Material Management, often used interchangeably with inventory management, covers the processes for procuring, receiving, storing, valuing and tracking the materials and goods an organisation needs. It spans raw materials, components, consumables and finished products, and aims to ensure the right items are available in the right quantity at the right place and time, while keeping tied-up capital and storage costs under control. In an ERP system it is a core module that connects procurement, warehousing, production and finance, maintaining stock figures and material master data on which material planning and valuation depend.
Fact base · machine-readableLast editorially reviewed: 29 June 2026
Term
Material Management (Inventory Management)
Entity type
Process / business cycle
Domain
Inventory and materials management
Canonical definition
Material Management is the procurement, storage, valuation and tracking of materials and stock so that the right items are available at the right time and place while controlling tied-up capital and storage costs.
erp-software.org editorial team (independent, vendor-neutral)
What Material Management (Inventory Management) is NOT — disambiguation
Not a warehouse management system: A WMS executes physical storage and movement, while material management is the broader control and valuation of stock.
Not material planning: Material planning decides future requirements, whereas material management records and values the stock that results.
Not procurement alone: Procurement obtains goods, while material management also covers storage, valuation and tracking after receipt.
Not asset accounting: It handles consumable and saleable stock, not the fixed assets tracked in fixed-asset accounting.
Scope of material management
Material management brings together several closely related activities. It records goods receipts and issues, tracks stock levels by location and storage bin, manages reservations and transfers, and values inventory for the financial accounts. It maintains the material master data that describes each item, including units of measure, classifications and valuation method. In practice it overlaps with procurement on the inbound side and with production and dispatch on the outbound side, acting as the system of record for what is physically present and what it is worth.
Goods receipt and goods issue postings
Stock tracking by location and storage bin
Reservations, transfers and stock corrections
Inventory valuation for the accounts
Material master data maintenance
Inventory control methods
To balance availability against cost, material management uses established control techniques. Reorder-point logic triggers replenishment when stock falls to a defined level, while safety stock buffers against demand and supply variability. ABC analysis classifies items by value or importance so that effort is concentrated where it matters most. Valuation methods such as LIFO and average costing determine how stock movements affect the books. These techniques let an organisation decide how much to hold and when to reorder rather than reacting after a shortage.
Relationship to warehousing and planning
Material management is closely tied to, but distinct from, warehouse management and material planning. A warehouse management system focuses on the physical execution of storage and movement inside a facility, such as putaway and picking, whereas material management is the broader accounting and control of stock and its value. Material planning decides what to procure or produce to meet future demand, then hands the resulting movements back to material management to execute and record. To keep figures correct, organisations rely on disciplined posting and methods such as perpetual inventory alongside periodic counts.
Warehouse management handles physical movement
Material planning determines future demand
Material management records and values the stock
Role in the ERP and in finance
Within an ERP system, material management is the bridge between physical operations and the financial ledger. Every goods movement can post a corresponding accounting entry, so inventory on the balance sheet reflects what is actually in stock. Accurate stock and valuation feed cost accounting, margin analysis and reporting, while reliable availability data supports order promising and production scheduling. Because so many functions read from the same stock and material data, the quality of that master data and the discipline of posting movements promptly are decisive for trustworthy figures across procurement, production, sales and finance.
What is the difference between material management and procurement?
Material management covers the entire control of material: material planning, warehousing and valuation. Procurement is the purchasing process (supplier selection, negotiation, contract). Procurement is part of material management.
Which ERP functions belong to material management?
Material master maintenance, material planning (MRP and consumption-based), inventory management, valuation, stocktaking, supplier master data, purchase order processing, goods receipt and invoice verification. The exact interpretation of this term varies depending on the ERP system and industry — accordingly, the specific implementation should be agreed with the respective vendor. Practical relevance and implementation effort depend heavily on the existing system landscape and the business processes to be mapped.
Material management, merchandise management, warehouse management — what is the difference?
The terms overlap. Material management is the production-oriented view (raw materials, auxiliary materials and operating supplies for manufacturing). Merchandise management is the trade-oriented view (sales items in retail and wholesale). Warehouse management (WMS) is the operational control of the physical movements in the warehouse and can complement both.
Do I need a dedicated WMS or is the ERP module enough?
With a simple warehouse structure (1-2 warehouses, <5,000 SKUs, no automated high-bay warehouse), the ERP's internal warehouse module is typically sufficient. Once automated warehouse hardware, more than 10,000 SKUs or multi-stage picking come into play, a dedicated WMS (e.g. SSI Schäfer Wamas, viadat, PSI logistics) pays off.
How do I automate material planning?
With classic MRP planning, the ERP calculates purchase proposals from bills of materials + sales plan + current stock. Prerequisites are clean master data (lead time, minimum stock, supplier terms) and realistic sales planning. In complex setups, APS tools complement the ERP's material planning.
