Materials management is a cluster of processes used to plan for and control the flow of inventory into, through, and out of a business. These processes are concerned with identifying the need for inventory, procuring and storing it, scheduling the inventory into production, and warehousing and distributing the finished product. An essential materials management function is determining the amount of finished goods to be deployed at each distribution point for sale to customers. Ideally, materials management strives to have inventory available when it is needed, while minimizing the cost of holding inventory. These conflicting goals are achieved by scheduling inventory to arrive only just as needed, but in sufficient quantities to handle unexpected surges in demand.
This is an essential function, since the investment in inventory can comprise a substantial proportion of a firm’s total working capital. In addition, the presence or absence of finished goods or merchandise may be critical to the ability of an organization to complete a sale transaction.