expertise differs. Some companies place MM on a level whereby there is a logistics director, other companies see the importance level as managing at the plant level by hiring an inventory manager or materials manager, and still other companies employ the concept that the supervisors in the plant are responsible accompanied by planners.

 

Origin. History

Initially the trend was having big socks and large inventory based on the idea that the bulk purchases would result in large benefits due to discounts. As a result there were large warehouses and stock houses.

Over time people released that a lot of cash was being blocked here. Also there were losses due to improper material handling.

To control these cost a new sub branch MATERIAL MANAGEMENT came into existence whose main aim was to release the blocked cash, make the material flow easy, reduce the inventory without hampering the production.

Various techniques like increasing Inventory Turn Over Ratio, decreasing Days Inventory Outstanding, EOQ ordering, and Just-in-time were implemented and it was found a large amount of cash could be saved for the company.

 

Assumptions

Various assumptions are made in practice. The inputs are usually obtained from various departments. The production scheduling data plays a very important role here.

For example the calculated economic order quantity  data comes from the forecast department, but the calculated values will not match exactly with the vendors offerings, so then we need to assume a nearby quantity.

Various cost like the cost of tracing materials or rising a purchase order are never known. We need to make assume them. The ability to do so comes with experience in the particular field.

 

Benefits of Material Management. Strengths

Companies are increasingly competing on a supply chain level. MM plays a very important role in this. Some of the major benefits of MM can be explained as:

  • Reducing stocks and warehouses
  • Making inflow and outflow of materials smooth
  • Helps in implementing quality tools like 5S
  • Avoid stock outs
  • Making optimum use of the available resources

Challenges

The major challenge that materials managers face is maintaining a consistent flow of materials for production. There are many factors that inhibit the accuracy of inventory which results in production shortages, premium freight, and often inventory adjustments. Further issues that all materials managers face are:

  • Incorrect bills of materials
  • Inaccurate cycle counts
  • Un-reported scrap
  • Shipping errors
  • Receiving errors
  • Production reporting errors.

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Compare with Materials Management: Value Chain  |  Vendor Managed Inventory  |  3rd Party Logistics (3PL)  |  RFID Technology  |  Cross-Docking  |  Quick Response Manufacturing

Special Interest Group Leader
ANUJ KUMAR SHRIVASTAVA
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Return to Management Hub: Supply Chain & Quality


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