There’s no question that inventory management is a critical practice for every type of business. But another is just as important: materials management.
While inventory and materials management are closely related, knowing how they differ — and how they’re similar — sets you up for success in both areas. Here’s what materials management is, along with how to manage it and seven strategies to help.
What is materials management?
Materials management is a systematic approach to planning, organizing, and controlling the flow of a business’s goods and supplies, whether they’re the direct materials used in the production process or indirect materials that support operations.
The materials management process includes everything from procuring raw goods to using them in production, ensuring you have the right materials on hand when needed. Otherwise, your business risks production delays, material shortages, or excess inventory — all problems that hurt your bottom line.
Materials management versus inventory management
Materials management is about sourcing, storing, and managing a company’s materials — items used in manufacturing or service delivery processes. Inventory management handles the movement of all kinds of inventory, including finished goods, work-in-progress materials, and raw materials. It also concerns machinery and equipment.
While these two practices are mostly separate, they often intersect when it comes to material procurement, and the processes within each practice are extremely similar. For example, both use forecasting to identify what materials and goods a company needs to operate and order them accordingly.
The materials management process: 5 steps
To better understand the process, let’s look at it piece by piece.
1. Planning and forecasting
The first step to establishing a materials management system is understanding what you need and when. Then, forecast demand and time purchases to keep the necessary materials on hand for your production schedule without overstocking.
2. Procurement
Decide which suppliers to source materials from and start negotiating contracts. For the best results, balance cost, quality, and reliability.
3. Receiving and inspection
When materials arrive at your facility, check them for quality and accuracy to verify that what you ordered matches what you received. Address any discrepancies or defects immediately to prevent more issues down the line.
4. Storage and inventory control
Once you’ve verified the materials’ quality, find them a place to live in your warehouse or store. This might simply mean organizing them in a way that’s easy to access and monitor, but sensitive materials might have more specific needs, like temperature regulation.
When materials have found a home, use an inventory tracking system to keep tabs on their locations, quantities, and statuses. Conducting regular counts also helps you account for every item to maintain accurate records.
5. Distribution and utilization
Whether it’s delivering raw materials to a production line or sending finished goods to customers, your management plan should include a good distribution system. This sends materials to the right location at the right time. It’s also a best practice to use and distribute them with minimal waste, reducing, reusing, and recycling whenever possible.
Types of materials management
There’s no one-size-fits-all approach to materials management, but the common methods below are crucial for all organizations.
Inventory control
The primary purpose of inventory control is to meet demand without overstocking or experiencing stockouts. This helps you fulfill orders promptly while minimizing holding costs. Try tracking inventory, setting reorder points, and using systems like perpetual or periodic inventory management to keep a close eye on the sellable materials on hand.
Procurement management
Procurement management focuses on sourcing the materials your business needs, including everything from selection and negotiation to purchasing and supplier relationship management. The goal is to secure the best quality materials at the most competitive prices while ensuring reliability and consistency.
Logistics management
Logistics management is a critical component of supply chain management, overseeing material movement and storage across the supply chain. This includes both inbound logistics — getting materials from suppliers to your facility — and outbound logistics, where finished products go to customers. Efficient logistics management moves materials smoothly, minimizing delays and reducing transportation costs.
Quality management
Quality management helps materials meet required standards and specifications. Common methods include regular inspections, well-defined quality control processes, and supplier audits to ensure consistency. By maintaining high standards, you reduce the risk of defects and ensure end products meet customer expectations.
Waste management
Whenever possible, minimize and properly dispose of the waste materials generated during production. Some effective ways to do so are recycling, reusing materials where possible, and safely handling hazardous waste — all techniques that reduce costs and support environmental sustainability initiatives.
Material requirements planning
Material requirements planning (MRP) calculates the materials and components required to manufacture a product. Using information like bills of materials and production schedules, MRP determines what to order, how much, and when, ensuring the right items are available for production while minimizing costs and preventing stockouts.
7 strategies for efficient materials management
To make the most of your new system, you need to optimize every step. Here’s how.
1. Conduct a needs assessment
Evaluate your current materials management practices to identify gaps and areas for improvement. A thorough needs assessment shows what’s working, what’s not, and where to make changes to enhance efficiency.
2. Implement a system
Software solutions like Fishbowl make materials and inventory management easier. Fishbowl automates tracking to provide real-time visibility into stock levels, order statuses, and materials usage for both materials and inventory management. You streamline operations and access the data you need to make informed decisions that move materials effectively.
3. Develop standard operating procedures
Create clear, consistent standard operating procedures (SOPs) that cover every aspect of materials management, from receiving and inspection to storage and distribution. With well-defined SOPs in place, everyone on your team follows the same processes, making operations more efficient and reliable.
4. Establish supplier relationships
Before you can manage on-site materials, you need a reliable system for procuring them. Build and maintain strong relationships with reliable suppliers, focusing on regular communication, transparent expectations, and mutual trust. You access better pricing, faster deliveries, and more consistent quality — and you’re better prepared to deal with challenges like supply chain disruptions or unexpected spikes in demand.
5. Monitor and optimize the materials you have
Analyze historical data and demand forecasts to decide what materials you need, set optimal reorder points, and reduce the risk of overstocking and stockouts. Plus, regularly reviewing data makes it easier to adjust your strategy and keep the materials you order and store in line with demand.
6. Set up a centralized warehouse management system
Centralizing the storage and management of materials streamlines operations and improves control, making it easier to organize items and coordinate distribution. A centralized warehouse management system also reduces the likelihood of misplacing materials, speeds up the putaway process, and ensures all materials are where they need to be.
7. Adopt just-in-time practices
Just-in-time (JIT) inventory and materials management involves placing orders just when you need them to avoid stockouts while minimizing carrying costs. This technique requires careful planning and strong supplier relationships, but when done correctly, it leads to more efficient operations and greater profitability.
Streamline your materials management with Fishbowl
You might know Fishbowl as the all-in-one inventory management solution designed to help you control stock, warehouse operations, manufacturing workflows, and more. But Fishbowl Advanced also offers a powerful material resource planning (MRP) feature that enhances materials management.
With Fishbowl Advanced, you can calculate reorder levels based on historical data, daily consumption rates, forecast percentages, safety stock, and days of stock, ensuring you always have the right materials at the right time.
Are you ready to gain end-to-end visibility over materials and operations? Schedule a demo today.