In this economically crumbling business world of today, profit generation is just one of many goals the business has to take care of. One of the main problems almost all businesses face is the adequate availability, purchase, storage and usage of raw materials. Indeed, businesses can operate well and reap long term benefits if they manage to use raw materials wisely.
It is a common notion that only manufacturing and construction industries rely on raw materials management. This is far from true; in reality every industry is directly or indirectly related to raw materials management and usage, and suffers some kind of loss at any point in the operational supply chain due to materials wastage.
In a sorry state of affairs, as per stats of US, 30% of raw materials is wasted every year in the US alone, let alone the whole world, and the prime reason is: more material is purchased than is needed, which ultimately gets wasted after expiry dates. Similarly, poor storage conditions and unexpected surpluses add on to material wastage, costing businesses millions annually. The reasons for material wastage are diverse; unmanaged surplus, inefficient forecasting, unskilled or untrained labor and poor storage conditions.
The main process of materials management might differ from industry to industry, but the following steps remain common in almost all of them.
Steps in Material Management
1. Purchase
The quest for material management starts with its purchase. Choosing the right supplier and opting for the right quantity are some of the main challenges in this step. Purchasing the needed amount is crucial because storage of extra raw materials is costly and mostly leads to wastage. Similarly purchasing a lesser amount would mean keeping the end customers waiting for their orders and disruptions in the overall supply chain.
2. Storage
Depending on the procedures of the business, every raw material might have to be stored at some point of the operations belt. Storage is another highlight of a business’s success, as 27% of all stored raw materials is annually wasted due to poor storage conditions, as per World Bank stats.Hence businesses which can efficiently manage storage spaces and stock raw materials save costs to a great extent, and ultimately earn higher profits.
3. Transportation/Distribution
Storing materials safely is no doubt a hallmark, but transporting the material to manufacturers, and in case of service industries, to the designated project execution sites, is another challenge businesses tackle. This is because materials face wastage not only during poor storage but also improper and delayed distribution. For large businesses, raw materials are often divided department wise so as to encourage apt and timely transportation to the designated manufacturers or project sites.
4. Receiving and Usage
Receiving raw materials on the project sites or manufacturing plants is also a task many businesses cannot undertake efficiently. Proper unloading and handling of materials can guarantee their longevity.
Similarly, as simple as it seems, effective usage of raw materials is not everyone’s cup of tea. Owing to unskilled labor and equipment malfunction, material management in the usage phase might also go wrong. Raw materials might be wasted and extra costs might have to be incurred to purchase more material, in case safety stock is not in store.
Benefits of Material Management
1. Adept Purchasing
Businesses know what to purchase if they have an able materials management system. This is because which raw materials are to be used where, when to make new purchases and how much budget is to be allocated to purchasing, all are questions that can be answered decisively only through proper materials management system. This not only curtails wastage but also saves business’s costs. As per stats, in the US, 22% of all business costs are cut down due to efficient purchasing of raw materials in the construction industry alone.
2. Maintaining the Right Inventory
Materials management is indeed a vast concept, and inventory management is just one of its many benefits. Businesses which have a control over their inventory systems excel ahead in project executions and supervision, far more than businesses who operate otherwise.
An example is the construction industry; building businesses which have apt inventory in store, not only complete projects on time, but also secure a vast clientele base, one of the major challenges in the construction industry today.
For this purpose, many construction businesses have efficiently integrated construction inventory management software, which informs how much inventory is in stock, how much more is needed or is in excess and in danger of being perished, which inventory is in the transportation phase and which has been used already.
The concerned suppliers’ details and buffer stock information, all are adequately stored and studied through this software. This enables construction businesses to make prudent decisions about materials’ purchase and storage.
3. Environmental Impact
Considering the speedy growth of air and water pollution, carcinogenic toxins in the air, and evolution of brand new hazardous diseases with every passing day, it is now the ethical duty of every business to implement waste reduction policies.
This is because every year, wasted raw and processed materials are dumped in the air as toxins or in the sea through toxic water, harming wildlife and posing potential threats to human health.
Material management not only manages active material, but also probes into solutions for effectively managing and sometimes recycling wasted material into something useful. An example is recycling steel and concrete by construction industries which is used in prefab homes and eco conscious houses.
4. Smoother Operations
Through vigilant management of materials, supply chains are seldom disrupted leading to overall smooth operations. When inventory and materials are just right at every step of the operational phase, projects are completed on time and materials are converted to finished products according to the production schedules.
Accurate material management enables businesses to foresee activities and need for purchase or storage of extra inventory, leading to timely decision making and subsequent completion of projects.
Conclusion
It can be said without a doubt that in this era of global inflation, material wastage and redundancy is a major issue for many businesses who seek to cut costs and improve revenue generation. Many successful names in different manufacturing and construction industries have unveiled the secret to excelling ahead as keeping an eye on their materials management. This can be done through digitizing inventory controls and making right decisions at the right time about purchase, storage and usage of inventory. This would enable not only cost cutting for the businesses but also a satisfied customer base in the long run.
