Monday 15 June 2015

Materials Management's Five Critical Processes

Authored by Usama Shahid

One of the decisions that companies have to make up front is whether purchasing is considered part of their materials management team function or if it is handled separately by a procurement team. However the supply chain management is organized, it is critical that there is outstanding communication flow between purchasing and the team handling inbound and internal logistics.

Choosing the right strategy and tactics for this portion of supply chain management depends largely on your resources and your industry. In a classic manufacturing environment, with fairly predictable needs established, ERP or Enterprise Resource Planning (ERP) and the ERP software that supports it continues to play a role.

What has changed is since the development of the Just In Time (JIT) method of materials management has grown to be viewed as the gold standard of materials management.

By developing supply chain partners that are ISO 9001 compliant, or show similar reliability whether they are formally certified or not, companies ranging from retail to manufacturing successfully reduce inventory levels, leaving capital free to invest in R&D, marketing, or capital improvements.

Building the right team can make or break your supply chain. The best materials manager has the breadth and depth of knowledge to execute:
  • Leadership of a skilled and diverse team
  • Procurement of Materials (both domestic sourcing and low cost country sourcing)
  • Execute strategic cost management on the supply chain
  • Oversee internal materials management
  • Make decisions about produce souring methods
In order to do these tasks successful, the person assuming the role as Materials Manager must have the skills necessary to oversee or actively co-operate with:
  • Procurement Managers
  • Transportation Directors
  • Strategic Sourcing Consultants
  • Production Managers
  • Vendor Partners
Procurement and inventory management staff on the materials team must be quick to embrace new methods for supply chain optimization. Whether they are dealing with production material management or any other material management needs of internal and external customers is key to success.

They must understand the metrics for measuring internal inventory efficiency such as inventory turnover rate, and make sure that procurement system tools, inventory management systems, and the retail inventory systems all tie in together to maximize material visibility throughout the supply chain.