Materials Management 101: Definition, Principles, Benefits & Best Practices

What is materials management?

Materials management is the systematic process of planning, procuring, storing, and controlling the materials needed to manufacture a product.

To do it well, you need to get the right materials to the right place, in the right quantity, at the right time — while keeping costs low and quality high.

Here's how growing manufacturers make that happen, step by step.

Now, depending on the organization, materials management might play a different tune. Some companies see it as a subset of procurement management, while others view it as its own entity serving different business areas. Still, others might split the responsibilities between departments like procurement, supply chain, logistics, and operations — a structure often seen in larger manufacturing or construction enterprises.

As part of procurement management, materials management is your one-stop shop for all things related to sourcing and purchasing. But if it's seen as a separate part of supply chain management, it bridges the gap between procurement and production. Here, it's more about material requirements planning, coordinating material deployment and replenishment, and ensuring quality control and inventory analysis for direct materials.

Speaking of materials, there are two types in the manufacturing world: direct and indirect. Direct materials are the ones that go directly into the products a company makes, like rubber in tires or fragrance in soap. Indirect materials, on the other hand, are used in the manufacturing process but don't make up the product itself — things like adhesives, staples, equipment, or spare parts. Materials management takes care of controlling the flow of both types.

Principles of material management

Effective materials management is built on a set of core principles. These principles guide how growing manufacturers plan, purchase, store, and use their materials — and they apply whether you're making cosmetics or circuit boards.

These are sometimes called the 6 R's of materials management. Some frameworks add a seventh — right transportation — which focuses on selecting the most cost-effective and reliable shipping method to move materials from supplier to your facility.

When all of these principles work together, you get a materials management system that keeps production humming, costs predictable, and customers satisfied.

What is the role of inventory management in materials management?

Think of your business as a well-oiled machine. Each part has a specific function, but the machine can't work effectively if one part is missing or underperforming. In the context of materials management, inventory management is that critical cog in the machinery that helps keep operations running smoothly.

Monitoring stock levels

Imagine running a bakery and suddenly finding out you're out of flour in the middle of a busy day. Not a pleasant scenario, right? Inventory management prevents such situations. It involves diligently tracking what's in stock, what's running low, and what needs to be reordered. This way, you're always prepared and never caught off guard.

Optimizing storage costs

Did you know that holding excessive inventory can lead to high storage costs and potential wastage? Inventory management comes into play here by ensuring you maintain an optimal balance. It helps you avoid stocking too much or too little, thereby reducing costs and minimizing wastage.

Enhancing customer satisfaction

How many times have you walked away from a business because the product you wanted was out of stock? Inventory management helps avoid such customer dissatisfaction. By ensuring a steady supply of products, you can meet customer demand promptly, enhancing their overall experience and loyalty.

Informing business decisions

What sells more? What doesn't? When is the demand highest? These are just a few of the questions that inventory management can answer. By providing insights into sales patterns and customer behavior, it can guide strategic decisions such as what to stock, when to reorder, and how to price products.

Remember, effective inventory management is the backbone of successful materials management. It ensures you have the right materials at the right time and in the right quantities, supporting seamless operations, cost efficiency, and customer satisfaction.

Benefits of materials management

Imagine the ripple effect that effective materials management processes could have on your business. Intriguing, isn't it? Well, that's just one of the many advantages you can anticipate when you get materials management right.

Smoother purchasing

Effective materials management involves obtaining the appropriate amount of materials to optimize purchasing procedures and reduce unnecessary expenses. By purchasing the right materials in the right quantities, companies can avoid waste and achieve substantial cost savings.

Better inventory control

Think of materials management as a balancing act. It's all about keeping your inventory levels just right — not too much, not too little. This way, you dodge the pitfalls of overstocking and shortages, sidestepping unnecessary storage costs or panic buying. The result? A smooth-running, cost-effective operation. Manufacturers with disciplined materials management practices often see.

Warehouse efficiency

Imagine an organized, smooth-running warehouse where every inch of space is put to good use and costs are kept at bay. This isn't just a dream scenario — it's the reality with effective materials management. Proper material flow planning means less wasted space, fewer bottlenecks at receiving docks, and faster picking times.

Accurate production schedules

When you know exactly what materials you have and when the next shipment arrives, building a reliable production schedule becomes much easier. No bumps, no hitches — just smooth operations and clear skies ahead.

Not only does this precision planning reduce downtime, but it also turbo-charges your operational efficiency. Your customers will notice when on-time deliveries become your new normal, not a pleasant surprise.

Cost reduction

Implementing materials management in your business can lead to substantial cost savings. Efficiently managed materials lead to fewer wasted resources, lower procurement costs, and reduced carrying expenses. For a growing manufacturer spending 50–70% of revenue on materials, even a small percentage improvement drops straight to the bottom line.

Quality control

With materials management, the quality of your products can significantly improve. By having a clear understanding of your materials and their lifecycle, you're better equipped to monitor their quality and performance. Consistent material quality means fewer defects, less rework, and a stronger reputation with your customers.

Less unpredictability

Unpredictability in business can lead to sleepless nights. Thankfully, materials management can help lower those stress levels. With a clear, well-organized system, you can better predict your material needs, quantities, and costs, reducing unforeseen complications. Less unpredictability equals more peace of mind.

Sustainability

Materials management isn't just about immediate benefits. It's also about looking to the future. By optimizing your use of materials, you contribute to more sustainable practices, reducing waste and environmental impact. A win for your business today, a win for the planet tomorrow.

Want real-time visibility into every SKU? See how Brahmin tracks inventory across all your channels →

Materials management best practices

To improve operational efficiency and sustainability, here are the best practices that growing manufacturers should consider implementing.

Establish benchmarks for material specifications and quality

Imagine being the captain of a ship, navigating the vast ocean of quality control and raw material purchasing. That's the role of a materials manager. But even the most skilled captain can't steer the ship alone — they need a reliable crew that follows standard operating procedures to the letter.

These procedures are the map to treasure. They detail material specifications, quality standards, and sourcing requirements. By adhering to them, your team can maximize product conformity and minimize non-conformity.

Keep up with frequent quality assessments and rate your suppliers

Quality control should start before production and be performed regularly. Quality failures can be costly, especially when detected by the customer. It's important to partner with reliable suppliers capable of providing appropriate materials in the correct quantities and on time.

Suppliers should be evaluated on cost, quality, reliability, and sustainability practices. Good quality enforcement is almost always more affordable than rectifying quality failures after the fact.

Track your direct and raw materials

For efficient factory operations, knowledge of material location and quantity is crucial. Proper markings and organized storage are important in managing physical stocks. Regular physical counts help identify issues, while technologies like inventory software or MRP software assist in daily inventory tracking.

If you're still tracking materials on spreadsheets, you'll hit a ceiling fast. Most growing manufacturers find that moving from spreadsheets to dedicated software pays for itself within a few months through fewer stockouts and less waste.

Stay on top of raw materials inventory expenses

For an average manufacturer, a significant chunk of expenditures stems from direct material costs. With this in mind, it's imperative to ensure that surplus inventory isn't tying up funds that could be better utilized elsewhere.

Remember, having inventory tied up for too long can lead to the unfortunate circumstance of goods perishing or getting damaged. This is especially relevant for materials with a definitive expiration date or lot-controlled shelf life.

Manufacturers should give thoughtful consideration to various inventory valuation methods — for instance, FIFO (First In, First Out), LIFO (Last In, First Out), or Weighted Average. The chosen method should align seamlessly with the specific nature of their business operations.

Devise a material planning strategy and stick to it

Material planning is crucial in materials management. It begins with demand planning, which forecasts the product quantities to be sold in a certain timeframe. Using your product's bills of materials, you can evaluate the material requirements for this period.

By assessing what materials are already in stock, you can determine what additional materials need to be ordered. This information helps create a delivery schedule to ensure a steady supply of raw materials and prevent work stoppages due to material shortages.

Use inventory control techniques

By utilizing established inventory control techniques, you can gain valuable insight into the performance of your SKUs. This knowledge can assist you in reducing your inventory costs.

ABC analysis

Ever heard of the 80/20 rule, also known as the Pareto principle? It's a proven approach in inventory management. By applying this principle, ABC analysis helps you classify your SKUs based on their consumption value.

Category A — the top 20% of SKUs that contribute to roughly 80% of your total consumption value. These deserve the most attention — think higher service levels and frequent reviews.

Category B — about 30% of your SKUs, contributing around 15% of total consumption value. They may not be as critical as A items, but they still need more attention than C items.

Category C — roughly half of your SKUs, but only about 5% of total consumption value. These get the least attention and resources.

What if sorting your items into three categories feels too simplistic? That's where XYZ analysis comes in. It allows you to account for the varying consumption patterns of your SKUs, adding another layer of insight to your inventory management.

Safety stock and reorder point

Think of safety stock as your safety net — a stash of materials you keep on hand to dodge inventory shortages and keep production humming along. It's your plan B when the unpredictable happens in the supply chain due to changes in supply or demand.

The reorder point is like your alarm clock. It's the predetermined inventory level that triggers an order for a particular SKU, signaling it's time to top up your stock.

Setting just a reorder point without safety stock could land you in a pickle. If delivery times overshoot the expected time to a stock-out, your materials will run dry and production will hit a pause until new materials roll in. That's where your safety stock steps in to save the day. But remember, these aren't arbitrary numbers — they need to be calculated with precision to provide maximum value.

Just in Time (JIT)

Imagine if you could organize your manufacturing process so that your product barely has a chance to gather dust before it's shipped to the end consumer. This is the magic of Just in Time (JIT) — not just an inventory control method, but an overall approach to manufacturing. It's all about minimizing the time your product spends in the supply chain, helping manufacturers dodge the pitfalls of overproduction, bottlenecks, and surplus inventory.

When you bring JIT into the world of materials management, the principle is simple — provide materials exactly when they're needed, matching demand as closely as possible. The result? A seamless flow of materials, drastically reduced inventory levels, and a significant cut in holding space and costs.

Slash search time with material kitting

Imagine having all the ingredients of your favorite recipe pre-measured, bundled, and ready to go. That's what material kitting is all about. It's the art of neatly packing all the elements of a Bill of Materials (BOM) into an easy-to-use kit, even before it hits the production floor. This technique not only simplifies your line-side inventory but also speeds up your picking, reporting, and quality control processes.

Kitting shines brightest when you're juggling a large variety of tiny components, crafting customized products with many variables, or when you're working with limited space on your shop floor.

Use technology to make processes more efficient

Manufacturers and materials managers today have a wealth of technological tools at their disposal. These include barcoding, RFID and IoT devices, and warehouse management software, all designed to keep a tight rein on inventory. But the real connector — the tool that brings everything together not just in materials management but across all departments — is a manufacturing ERP system.

A solid manufacturing ERP allows manufacturers to unite their entire business within one application. This covers aspects of material management like material requirements planning, material deployment and replenishment, supplier management, quality control, inventory control and analysis, kitting, and more.

Beyond materials, a manufacturing ERP system also simplifies other key operations management processes — production planning and scheduling, order management, return merchandise authorization (RMA), and more. The result is greater efficiency and improved management practices across your entire company.

What is Sustainable Materials Management (SMM)?

You may have heard the term "Sustainable Materials Management" (SMM) thrown around. Here's what it actually means and why it matters.

What SMM covers

At its core, SMM is about using and reusing resources as productively and sustainably as possible over their entire lifecycles. The aim is to minimize environmental impacts and conserve resources for the long term.

SMM isn't just a fancy term — it's an approach that helps businesses manage their materials from design and manufacture through use, reuse, and recycling. According to the U.S. Environmental Protection Agency (EPA), sustainable materials management focuses on:

Being smart with materials to cut down on waste and its harmful impact.

Preserving resources and limiting the ecological effects tied to material usage.

Encouraging innovative products and processes that can drastically reduce environmental damage.

Materials management in this context represents a mindset shift. It's moving away from the old "take-make-waste" model and towards a circular one where materials are given new life through reuse, recycling, or composting.

SMM in everyday life

Think about a soda can. With SMM, the goal would be to design the can so that once you're done enjoying your beverage, it can be reused or recycled with as little environmental impact as possible. It's about making the most of what we have and leaving as small a footprint as possible.

For growing manufacturers, sustainable materials management can also mean lower waste disposal costs, compliance with emerging environmental regulations, and a stronger brand story for customers who care about where their products come from.

Frequently asked questions

What are the 7 R's of material management?

The 7 R's are: right quality, right quantity, right time, right source, right price, right place, and right transportation. Together, they form a framework for making sure materials are procured and delivered in the most efficient and cost-effective way possible.

What is the basic of material management?

The basic idea behind materials management is to plan, source, store, and control the materials a company needs for production — so the right materials are available when and where they're needed, at the lowest possible cost. It connects procurement, inventory, and production into one coordinated process.

What is the difference between materials management and inventory management?

Inventory management is a subset of materials management. It focuses specifically on tracking stock levels, reorder points, and storage costs. Materials management is broader — it also includes procurement, supplier management, quality control, material planning, and logistics coordination.

How does materials management reduce manufacturing costs?

Materials management reduces costs by preventing overstocking (which ties up cash), avoiding stockouts (which halt production), negotiating better supplier terms through consolidated purchasing, and reducing waste through better planning and quality control.

How Brahmin Solutions can help

Materials management breaks down when procurement, warehouse, and production operate in separate systems — or worse, separate spreadsheets. Brahmin tracks the entire materials flow in one place: purchase orders created from MRP suggestions, goods received and checked in, inventory stored with location and lot assignments, materials allocated and consumed against work orders, and finished goods ready to ship.

The key difference is that MRP drives procurement instead of guesswork. When you schedule a production run, the system checks your BOMs, compares required materials against what's on hand and on order, and tells you exactly what to buy and when it needs to arrive. Real-time consumption tracking against work orders means your inventory counts are always current, not waiting for someone to update a spreadsheet after the shift ends. If you need end-to-end materials visibility connected to production planning, book a demo and we'll walk through the full flow with your materials.