Materials Management: Definition, Process, Benefits
Materials management is an aspect of supply chain management and planning. The primary purpose of materials management is to ensure that manufacturers have all the raw materials they need to make goods.
Materials management also focuses on ensuring that no components are wasted and optimizing inventory maintenance and management. While materials management requires understanding what materials are needed and where to source them, it is also heavily involved in inventory management and storage.
Many industries incorporate and rely on high-quality materials management, including manufacturing, construction, hospitals and healthcare, textiles, oil and gas, pharmaceuticals, and more. Any industry involved in the movement and supply of many raw materials requires material management expertise.
Materials management can save organizations and manufacturers lots of work, money, and time. Supplying the right quality of materials to the right places at the correct times can be extremely difficult for individual companies and organizations. This difficulty is part of the reason why many companies decide to outsource or create specialized material management departments.
Indirect Materials and Direct Materials
Materials managers deal with both direct materials and indirect materials. Direct materials are the components that cost the most and are the most essential to the production line. Indirect materials include raw materials, natural resources, and other supplies needed to create products.
Indirect materials are less cost intensive than direct materials and involve less measurement. Examples of indirect materials include gloves, PPE, and maintenance supplies.
Materials Management Definition
At its core, materials management is the process of ensuring the correct materials get to the right people at the right time.
Materials management is also referred to as asset management, hardware management, property management, and material handling. How material management is referred to and how it is defined can shift depending on the industry.
Materials Management Process
The process of materials management includes all steps from purchasing materials to receiving materials. This includes storage and warehousing, transport, and receiving. Each step has its own goals and process.
- Purchasing: Purchasing the right amount of goods is important for two reasons. First, it ensures the end-user has everything they need to operate. Second, this process can minimize the amount invested in storage and stored inventory.
- Storage: The goal of storage is to invest in the correct amount of warehousing space in the right places to facilitate the transport of goods in the next step. Storage can also act as a buffer between material production and materials used to mitigate the effect of shortages or material product mistakes.
- Transport: Transporting the correct materials to manufacturers or others at the right time is such a large and involved process that some companies occasionally separate it into its own department.
- Receiving: Receiving in materials management involves checking and distributing components to the correct customers.
Benefits of Materials Management
Well-executed materials management can be transformative for manufacturers and other industries. There are countless benefits, many of which are industry-specific.
Some benefits are more ubiquitous, however, such as the ability to perform just-in-time inventory control, reduce material waste, increase inventory accuracy, and optimize material transport.
JIT Inventory Management
Accurate materials management can allow for just-in-time inventory management (JIT). JIT is an inventory management style that involves delivering components right as needed, i.e., just in time.
JIT allows companies and organizations to minimize the amount of inventory they hold before it is needed, reducing risk. Overall, JIT is an excellent way for companies to reduce risk, save money, and improve efficiency if done correctly.
JIT would be difficult for manufacturers and organizations to perform without the oversight of specialized or outsourced materials management, which can handle the smaller, more frequent storage orders and supply chain risks.
One of the most significant risks of JIT is that it magnifies the impact of differences between planned and actual results. Designating the job of material management can mitigate some of these risks. Dedicated materials managers will be able to anticipate material requirements more accurately than non-dedicated departments, making JIT a more reasonable solution.
Reduction of Material Waste
By overseeing inventory and managing the timing of material delivery, material managers can reduce receiving errors and waste. Reducing waste is important to save costs and conserve resources.
Increased Inventory Accuracy
Knowledge of accurate direct material inventory levels can help increase production efficiency and reduce inventory loss. Preventing the loss of materials is an essential step in reducing the cost of raw materials.
Optimization of Material Transport
By creating specialized materials management departments and focusing on better management techniques, production companies can fully optimize the transportation of materials and the supply chain.
This optimization is done by choosing the correct storage locations and using good transportation techniques. Optimizing material transport can help provide a more consistent raw material flow for manufacturers.
Materials Management in Supply Chain Management
Extended supply chain research and supply chain management can significantly impact materials management. Extended supply chain analysis aims to understand customers’ needs beyond the manufacturer.
Material managers working to understand the extended supply chain usually collaborate with others in their organization. For example, a material manager working in supplies for a construction company will collaborate with developers and sales managers on new projects.
By working with those in other sections of the organization, a materials manager can work on sourcing materials beyond current needs. This can make it easier for managers to navigate potential material shortages, large increases in production, or other circumstances they may not have otherwise been able to anticipate.
Materials Management in Construction
One of the most significant industries that requires intensive materials management is construction. Obtaining and shipping materials (i.e., material management processes), not labor, makes up most of the cost in most construction projects.
Getting the right materials of the right quality to the right people is the core function of materials management, and all of these factors can change significantly depending on the construction project.
These challenges create the need for different material management specialties within different construction sectors.
The goal of every materials management construction job is to reduce waste and costs while ensuring that construction companies have everything they need to complete a project on time.
In construction, materials management also aims to provide correct inventory levels to prevent lost or stolen goods on sites that may not have the resources to manage inventory levels independently.
What is Sustainable Materials Management (SMM)?
According to the EPA, sustainable materials management is “a systematic approach to using and reusing materials more productively over their entire life cycles.” (EPA, n.d.). Sustainable materials management can significantly reduce emissions, waste, and environmental impact.
How to Incorporate Sustainable Materials Management Into Your Company
Sustainable materials management is a growing area of concern for many material managers. While SMM techniques hold obvious importance for environmental and ethical reasons, they can also serve to reduce overall costs in many industries.
The Impact of a Life Cycle Assessment on SMM
One of the first and most essential steps to an effective SMM strategy is understanding the life cycle and environmental impacts of goods and materials. A material manager can understand the life of a product by performing a life cycle assessment (LCA).
Life cycle assessments are performed in four key steps: the scope and goal, life cycle inventory, life cycle impact assessment, and interpretation.
Scope and Goal
Before the research portion of an LCA can be performed, the project’s scope needs to be defined. In defining scope, researchers will determine impact categories (environmental sectors) to be observed, and the scope of the product life cycle up for consideration. For example, some LCA projects may consider the end consumer, while some may stop with the manufacturer.
Life Cycle Inventory
The second step in an LCA is a life cycle inventory. In this process, researchers analyze the flows of energy and materials for a product or good created within the defined scope.
Flows observed usually include materials or energy out of or into the ecosystem.
Life Cycle Impact Assessment
Using the defined flows of energy and material, researchers can then measure the inventory’s estimated or actual impact. Research areas can include effects on habitats, climate, pollution, etc.
While performing the impact assessment, researchers will classify and characterize their results. This process involves normalizing research results for easier comparison and selecting the most important categories for further analysis.
Researchers will take previously collected data and interpret the information in a review process. This process involves evaluating data quality,re-assessing scope, identifying the most significant issues, and outlining points for future change.
The Impact of Sustainable Material Procurement on SMM
Sustainable material procurement is a method for performing SMM. To meet sustainable material procurement goals, material procurement may be altered to follow guidelines that outline better material sources. For example, the EPA has a comprehensive set of guidelines for material procurement to reduce environmental and human health impacts (EPA, n.d.).
Organizations can meet sustainable material procurement goals by choosing different raw material providers, placing restrictions on current material providers, or finding ways to select other materials altogether.
The Impact of Circular Economy Strategies on SMM
Recycling strategies, especially circular economy campaigns, have had impacts on SMM. A circular economy is a goal for a type of material management in which supplies and end-of-life plans for products are anticipated.
Circular economic strategies can include things like second-hand stores, electronics designed to be repaired, and returns programs for broken goods, but they can also include broader goals, such as recycling plastics into usable pellets for future manufacturing.
Many tools are available for material managers and materials management departments that want to move towards sustainability. SMM tools are available for many industries and materials managers working in all sectors.
As materials management is so significant in construction, SMM tools for construction materials managers are available in all construction sectors. We can use the tools available for better disposal of construction and demolition as a case study to explore the impacts of SMM tools.
Many organizations will collaborate with material management to build a more circular economy for the construction sector. For example, a non-profit called Build Reuse maintains an index of construction materials that can be reused across the United States.
This index allows those building new projects to source materials from those demolishing buildings or who have extra materials from a completed project. These materials may have otherwise gone to waste because finding and communicating with potential buyers was not worth the cost and effort.
Build Reuse is just one example of a tool for SMM. Many third-party tools are available that can transform various industries and make it easier for materials management to become sustainable materials management.
Related Concepts to Materials Management
Many industries operate in conjunction with or close to materials management. For example, the following sectors are reliant on or work in conjunction with materials management departments:
- Supply chains
- Inventory management
- Enterprise resource planning
- Production management
Materials management applies broadly to many industries. Materials management techniques deeply impact any economic sector that deals with raw materials sourcing.
As such, the development of sustainable materials management has the potential to profoundly impact the environment and reshape the future of the planet.
Strategies for sustainable materials management are vast. Departments and research teams work hard and use many resources to understand the current environmental impacts and areas of concern, which doesn’t even touch on attempts to reduce that impact.
Fortunately, there are guidelines and tools available for companies to use to create the best possible sustainable materials management techniques for each sector—many current strategies to reduce the environmental impacts of materials management attempt to employ a circular economy.
A circular economy is an economy in which the end-of-life destination for products is anticipated from their conception.