Supply Chain Materials Management Areas of Concentration -
November 4th, 2011
Supply Chain Materials Management Areas of Concentration
The goal of materials management is to provide an unbroken chain of components for production to manufacture goods on time for the customer base. The materials department is charged with releasing materials to a supply base, ensuring that the materials are delivered on time to the company using the correct carrier. Materials is generally measured by accomplishing on time delivery to the customer, on time delivery from the supply base, attaining a freight budget, inventory shrink management, and inventory accuracy. The materials department is also charged with the responsibility of managing new launches.
In some companies materials management is also charged with the procurement of materials by establishing and managing a supply base. In other companies the procurement and management of the supply base is the responsibility of a separate purchasing department. The purchasing department is then responsible for the purchased price variances from the supply base.
In large companies with multitudes of customer changes to the final product over the course of a year, there may be a separate logistics department that is responsible for all new acquisition launches and customer changes. This logistics department ensures that the launch materials are procured for production and then transfers the responsibility to the plant materials management
There are no standards for materials management that are practiced from company to company. Most companies use ERP systems such as SAP, Oracle, BPCS, MAPICS, and other systems to manage materials control. Small concerns that do not have or cannot afford ERP systems use a form of spreadsheet application to manage materials.
Materials management is not a science and depending upon the relevance and importance that company officials place upon controlling material flow, the level of expertise changes. Some companies place materials management on a level whereby there is a logistics director, other companies see the importance level as managing at the plant level by hiring an inventory manager or materials manager, and still other companies employ the concept that the supervisors in the plant are responsible accompanied by a planners.
Because there are no standards there is only best practices for any particular business sector that are widely used. For example, the generation of releases to the supply base come in many forms from the lowest level that requires sending facsimilies and PDF files, the EDI information exchange, to the ultimate practice of a supplier web base site.
Materials Management Challenges
The major challenge that materials managers face is maintaining a consistent flow of materials for production. There are many factors that inhibit the accuracy of inventory which results in production shortages, premium freight, and often inventory adjustments. The major issues that all materials managers face are incorrect bills of materials, inaccurate cycle counts, un-reported scrap, shipping errors, receiving errors, and production reporting errors. Materials managers have striven to determine how to manage these issues in the business sectors of manufacturing since the beginning of the industrial revolution. Although there are no known methods that eliminate the afore mentioned inventory accuracy inhibitors, there are best methods available to eliminate the impact upon maintaining an interrupted flow of materials for production.
One challenge for materials managers is to provide timely releases to the supply base. On the scale of worst to best practices, sending releases via facsimile or PDF file is the worst practice and transmitting releases to the supplier based web site is the best practice. Why? The flaw in transmitting releases via facsimile or email is that they can get lost or even interpreted incorrectly into the suppliers system resulting in a stock out. The problem with transmitting EDI releases is that not all suppliers have EDI systems capable of receiving the release information. The best practice is to transmit the releases to a common supplier web base site where the suppliers can view (for free) the releases. The other advantage is that the supplier is required to use the carrier listed in the web site, must transmit an ASN (advanced shipping notification), and review the accumulative balances of the order
Improving circulation infrastructure
Redundancy can be reduced and effectiveness is increased when service points are clustered to reduce the amount of redundancy. An effective materials management program can also resolve “island” approaches to shipping, receiving, and vehicle movement. Solutions can include creating a new central loading location, as well consolidating service areas and docks from separate buildings into one. Developing better campus circulation infrastructure also means re-evaluating truck delivery and service vehicle routes. Vehicle type, size, and schedules are studied to make these more compatible with surrounding neighborhoods. This will reduce truck traffic, creating a safer environment for pedestrians and a more attractive environment for other uses.