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Raw material management involves evaluating, procuring, and using materials in the manufacturing process while minimizing waste. The manager researches and purchases materials at the best price, negotiates contracts, and streamlines production to reduce waste and costs. The process is ongoing to secure materials and minimize disruptions.
Raw material management is a process considered part of the overall supply chain management process and focuses on the tasks of ensuring the highest quality materials at the lowest possible rates, while also working within the corporate structure to make sure that those materials provide the best possible benefit within the production process. This means that the broad scope of raw materials management begins with the evaluation and procurement of raw materials, goes through the use of those materials in the manufacturing process, and even involves evaluating the amount of waste that is present after that. those materials were made into finished products. At best, this type of management process not only saves the company money on expenses, it also helps reduce waste and allows the company to get more profit from every finished unit sold.
The duties of raw materials management begin with the evaluation and selection of materials needed to manufacture goods. Purchasing raw materials requires identifying the standards that must be met to produce the desired quality of finished products. To this end, the manager will spend time and effort researching the right materials, using company resources to ensure they are of the right level of quality, and then making arrangements to purchase the materials in the desired quantities.
As part of the procurement process, the manager will also attempt to negotiate the best possible price of the raw materials to be used in the production process. This is often an easier task when the company’s business volume is high enough to require large quantities of materials. Here, the focus of raw materials management shifts away from the task of finding the right materials and focuses on using comprehensive contractual agreements of discount pricing or volume purchase pricing to ensure that the business has an adequate supply of the right materials to support the operation.
Even after the evaluation and purchase of raw materials, the commodity management function will continue. As part of manufacturing process support, the manager will work with others within the organization to help streamline the way those materials are used in the manufacture of goods. The idea is to identify the stages of production where material waste occurs and identify changes that would minimize that waste. This effort helps reduce production costs, as less waste means more materials purchased in the end are used for finished products. The lower costs of production in turn lead to the generation of a higher rate of return from each finished product sold, enabling the company to generate higher profits.
The raw material management process is ongoing. At all times, efforts to secure raw materials of the right level of quality and for the most competitive price are ongoing, enabling the manager to locate new suppliers and possibly save the company more money on the front end. By always being aware of the options available to the company to secure the materials needed for production, the company can minimize any production disruptions that may occur if the regular supplier is suddenly unable to meet the demand for some reason .
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