Collaborative materials management : A comparison of competitive and collaborative approaches to materials management in SCM

Abstract: Supply Chain Management (SCM) presents the new paradigm in strategic and operational business management for the 21st century. By offering a cooperative and integrated model of the value-creation process in a cross-organizational perspective, it also places new challenges on business management methods and instruments used, in theory as in practice. In the field of materials management, the new SCM perspective led to major changes in the methods used and in the emphasis of the different process steps. This master thesis presents classical as well as supply-chain-based materials management methods, compares them and draws conclusion on their use in theory and practice.   Materials Management (MM) was long neglected by business management and economic theory. The role of materials management as a secondary activity in the organization and its supportive role to production were encouraged in classical materials management. SCM reevaluated the value chain of whole industries and therefore reemphasized the strategic role of materials management for the supply chain. MM is divided into 5 steps or activity fields: supporting activities, sourcing, distribution, storage and disposal. SCM changed the methods used in each separate step. In supporting activities for example SCM requires multi-dimensional, long-term and dynamic instruments to guide decision-making in materials management, using cross-organizational cooperation to succeed, such as advanced purchasing. In sourcing the strategic role of sourcing was reemphasized by SCM and new tools such as the use of procurement marketing, SCR, green sourcing, TCO, ethical sourcing, PCB, strategic alliances and TPB were introduced, due to the new cooperative paradigm in SCM. In distribution and storage too, cooperative instruments are used to keep up competitiveness, such as VMI and integrated logistics. In disposal, however, SCM provides a totally new philosophy, reducing the focus on waste and enhancing material cycles, environmental programs and new recycling programs, such as reverse logistics. Overall in SCM, the main focus was relocated from scheduling and storage planning that was the main activity of materials management in the classical perspective to strategic sourcing and disposal as the two main processes of materials management. Concluding, the comparison of classical and supply-chain-based materials management showed, that SCM emphasizes on the strategic role of materials management by offering an integrated and process-oriented perspective on the value-creation process. Furthermore supply-chain-based materials management bases on communication, mutual interdependence and decreasing short-term competition to stay competitive in the long run as an entity, represented by the supply-chain. The long-term, complex and dynamic perspective of SCM and the pursuing of multiple and conflicting goals in SCM are mirrored in the methods used in supply-chain-based Materials Management. Recapitulatory, SCM reemphasized the strategic role of materials management as a cooperative, process-oriented primary activity within the supply-chain that has major potential for the competitiveness of the supply chain in the long-run.