Material Management over the past year:
If there is anything that the COVID-19 pandemic has taught us, business processes and supply chains are liable to disruption at any moment. As container ships continue to idle outside ports worldwide, the importance of building a resilient supply chain has never been more critical. But how exactly can companies do this?
Since the industrial revolution, materials management has been integral to company operations. Paper-based requirements for a company’s production process may seem easy, but in reality, it’s a difficult job requiring competent managers to ensure consistent material availability. Any shortage of material availability will negatively impact production processes and ultimately harm its bottom line.
To prevent this scenario, material managers are responsible for sourcing raw materials needed for the production process and delivering them to manufacturers on time. For now, let’s take a closer look at material management; we will discuss what a materials manager will do later.
What is Material Management?
Material management is the process that companies – usually manufacturing companies – use to plan, organize, and control how they secure materials for production. To this end, material management focuses on how a company procures, transports, and stores both direct and indirect materials needed for production.
Thus, materials management activities include procuring raw materials to meet the needs of a company, ensuring that the quality of the materials is good enough for both the customer and company and inventory management (this will be discussed in more depth below).
Material management and material planning additionally focus on supply chain management to ensure that the needed materials will arrive on time and in the correct quantity. As the condition of your extended supply chains has such a significant imprint on manufacturing operations, it is unsurprising that they are an essential aspect of material management.
Let us now look at what we mean by ‘direct and indirect materials and how the two types differ.
Classification of Materials
Direct Materials
Direct materials are materials that are directly used in manufacturing the final product. So, this would include nylon or wool; for a car manufacturer, this would consist of windows and wheels.
The relationship between materials managers and the procurement of direct materials is as follows: as a core function of material management is concerned with securing production materials for the continuation of manufacturing, material managers must ensure that the material requirements are met, that they arrive on time, that their quality is sound, and that they are purchased at a reasonable price.
Additionally, during the procurement of direct materials, materials managers can save costs to the company by assessing which supplier(s) offer the best quality for the lowest price. Delivering cost savings when procuring direct materials is essential for maximizing returns on working capital.
Indirect Materials
Right, now that we have our direct materials – we are ready to get to work to transform these raw materials into a final product! This is done with ‘indirect materials’ – which are not part of the finished product but are an essential part of the production and business processes.
Indirect materials, therefore, include items such as machinery, spare parts, and other equipment. This is where materials management can undoubtedly get complicated – as both the supply side and machinery have to be in optimal condition to guarantee project success. Of course, one component of narrowing the gap between planned and actual results has enough spare parts for maintenance and emergency repairs.
The Five Rs of Materials Management
If you happen to find yourself quizzed by someone about materials management’s purpose(s), remember the ‘Five Rs of materials management to help you answer them! So, what are these Five Rs?
The Right Materials:
Firstly, materials management is concerned with finding the right/correct material for manufacturers.
Right Time:
Secondly, this raw material needs to be sourced at the right time to keep the production schedules ticking. Material that manufacturers do not require will either end or be in storage or, at worse, remain unused.
Right Amount:
Thirdly, materials have to be purchased in the right amount. Both a surplus and shortage of material will have negative consequences for a company. Related to this is ‘material flow‘ – in other words, materials management is concerned with ensuring a consistent flow of materials according to the manufacturers’ requirements.
Right Price:
Fourthly, materials need to be procured at a reasonable cost. Of course, most companies will buy fabrics that have the lowest price. The desire for cost savings is balanced against the need for good quality material to meet customer demands.
Right Sources:
And finally, materials have to be sourced from suppliers who provide the required material quality and that you trust and have a good working relationship with.
What does a Materials Manager Do?
Up to now, we have simply explained what materials management entails. Let’s now discuss some of the specifics of what a materials manager is expected to do.
Sourcing and Procurement of Raw Materials
First and foremost, material managers have to safeguard a consistent material flow for the manufacturing process to keep moving. To do this, a materials manager will procure the necessary material (with the ‘Five R’s’ as their guide).
Transportation and Storage of Purchased Material
Once the material has been purchased, material managers will need to locate the best transport to move the materials to the company or customers. Once the materials have arrived, the materials manager is responsible for properly recording and storing them in a safe location where the material quality will not degrade.
Incoming material must be recorded for stock control purposes; after all, it is easier to know when to order more stock if a complete record of stock levels is kept. Once the materials have been recorded, they are handed over to the manufacturers.
Inspection and Handling of Material
Material handling and quality control are further important tasks for materials managers. The incoming material must arrive undamaged for it to be sent to the manufactures.
Managing Inventory
Inventory management and inventory control are essential components of materials management. With a good system in place, it is easier to decide when more materials should be purchased, reducing wasteful expenditure. There are three factors of inventory management related to materials management: maximum stock, minimum security stock, and establishing a re-order point. Let’s discuss all three in turn.
The maximum stock simply refers to the maximum amount of stock that is held at any one time. Remember, holding stock is not free – as a company will have to pay for its storage and warehousing; if too much inventory is ordered, there is also a chance that it will never be used. Minimum security stock refers to the agreed-upon minimum stock levels that need to be kept for manufacturers. Finally, a re-order point is reached when warehouse stock levels are too low; new material orders will be made to align with production schedules.
Strategic Risk Management
At each step in this process – ordering/procuring, transporting, and storing the materials – there is an element of risk that needs to be managed. Most of the risk seems to be found in a company’s extended supply chain. For manufacturing or logistics businesses that rely extensively on asset management, a company such as the NonStop Group can help manage both direct and indirect materials.
To ensure continuity of the flow of material, the NonStop Group can provide solutions to the logistical arm of a company; additionally, the logistics companies that have utilized the services of the Non-Stop Group have seen improvement in their operations (most notably in their ability to track assets around the world and to manage their inventory).
We mentioned ‘indirect materials’ as crucial in material management. The NonStop Group has assisted with maintenance solutions for manufacturers. These solutions have helped reduce downtime and create work orders for preventive maintenance. If you need assistance with logistics or manufacturing operations, be sure to contact the NonStop Group today!
Ensure a Hassle-Free Manufacturing Process
For manufacturers to meet demand, raw materials need to arrive on time and in good condition. Raw material which does not arrive on time will impact production schedules and delivery schedules; this, in turn, results in profit loss for a company. It is, therefore, the responsibility of the material manager to ensure that manufacturing operations proceed as smoothly as possible.
Purpose and Objectives of Material Management
To summarise, the primary purpose of materials management is to secure an unbroken chain of materials to manufactures; this is essential for production schedules to move along. Modern companies will sometimes have a separate department to obtain these materials, called the ‘purchasing department.’ Whether procurement is the responsibility of the materials department or purchasing department, once the manufacturers have received their material, they can get to work transforming these raw materials into a finished product.
Regarding the objectives of materials management, remember the ‘Five Rs’! Following these ‘Five Rs’ is essential to ensuring a maximum return as any supply disruptions or drop in the material quality will disrupt production schedules and thus harm potential profits.
But other objectives of materials management are essential – such as optimal material selection (quality assurance of material selection is critical here), closely monitoring inventory levels, and forging good relationships with suppliers.
Difference Between Material Manager, Logistics Manager, and a Supply Chain Manager
There are some differences between the three despite the overlap between material managers, logistics managers, and supply chain managers.
As discussed, materials management is concerned with securing consistent material flow to manufacturers; supply chain management is concerned with building and maintaining an organization’s network from suppliers to end-users, a far broader task than material management. This means that materials management is simply a component of supply chain management.
A logistics manager will also be concerned with the material flow. Still, in addition to this responsibility, logistics managers will also be tasked with quality control, final delivery of the manufactured products, and order fulfillment.
MRP (Materials Requirement Planning
(Software) and Its Comparison With ERP (Enterprise Resource Planning)
Materials management, as we have seen, is a complicated job. With minimum deviation, a constant flow of material for production schedules can be made easier with MRP and ERP software.
MRP software helps material managers with the ‘Five Rs’ – in other words, what goods are required, how much they cost, and where they are. With MRP, all this information will be available instantly, allowing material managers to make crucial decisions quicker.
ERP can also be used in manufacturing, but it has other functions which MRP does not. While both MRP and ERP can display supply and inventory levels, ERP goes further – it can show sales data, scheduling, and supply chain issues. Additionally, MRP is only used in the manufacturing sector of a company; in a company with multiple sectors, each sector can use ERP software to update important information – such as sales data or scheduling. Other sectors of the company can use this data to assess overall business operations and requirements.
Requirements of an Ideal Material Management System
To quickly summarize, an ideal material management system must have a holistic view of the entire production process – in other words, and it must extend from your suppliers through to your customers. A management system that neglects any steps of this process is likely to impact the central objective of materials management, which is to ensure a continuous flow of raw materials to manufacturers to keep production and delivery schedules on track. Lastly, companies like the NonStop Group can help both the manufacturing and logistical arms of a business; if you require their assistance, be sure to contact them today!