What is materials management

These are the products that wind up on a bill of materials, which in turn can be helpful for calculating costs and finding suppliers. Materials managers are also responsible for indirect materials. The main responsibility of a materials manager is to source the right goods at a reasonable price. While larger organisations may have their own purchasing departments, often it falls to the materials manager. After being briefed by production managers as to what direct and indirect materials are required, a materials manager will hunt through their network of suppliers or seek to expand said network in order to source right-fit goods at a reasonable price.

So, this part of the chain must be carefully managed and optimised to find those critical areas of improvement. From here, goods can be distributed or stored as appropriate. Inventory management is about a lot more than just keeping a tidy warehouse.

Materials managers are also responsible for the maintenance of good storage records, as well as control of the facility itself. Goods must be stored in a manner that minimises the chance of spoilage, and the flow of goods must be monitored to ensure desirable inventory turnover.

Forecasting to meet demand is a skill unto itself, requiring accurate data and strong industry knowledge. Meanwhile, each stage of the materials supply chain comes with it a degree of risk, especially when third parties are involved. A materials manager who can accurately plan for demand and build control strategies associated with risks i.

Yet, this breathing room will not be so large as to potentially create a risk of its own — for instance, purchasing more resources than you need could create breathing room, but also increase carrying costs and the risk of scrap or spoilage. There are five objectives for any good material manager.

This is especially important for any organisation with either a highly automated process, or which follows the JIT just in time inventory model, where there is little room for supply errors. From sourcing to purchasing to transportation to storage, there are many nodes in the materials management network and each comes with a cost. By taking time to track the data from each of these sources, a materials manager may be able to see where inefficiencies are occurring thus increasing costs , or where a less-expensive alternative may be possible i.

Inventory turnover is a highly useful metric for determining how quickly your business turns over its entire stock in a set time period. A high inventory turnover i. Learn more: How to Calculate Inventory Turnover.

For many manufacturers, what comes out is equal to what goes in. Fluctuations in the quality of components could lead to fluctuations in the quality of products, which may harm customer satisfaction down the line. As such, materials managers must work to ensure continuity of materials quality to better guarantee a desirable end result.

Finally, the importance of a strong supplier network cannot be overstated. Building strong relationships with key suppliers can lead to a variety of benefits, for example, VIP customer discounts, stronger negotiating positions, or even just making life a little easier by reducing friction. Given that both terms seem related to the flow of goods from the origin point to selling manufactured products, it would appear at first glance that materials management and supply chain management are redundant terms — more or less the same.

In a sense, they are. Downstream, it extends through more logistics companies and distribution centres until it gets to the business that sells your products, then on to the end-users themselves. To put it in short, materials management is a logistical function, which forms just one component in the supply chain.

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An information flow is focused on order management, things such as delivery status and order turnaround time. This is important for providing transparency between the business and its customers, many of whom are looking for accurate and real-time information about the status of their orders. A financial flow is focused on the value of the materials being used in the creation of a product. This is important for calculating values such as cost of goods sold COGS and for maintaining accurate bookkeeping in areas such as inventory accounts and accounts payable.

In addition to these flows, MM plays an important role in larger and end-to-end business processes, such as:. In the procure-to-pay sometimes called source-to-pay process, users identify the raw materials they need to produce certain products, solicit quotes from suppliers, and choose the best offer for their manufacturing needs.

Since this deals with acquiring materials, the material and financial flows are affected. In the plan-to-product sometimes called design-to-operate process, businesses select the amount of raw and packing materials they need from their inventory and begin work on creating the product. Since this deals with movement of materials within the production warehouse, the material and financial flows are affected, including the actual costs incurred to produce the product.

In the order-to-cash sometimes called lead-to-cash process, businesses collect and fulfill orders from customers via sales orders. Since this deals with the movement of products and orders, the material, information, and financial flows are affected. This inventory management falls under the purview of MM. Similar to maintenance management, as businesses look to expand or rebuild their plants and production equipment by purchasing assets, equipment, machinery and materials for the projects, the associated inventory of parts that go into such a capital project fall under the MM umbrella.

Back to ToC. First released in , it drastically simplifies processes compared to SAP ERP, and consists of numerous lines of business LoBs which also cover a host of business processes. SAP is continually expanding its product functionality across all products, and the MM area is no exception. One of the most important MM-related features that SAP has introduced is the Material Ledger , a way to record, valuate, analyze, and report on inventory.

As SAP continues to explore different intelligent technologies such as AI and robotic process automation, further MM enhancements are expected to be delivered to customers.