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Material Management Module in ERP System

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  • Difficulty Level : Easy
  • Last Updated : 16 Nov, 2020

Material Management Module in ERP System Determines needs, identifies a potential source of supply, compare alternative quotations, create a purchase order, track the status of the purchase order, receive goods, and verify invoices upon receipt of goods.

An ERP System provides a needed integration between Material Management System and other sub-modules. For example, All purchase orders are assigned to a cost center in the Management Accounting module. In production planning, the inventory function post component needed to fill Production Orders. This shows purchasing and financial accounting share common vendor data.

Importance of Material Management Module :

The efficient and structured Material Management Module is very advantageous for many companies. Also, customer satisfaction is can be noticeably increased because only a well-functioning material is available at the right time in the right place and in the required quantity and quality. This in turn is the basis for high adherence to deadlines and the lowest possible throughput times.

Material management is also important with regard to the warehouse management because companies will know how many raw material, finished products, and spare parts, etc. are available in Warehouse at all the time.

Also, with the help of the material management module following below tasks can be handled much easier:    

  • Collecting material
  • Shipping planning
  • Container Management
  • Inventory Management

Key Components for setting up Material Management Module

  • When multiple projects are being managed then assigning of Unique Project Number Schema reduces the ambiguity.
  • Material Storage Location must be clearly defined and marked.
  • Inspection, Certifications, Quality Management, Tracked Digitally.
  • The unit of measure and material classifications must be descriptive and accurate to ensure all material can be found quickly and efficiently.

Objective of Material Management

  • Get at Right Price
  • High Turnover
  • Low Procurement and Storage Cost
  • Consistency in Quality
  • Continuity Of Supply
  • Inter-Department harmony
  • New Material and Product
  • Product Improvement

Advantages of Material Management System

i) Material Valuation: Material Valuation helps in:

  • Determining the price of the material.
  • Helps in recording tracking and moving material.
  • It provides divergent inventory valuation methods such as LIFO, FIFO, Moving Average, etc.

ii) Multi-location Inventory: For Manufacturing units that produce goods on large scale and for consumer goods there are more than one Distribution Unit for making Supply Chain Management Easier. In different distribution units lot tracking, serialized inventory, and specific costing, etc. are properly maintained.

 iii) Traceability: Consumer goods and Raw Material consist of Lot number or serialized number which is used to track the location of goods. For example, if the product is sent to the consumer, importing raw material, amount of goods available in the Warehouse can be easily traced by an organization which makes the work of organization much easier.

iv) Product Life Cycle Management: New products and old products are the backbones of an organization. So every organization make the analysis of the new and old product and measure the demand and supply of that product. So the product which is more demanded having a high life span.                                                                                                                                                

For example: Let us take 2 products from a company suppose A and B. Out of its product A highly demanded and Product B is very less demanded. So in that company Product A is manufactured more and the company will spend more on Advertising of that Product.

A new product in an Organization when manufactured have gone through five stages:

  • Introduction Stage
  • Growth Stage
  • Maturity Stage
  • Decline Stage
  • Abandonment Stage

Disadvantages Of Material Management:

  • Data integration issue cause when Material is placed in Multi-Location.
  • Engineering requisition issues are also caused.
  • Inaccurate Inventory level caused due to Shipping and Receiving Error.

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