There’s no question that inventory management is a critical practice for every type of business. But another is just as important: material management (also called materials management).
Get it wrong and the disruption shows up fast. In the National Foreign Trade Council’s 2025 supply chain survey, 94% of respondents named raw material procurement the most affected part of their supply chain.
While inventory and material management are closely related, knowing how they differ, and how they’re similar, sets you up for success in both areas. Here’s what materials management is, along with how to manage it and seven strategies to help.
Key takeaways
- Material management is a systematic approach to planning, organizing, and controlling the flow of a business’s direct and indirect goods and supplies.
- Material management differs from inventory management by focusing on production materials, while inventory management tracks all stock, including finished goods and equipment.
- Material management runs through five steps, from planning and forecasting to procurement, receiving, storage, and distribution.
- Material management done well pays off with fewer stockouts, lower carrying costs, and on-time production.
What is materials management?
Materials management is a systematic approach to planning, organizing, and controlling the flow of a business’s goods and supplies, whether they’re the direct materials used in the production process or indirect materials that support operations.
The material management process includes everything from procuring raw goods to using them in production, ensuring you have the right materials on hand when needed. Otherwise, your business risks production delays, material shortages, or excess inventory. Each of those problems hurts your bottom line.
How is materials management different from inventory management?
Materials management is about sourcing, storing, and managing a company’s materials, the items used in manufacturing or service delivery processes. Inventory management handles the movement of all kinds of inventory, including finished goods, work-in-progress materials, and raw materials. It also concerns machinery and equipment.
While these two practices are mostly separate, they often intersect when it comes to material procurement, and the processes within each practice are extremely similar. For example, both use forecasting to identify what materials and goods a company needs to operate and order them accordingly.
What are the 5 steps of the materials management process?
To better understand the process, let’s look at it piece by piece.
1. Planning and forecasting
The first step to establishing a materials management system is understanding what you need and when. Then, forecast demand and time purchases to keep the necessary materials on hand for your production schedule without overstocking.
2. Procurement
Decide which suppliers to source materials from and start negotiating contracts. For the best results, balance cost, quality, and reliability.
Timing matters as much as price. The Institute for Supply Management (ISM) reported that production materials averaged 81 days of lead time in April 2026. Build reorder points and forecasts that account for those long waits.
3. Receiving and inspection
When materials arrive at your facility, check them for quality and accuracy to verify that what you ordered matches what you received. Address any discrepancies or defects immediately to prevent more issues down the line.
4. Storage and inventory control
Once you’ve verified the materials’ quality, store them in an organized spot in your warehouse or store area. This might mean arranging them for easy access and monitoring, but sensitive materials might have specific needs, like temperature regulation.
Once materials are stored, use an inventory tracking system to keep tabs on their locations, quantities, and statuses. Conducting regular counts also helps you account for every item to maintain accurate records.
5. Distribution and utilization
Whether it’s delivering raw materials to a production line or sending finished goods to customers, your management plan should include a good distribution system. This sends materials to the right location at the right time. It’s also a best practice to use and distribute them with minimal waste, reducing, reusing, and recycling whenever possible.
What are the types of materials management?
There’s no one-size-fits-all approach to materials management, but the common methods below are crucial for all organizations.
1. Inventory control
The primary purpose of inventory control is to meet demand without overstocking or experiencing stockouts. This helps you fulfill orders promptly while minimizing holding costs. Try tracking inventory, setting reorder points, and using perpetual or periodic systems to watch the sellable materials on hand.
2. Procurement management
Procurement management focuses on sourcing the materials your business needs, including everything from selection and negotiation to purchasing and supplier relationship management. The goal is to secure the best quality materials at the most competitive prices while ensuring reliability and consistency.
3. Logistics management
Logistics management is a critical component of supply chain management, overseeing material movement and storage across the supply chain. This includes both inbound logistics (getting materials from suppliers to your facility) and outbound logistics, where finished products go to customers. Efficient logistics management moves materials smoothly, minimizing delays and reducing transportation costs.
4. Quality management
Quality management helps materials meet required standards and specifications. Common methods include regular inspections, well-defined quality control processes, and supplier audits to ensure consistency. By maintaining high standards, you reduce the risk of defects and ensure end products meet customer expectations.
5. Waste management
To cut waste, minimize and properly dispose of the waste materials generated during production. Effective options include recycling, reusing materials where possible, and safely handling hazardous waste, all of which reduce costs and support sustainability initiatives.
6. Material requirements planning
Material requirements planning (MRP) calculates the materials and components required to manufacture a product. Using inputs like bills of materials and production schedules, MRP determines what to order, how much, and when. That keeps the right items available for production while minimizing costs and preventing stockouts.
What are 7 strategies for efficient material management?
To make the most of your material management system, optimize every step. Here’s how.
1. Conduct a needs assessment
Evaluate your current material management practices to identify gaps and areas for improvement. A thorough needs assessment shows what’s working, what’s not, and where to make changes to enhance efficiency.
2. Implement a materials management system
Software solutions like Fishbowl make materials and inventory management easier. Fishbowl automates tracking to provide real-time visibility into stock levels, order statuses, and materials usage. You get the data you need to make informed decisions that move materials effectively.
The payoff is real. After Extract Production, an oil and gas services company, moved to Fishbowl, it cut stockouts by 22% and saved $11 million in inventory costs.
3. Develop standard operating procedures
Create clear, consistent standard operating procedures (SOPs) that cover every aspect of material management, from receiving and inspection to storage and distribution. With well-defined SOPs in place, everyone on your team follows the same processes, making operations more efficient and reliable.
4. Establish supplier relationships
Before you can manage on-site materials, you need a reliable system for procuring them. Build and maintain strong relationships with dependable suppliers through regular communication, transparent expectations, and mutual trust.
Strong partnerships bring better pricing, faster deliveries, and more consistent quality. They also leave you better prepared for supply chain disruptions or sudden spikes in demand.
5. Monitor and optimize the materials you have
Analyze historical data and demand forecasts to decide what materials you need, set optimal reorder points, and reduce the risk of overstocking and stockouts. The KidWind Project shows the upside: right-sizing the parts it kept on shelves cut on-hand inventory from $270,000 to between $80,000 and $100,000. Plus, regularly reviewing data makes it easier to adjust your strategy and keep supply in line with demand.
6. Set up a centralized warehouse management system
Centralizing the storage and management of materials streamlines operations and improves control, making it easier to organize items and coordinate distribution. A centralized warehouse management system also reduces misplaced materials, speeds up putaway, and keeps everything where it belongs.
7. Adopt just-in-time practices
Just-in-time (JIT) inventory and materials management involves placing orders just when you need them to avoid stockouts while minimizing carrying costs. Crossroad Distributor Source, whose raw materials originate overseas, used Fishbowl min/max reorder points to hold a minimum 95% order fill rate. This technique requires careful planning and strong supplier relationships, but when done correctly, it leads to more efficient operations and greater profitability.
Streamline your materials management with Fishbowl
You might know Fishbowl as the all-in-one inventory management solution designed to help you control stock, warehouse operations, manufacturing workflows, and more. But Fishbowl Advanced also offers a powerful material requirements planning (MRP) feature that enhances your material management.
With Fishbowl Advanced, you can calculate reorder levels from historical data, daily consumption rates, forecast percentages, safety stock, and days of stock. That ensures you always have the right materials at the right time.
Are you ready to gain end-to-end visibility over materials and operations? Schedule a demo today.
Frequently asked questions about materials management
How is materials management different from inventory management? Materials management focuses on sourcing, storing, and controlling the direct and indirect materials used in production or service delivery. Inventory management is broader, tracking the movement of all stock types, from finished goods and work-in-progress items to raw materials and equipment. The two overlap most during procurement, so treat materials management as the specialized part of inventory management that keeps production lines supplied.
How can I reduce inventory carrying costs without risking stockouts? Match supply to real demand instead of guesswork by analyzing historical usage and forecasts to set reorder points and safety stock. That way you hold enough to cover lead times without overbuying, and just-in-time ordering trims costs further when suppliers stay reliable. Tracking software supports the balance by flagging slow movers and reorder triggers before cash piles up on the shelf.
How do I manage hazardous materials alongside regular stock? Store hazardous materials separately and follow the handling, labeling, and disposal rules that apply to them. Many need controlled conditions such as temperature regulation, ventilation, or secure containment, so give them dedicated, clearly tagged locations in your warehouse. Track them in the same system as regular stock, and run frequent counts and audits to stay accurate and compliant.
What are the 5 R’s of materials management? The 5 R’s are a shorthand for effective material management. They are the right material, the right quantity, the right time, the right place, and the right price or source. Hitting all five consistently keeps enough correct items on hand for production without tying up cash in excess stock.
What does a materials manager do? A materials manager oversees the flow of materials from purchase through production, forecasting demand, negotiating with suppliers, and setting reorder points. They also monitor quality on receipt, organize storage, and coordinate distribution to production lines or customers. Much of the role is balancing cost against availability, ordering enough to avoid stockouts without overstocking.
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