Materials management is part of logistics and refers to the location and movement of the physical items or products. There are three main processes associated with materials management: spare parts, quality control, and inventory management. Materials management is important in large manufacturing and distribution environments, where there are multiple parts, locations, and significant money invested in these items.

The first process in materials management is related to spare parts. A detailed business process is required to determine the order point for the spare parts, identify the ideal quantity to order, process receipt of the parts, and then make sure they are in the correct place. Spare parts are integral to the continuing operation of production lines and related equipment. Poor management of this process can cause downtime and loss of production.

Quality control is a large part of materials management. The creation of material standards, inspections, and returns process is a primary responsibility of the materials management group. All parts and materials must be tested to ensure that a specific level of quality is met. This is typically completed before a purchase order is issued to a supplier, to ensure that the supplier has met the conditions of their contract.

Inventory management is the accurate tracking of all materials in the company’s inventory. The company has purchased these items from another supplier. There are three possible areas of loss that are reduced through effective inventory management: shrinkage, misplacement, and short shipments.

Shrinkage is a general materials management term used to describe the loss of materials once they have reached the companies property. This type of loss can be due to theft or damage. There are several strategies that can be used to reduce the risk through loss prevention, such as itemized product inventory, bar coding, and security cameras.

Loss through misplacement is most commonly found in very large organizations or warehouses. Material is received by the shipper and then moved to another location by the distribution staff. However, if it is moved to the wrong location, it is as if the product had not been received at all. This issue can be reduced through bar code scanning to confirm product placement and a tracking system, which records when items are stored and where.

Short shipments occur when the quantity received is less that the quantity on the packing slip. This must be identified and corrected as soon as possible, preferably before the shipper receives the package. The more time that passes before it is realized, the greater the risk the supplier will insist that the product was shipped correctly, and the loss occurred within the customer's warehouse.