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Strengthening the materials core: Three pillars for operational excellence

January 15, 2024 | Operational Excellence

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At a Glance

  • Materials dominate manufacturing, accounting for 60% to 70% of output and therefore, require smooth flow and cost-effective transformation.
  • Effective materials management means getting the right materials, at the right time, at the right price, minimising disruption and waste. This improves sustainability, optimises resources, and drives competitive advantage.
  • Beyond digital tools, behavioural and cultural change are key to materials management success.

Materials are the foundation of any manufacturing system, accounting for approximately 60% to 70% of the total production. Without the raw and processed materials for direct or indirect production, manufacturers lack the essence of their output – the finished products delivered to consumers.  

Materials include purchased materials, suppliers, unfinished components, and ultimately, finished goods. To ensure a steady flow of materials and their cost-effective transformation into desirable products, manufacturers must integrate materials management into their broader supply chain management framework.  

This article examines the importance of materials management, the three key aspects of effective materials management, and the pivotal role of behavioural and cultural change in materials management that could shape a prosperous future for the manufacturing industry.   

What is materials management? 

Material management is the control of the entire flow of resources throughout a manufacturing process, including activities such as materials planning, supplier selection, purchasing, shipping, warehousing, inventory tracking, and distribution.  

According to a Gartner survey, up to 76% of supply chain executives reporting increased disruptions in 2022 compared to three years ago. Unforeseen disruptions in the supply chain can lead to delays and increased production costs. Effective materials management is therefore critical to ensure the availability of the right quality material, in the right quantity, in the right place, at the right price, and at the right time, sourced from the right suppliers.   

Given the increasing emphasis on sustainability, including environmental, social, and governance (ESG) issues by regulators, investors, and customers, proper materials management contributes to significant cost savings and waste reduction, as inadequate management can lead to the premature purchase of excess material, contributing to excess inventory.   

In summary, a systematic approach to materials management minimises risks such as material shortages, delivery delays, price volatility, and waste. This, in turn, provides a competitive advantage by optimising the organisation’s use of resources and driving it towards operational excellence.  

Efficient materials management depends on perfection in the execution of three key aspects: planning, procurement, and warehousing and distribution.  

Preparation is the key to success  

A good planning system has several levels, including the master plan, which includes a strategic business plan, production plan, and a master production schedule. A material requirements plan is also necessary.  

As each level feeds into the next, it is important to create a cohesive and responsive planning system that supports the smooth running of the business. Each level should outline the different purpose of the plan, the level of detail and the planning cycle. Essentially, each level needs to consider priority, available capacity and how to resolve the differences between priority and capacity. At all levels, there needs to be a balance between strategic objectives and operational capabilities, constantly adjusted to prioritise tasks and manage capacity effectively.  

Strategic procurement  

Purchasing, or procurement, is the process of acquiring goods and services. Organisations need to understand and adhere to the following purchasing objectives, which can contribute to effective materials management:  

  • To obtain goods and services in the required quantity and quality.  
  • To obtain goods and services at the lowest possible cost.  
  • Ensure the best possible and timely delivery from the supplier.  
  • Establish and maintain good supplier relationships and develop relationships with potential suppliers.  

To achieve these objectives, organisations need to establish the right purchasing specifications, including quality, quantity, and delivery. Choosing the right suppliers and negotiating favourable terms and conditions are equally important.  

Rather than tactical buying, strategic sourcing is a good tactic for effective materials management. This can be achieved by aligning organisational needs with the supplier market. The foundation of strategic sourcing is ‘spend visibility’ — understanding where money is being spent — and continuous improvement for optimal procurement results. 

Best warehousing practices 

The final aspect of effective materials management is the implementation of sound warehousing practices. Within the warehouse environment, the focus should be on improving inventory and picking accuracy. Implementing warehouse management systems (WMS) that incorporate sensors and automated processes for picking and replenishment efficiency, stock rotation, and backorder handling, could also improve the warehousing function.  

To complete a comprehensive solution, it is important to maximise labour and equipment productivity through performance management initiatives. This can be achieved by relentlessly training employees to break bad habits and instil good ones. Read more about other warehouse best practices here.   

Leave materials management to the experts 

Materials management is an essential part of supply chain management and a well-functioning supply chain is critical to the success of any business. The onset of digital has revolutionised supply chain management by providing new tools and technologies to improve efficiency, visibility, and collaboration across the supply chain. Digital solutions have transformed the way companies manage their supply chains, enabling them to respond more quickly to changes in demand, reduce costs, and improve overall customer satisfaction. 

Effective supply chain management is more than just adopting digital solutions, as the way people behave, and work can make or break a business. This is where expert help is essential. With over 25 years of experience in change management, Renoir focuses on delivering results through behavioural change, empowering your people to embrace change, adopt new technologies, and drive success. We focus on strategies, tools, and people – the factors that deliver lasting results.

Are you ready to change the behaviour of your people to achieve effective materials management?

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