A core component of ERP is its material management module, which focuses on inventory management, including raw materials, finished goods, and work-in-progress, and also warehouse management.
What is Material management or Material Requirements Planning (MRP)?
MRP is a software system that helps businesses plan and manage the production and procurement of components needed to create their final products. It calculates exactly what materials are required, how much is needed, and when they’re needed to meet production schedules.
How does MRP work?
By analyzing factors like customer demand, inventory levels, and production lead times, MRP creates a detailed production plan. This plan outlines the specific components and raw materials needed for each product, ensuring that the right materials are available at the right time.
Effective material management is crucial for smooth supply chain operations and efficient manufacturing processes. By accurately tracking inventory levels and material requirements, businesses can optimize production schedules, reduce costs, and prevent out-of-stock or overstocking situations.
ERP’s material management module integrates with other ERP modules to gather data and generate reports on material needs, inventory levels, and production planning. This integration ensures that the right materials are available at the right time to meet production demands.
Industries such as manufacturing, steel, coal, and cement have widely adopted ERP systems for their material management capabilities. By implementing robust material management solutions, these industries can streamline operations, improve efficiency, and adopt Digital Transformation successfully.
The material management module, often referred to as inventory management, provides real-time insights into inventory levels, preventing unnecessary purchases and optimizing cash flow. This module plays a vital role in the overall success of business operations.
Key Features of the ERP Software for Material Management
Material Valuation
The ERP software for Material Management systems oversees the acquisition of raw materials and the storage of finished goods. When raw materials are purchased, their value is recorded and integrated into the finance and accounts module for accurate financial tracking.
Additionally, this Material management module of ERP monitors the movement of manufactured goods. When materials are dispatched, their movements are tracked and the information is forwarded to the logistics module. This streamlines the entire material handling process within the ERP system.
The ERP for Material Management fulfills all essential requirements for material handling, ensuring seamless information sharing with the quality control module. This guarantees that each batch meets the industry’s quality standards.
Bin Management
Bin management is a crucial function within the material management module, directly impacting inventory management. Warehouses allocate storage bins for manufactured products, ensuring efficient stock organization.
This module ensures adequate stock levels and prevents shortages. During order fulfillment, inventories are grouped and stored, with materials being scanned and tagged for future reference.
The system also tracks the availability of specific brands within the inventory. If a brand is out of stock, the module generates an order for replenishment, demonstrating the material management module’s integral role in inventory oversight.
Multi-location Inventory Management
Effective supply chain management relies on efficient distribution channels, which can span multiple states or locations. Managing these dispersed inventories can be challenging.
The multi-location inventory feature within the material management module simplifies this process. Centralized storage of location details allows for easy access from any geographical point, streamlining stock and material management across various locations.
Product Life Cycle Management
Every product undergoes a distinct life cycle during production. Developing innovative products is essential for business continuity, and assessing their success is crucial.
Product Life Cycle Management helps determine the effectiveness and success rate of new products. It also identifies products that need revamping, optimizing resource allocation.
Continuous monitoring and analysis of products are facilitated by the ERP system, helping businesses identify profitable products and those with higher sales rates.
Benefits of the ERP for Material Management
- Cost Reduction: The ERP system enhances operational efficiency, leading to a significant reduction in operational costs.
- Centralized Information Storage: Centralized data storage eliminates paper trails and reduces document misplacement.
- Seamless Data Access: Centralized information allows easy data access and fosters operational harmony.
- Efficient Tracking: Serial/lot numbers for material batches enable precise product tracking.
- Inventory Management: Accurate estimation of raw material shortages simplifies stock replenishment.
- Smooth Supply Chain: Comprehensive material information ensures smooth supply chain management.
Material Management or Inventory Management is crucial for an ERP module. It integrates with various other modules to gather information, prepare detailed stock replenishment reports, and track manufactured products. ERP software designed for specific industries enhances productivity and streamlines operations.
By refining the strategic sourcing process, businesses can reduce cycle times, enhance process control, achieve sustainable savings, and create long-term business value.
Sourcing
– Purchase planning based on Make-to-Stock (Forecast) or Make-to-Order (Sales Order)
– Requirement analysis using MRP and Bill of Material
– Supplier analysis considering credit limit, price, quality, delivery, and service criteria
– Item purchase history for lead time and best rate analysis
– Comparative analysis of RFQs and supplier quotations
– Landed value calculation with provisions for additional expenses
– Purchase requisition/order generation from purchase planning
Purchasing
– Comprehensive inventory controls for stock movements within and outside units/plants
– Stock valuation using FIFO/Weighted Average/Standard Cost, stock aging, and reorder management
– Multi-level inventory classification, handling based on various attributes
– Inventory, purchase, and sales account settings at company/group/item level for extensive analysis
Receiving
– User-defined procurement flow: Requisition-Enquiry-Quotation-Purchase Order Processing-Material Receipt-Supplier Invoice
– Linking of gate entry, weigh slips, QC inspection, purchase order, and indents
– Advance payment management to suppliers
– Multi-level approvals for PO, material return, and rejection/replacement management
– LC management for purchase
Warehouse Management
– Define warehouse/rack/bin structure.
– Reconciliation and stock verification using external devices
– Warehouse-wise and consolidated stock reports
– Physical stock verification and adjustment
Subcontracting and Services Management
– Work orders: Fixed value, service quantity, or rate-based contract types
– Contractor issue: Billable or non-billable
– Issue slip and debit note for chargeable stores items
– Service billing effect in the accounting system with references to work orders
Imports
– Import purchase order and LC workflow
– Import shipment data entry at the loading port
– All entries including Bill of entry and all necessary tax and duty calculations
– Material receipt GRN linked to the bill of entry
– CENVAT of duties against the bill of entry
– Import bill passing with overhead expenses linking
– Actual landing value analysis against the purchase order
