Written by Marijn Overvest | Reviewed by Sjoed Goedhart | Fact Checked by Ruud Emonds | Our editorial policy
Material Procurement Management — Definition + Example
As taught in the Value Chain Analysis Course / ★★★★★ 4.9 rating
What is material procurement management?
- Material procurement management is the process of planning, sourcing, acquiring, and overseeing the needed resources for successful project development.
- Material procurement management streamlines procurement processes to maintain steady material flow, prevent shortages, and reduce delays.
- Effective material procurement management ensures a consistent supply of high-quality materials at fair prices, keeping production smooth and efficient.
What is Material Procurement Management?
Material procurement management is the process of planning, sourcing, acquiring, and overseeing the materials needed for a project or business operation. It ensures that the right materials are procured at the right time, in the right quantity, and at the best possible cost.
A procurement team is responsible for managing supplier relationships, negotiating contracts, and ensuring the timely delivery of materials to prevent project delays. Effective material procurement management helps optimize costs, maintain quality standards, and improve supply chain efficiency. It plays a crucial role in industries such as construction, manufacturing, and logistics, where material availability directly impacts project success.
Material Procurement Management Example
Scenario 1:
A construction company is building a five-story building and needs cement, steel, and bricks to start the foundation. Before ordering the required materials, the procurement manager first checks the project timeline and calculates how much material is needed at each stage.
Then, they contact multiple suppliers, compare prices, and choose the most reliable option that offers quality materials at a good price.
To avoid storage issues, they schedule deliveries in phases—cement and steel will arrive first, followed by bricks and other materials when needed. By carefully planning procurement, the project stays on schedule, avoids unnecessary costs, avoided overcrowding the site, and keep the project running smoothly.
Scenario 2:
One day, a furniture company that specializes in making high-quality wooden chairs realizes that their main wood supplier is experiencing delays, which causes them to run low on high-quality wood and could lead to halting the production.
To prevent this, they act quickly by looking for alternative suppliers. After comparing options, they chose a new supplier that could deliver the same quality wood at a fair price within a short time. They also negotiate a long-term contract to avoid future shortages.
Because of this, production continues without delays, orders are completed on time, and customers receive their chairs are promised
Scenario 3:
A restaurant chain that serves fresh seafood depends on daily deliveries from its supplier. One day, bad weather occurred, which resulted in the restaurant’s main supplier not being able to deliver enough seafood.
The procurement manager quickly contacts backup suppliers and arranges an emergency order to keep the kitchen running. At the same time, they adjust the menu to offer dishes that use available ingredients.
Because of their fast response, the restaurant avoids running out of food, and the customers continue to enjoy their meals without noticing any supply issues.
Material Procurement Management Process
Negotiating raw materials requires a strategic approach to ensure that you secure favorable terms and pricing while maintaining quality and reliability. Here are some of the processes for negotiating raw materials effectively:
1. Research and Preparation
Preparing thoroughly by doing a lot of research can be a big help to an organization. In doing so, it enables an organization to sort out what it needs and what it wants. It also helps them minimize risks and costs.
An organization should conduct thorough research about the raw materials they need, including market prices, suppliers, quality standards, and alternative sources.
After that, begin to identify the requirements, priorities, and negotiation objectives, such as pricing, quality specification, delivery terms and conditions, and contract duration.
2. Build Relationships
Organizations should cultivate strong relationships with their potential suppliers. This can be done through open communication, building trust, and having mutual respect.
Attend industry events, trade shows, and networking opportunities to connect with suppliers and learn about their capabilities and offerings.
Building relationships with potential and existing suppliers is one of the key tricks in negotiating raw materials effectively. When you have a strong relationship with suppliers, the quality of the goods you buy can be assured and even improved in the long run.
3. Understand Supplier Dynamics
When building relationships with suppliers, the organization has the responsibility of understanding supplier dynamics.
This includes understanding their business model, market position, strengths, weaknesses, and competitive landscape.
The organization should also coordinate with its suppliers to identify the supplier’s pain points, constraints, and objectives to tailor its negotiation strategy accordingly.
4. Create Leverage
Any organization striving to improve or be innovative in the procurement scene should create leverage to create more opportunities. To do so, the company needs to identify and leverage its strengths, such as volume commitments, long-term partnerships, or alternative suppliers.
Creative leverage also means convincing potential suppliers to create a partnership with you. Highlighting your value proposition to the supplier, including your reputation, reliability, and potential for future business growth, will be good.
5. Negotiation Strategy
Negotiation strategies are especially important if you want to dominate during negotiations. You need to adopt a collaborative yet assertive negotiation approach that focuses on creating value for both parties. Set clear objectives, priorities, and trade-offs before entering into negotiations.
Also, remember that it’s not only you who should benefit from negotiations but your partners as well. Learn to be flexible and creative in exploring various negotiation options and concessions to reach a mutually beneficial agreement.
6. Focus on Value
Negotiations are more than just dealt with on a surface level. If you want to keep an edge over other competitors, you must also redirect your focus to value.
Emphasize the value proposition of your offer beyond just price, such as quality, reliability, consistency, innovation, and service levels.
You should also demonstrate your commitment to a long-term partnership and willingness to invest in supplier development and collaboration.
7. Negotiation Tactics
Lastly, you need to use negotiation tactics such as anchoring, and framing. Depending on the supplier or group you want to negotiate with, use appropriate negotiation tactics to bring favors to your side.
What is a Material Manager?
The material manager is the one tasked to maintain the material procurement and all the other processes involved. It also oversees material management.
The material manager does not just manage the flow of delivery but seeks to manage cost and quality throughout the supply chain.
The material manager supervises inventory management. It checks if all the materials are available and sufficient for the span the project will be constructed.
Two Types of Materials
The following are the two types of materials in procurement:
1. Direct Materials
Direct materials are those that go directly into the product or project. This represents the cost and benefit of the product itself. An example of these items are pipes, hollow blocks, cement, wood, and glass.
The availability of direct materials is crucial for the success of a project. If these materials are not available at the time you need them, the company may incur great losses.
2. Indirect Materials
These materials are part of the project but do not become part of it. In simple terms, it is the things that make the product. An example of these materials includes equipment and spare parts such as hammers, drills, screwdrivers, and nails.
Its value may not be seen but the absence of these materials will have a great impact on the project. It will greatly affect the process and result of the project if these materials are not available.
Importance of Material Procurement
Material procurement is focused on acquiring materials for the project. If there is no material procurement, then the project will ultimately fail. Many consequences may arise if material procurement is not taken seriously. This includes delay, overspending, and scarcity of supplies.
Material procurement is not just about acquiring materials but also procuring things that are good in quality and cost-efficient.
If material procurement is done right, then then the project will surely succeed. Because it lays out all the things that will be needed for the project. This allows for a smooth and cost-efficient construction of the project.
Benefits of Material Procurement
Here are some of the benefits that you can gain by having an efficient material procurement:
1. Competitive Bidding and Quality of Materials
Material procurement seeks to acquire goods that have a competitive price. This is where bidding comes in. A list of suppliers will be prepared and then it will be narrowed down as the process goes on.
When selecting a supplier, the business may prefer those who match their budget and requirements. This benefits the company as they will not go beyond their allotted budget while still being true to the quality.
However, environmentally friendly materials just because it has a lower price. Some businesses also consider the quantity they can supply for the span of the project. This allows businesses to be at an advantage as negotiation is in their hands.
2. Sustainability
Material procurement helps the project to be sustainable until it has been constructed. It assists the project by checking if the needed supplies are available in the inventory.
Sustainable material procurement also assessed value for money and the environment. Some businesses may source environmentally friendly materials combined with value for money.
3. No Delays
Material procurement lessens or even eliminates the risks of delays. This is due to the availability of the needed materials in the inventory. Material procurement ensures that all deliveries will be made on time.
It also checks the accuracy of the materials that arrive. This allows the construction of the project to be free from delays which results in finishing on time.
Procurement Expert’s Insights on Material Procurement
For this article, we asked an experienced procurement expert to share her insights to help answer common questions about material procurement.
Nesrin Chabbah
Senior Lead Buyer
LinkedIn Profile: linkedin.com/in/nesrin-chabbeh
1. What do most people get wrong about material procurement?
“Material management’s crucial role is often underestimated. It encompasses efficient material flow considering factors like demand, price, and quality. Misconceptions stem from not realizing its influence in maximizing profits through JIT inventory management.
Effective material management minimizes waste, enhances inventory accuracy, and optimizes transport, significantly benefiting the supply chain. Recognizing its significance is key for streamlined operations and substantial cost savings.”
2. What should people know about material procurement if they are planning to start working on this?
“Material procurement is about acquiring needed project materials. It’s tightly linked with efficient material management. This ensures smooth sourcing, purchasing, and handling of materials.
Effective procurement is crucial for project success and client satisfaction, and proper material management is key to achieving this.”
3. From your experience, what is the most important thing you learned about material procurement?
“Successful material procurement hinges on effective material management, guaranteeing timely sourcing, cost-efficiency, and optimal resource use. The integration of these elements profoundly influences project success and overall business performance.”
4. What tips can you give them to be effective in material procurement?
“To enhance material procurement effectiveness, prioritize streamlined processes, utilize technology for automation, foster robust supplier relationships, optimize inventory, ensure compliance, provide continuous staff training, conduct cost analysis, integrate sustainability, and manage risks effectively. These factors collectively optimize material sourcing, benefiting both project outcomes and broader business operations.”
5. Can you give us examples and tips on how you sourced materials locally and internationally?
“When sourcing materials locally, we initiate by engaging with our existing supplier to evaluate their capacity to fulfill our requirements. If that’s not feasible, we explore the option of manufacturing the products ourselves. If this isn’t viable either, we reach out to potential local suppliers, often leveraging market research to identify several options.
On the international front, we start by reaching out to our existing international suppliers while integrating a rigorous risk management assessment for any new potential supplier we approach. This meticulous approach helps us secure reliable material sources both locally and globally.
For example, when we were sourcing materials locally for a recent project, we began by contacting our current supplier, and upon finding their capabilities limited, we explored the possibility of local manufacturing.
Additionally, market research revealed several potential local suppliers, broadening our options. On the international level, we engaged our existing international suppliers and incorporated risk management practices, ensuring a thorough assessment of any new potential supplier contacted, thus assuring a stable and diversified global material supply chain.”
The Connection Between Material Procurement and Material Management
Materials management is a key to good material procurement. It boosts productivity and efficiency in constructing a project.
Material management refers to the combined process of sourcing, purchasing, moving, handling, and controlling the materials.
Disruption to material procurement may result in a loss of profit and customer trust. That is why effective material procurement needs good material management.
Conclusion
Material procurement management is a crucial function that directly impacts the success of a project or business operation. A well-structured procurement process ensures that materials are sourced efficiently, delivered on time, and meet quality standards—all while optimizing costs. Through strategic planning, strong supplier relationships, and proactive risk management, organizations can prevent delays, control expenses, and maintain smooth operations.
Whether in construction, manufacturing, or food service industries, effective material procurement is essential for maintaining efficiency. By continually improving procurement strategies, embracing technology, and prioritizing sustainable sourcing, organizations can strengthen their supply chains and stay competitive in a constantly evolving market.
Frequently asked questions
What is material procurement management?
Material procurement is the process of planning, sourcing, acquiring, and overseeing the materials needed for a project or business operation.
What does a material manager do?
A material manager manages the entirety of material procurement and material management.
Is material procurement important?
Material procurement is important to successfully build a project. It is what determines the project’s materials, costs, and the time it takes to be constructed.
About the author
My name is Marijn Overvest, I’m the founder of Procurement Tactics. I have a deep passion for procurement, and I’ve upskilled over 200 procurement teams from all over the world. When I’m not working, I love running and cycling.
