Definition: Material flow optimization

The VDI Richtlinie 2689 defines the material flow as

“the interlinking of all processes involved in extracting, processing, distributing, and handling goods within designated areas.”

An efficient material flow is the backbone of every productive business activity, whether in production, logistics, or sales. Seamless and effective movement of materials is critical to operational efficiency and profitability. But what exactly is meant by material flow and what are its elements?

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What is meant by material flow?

The material flow is the process by which materials and goods are moved from their point of origin to their final destination. This flow can take place within a company – for example, from the warehouse to the production facility – or between different companies – for example, from the supplier to the customer. The material flow includes both physical movements (transport, storage, handling) and the associated flows of information.

Physical material flow

The physical material flow refers to the actual movement of materials and products. This includes the transportation of materials from one place to another, their storage at different points along the flow, and the handling of the materials during transportation and storage.

Information flow

Along with the physical flow of materials, there is also an information flow. This includes all the information that is needed for the control and coordination of the material flow, such as inventory information, delivery times and production plans.

What belongs to the material flow?

The material flow involves various elements that work together to ensure a smooth and efficient process. These include:

  • transportation
  • storage
  • handling
  • planning and control.

In the following text, we will take a closer look at these elements.

Transport

Transportation is a central element of material flow. It includes all activities related to the movement of materials from one place to another. This can entail the transportation of raw materials from a supplier to a production facility, the internal transport of materials within a warehouse or factory, and the transportation of finished products to customers.

Storage

Storage is another important component of material flow. It refers to the activities related to the storage of materials and products at different points along the material flow. This can include the storage of raw materials, intermediate products, and finished products.

Handling

The handling refers to the physical manipulation of materials during transportation and storage. This may include loading and unloading vehicles, transferring materials from one transport mode to another, and stacking and sorting materials in the warehouse.

Planning and control

The planning and control of material flow is crucial for the efficiency of the entire process. It involves planning the optimal route for the flow, determining the necessary resources, and coordinating the various activities related to material flow.

Why is material flow so important?

A well-organized material flow is crucial for operational efficiency. An optimal material flow can help shorten production times, reduce inventory costs, and increase productivity. Additionally, an efficient value stream can help increase customer satisfaction by ensuring that the right products are available at the right time and place.

Improvement of production times

By optimizing the material flow, the time needed to bring a product from raw material to finished product can be significantly reduced. This can help increase production capacity and shorten lead times.

Reduction of inventory holding costs

An efficient material flow can help reduce the amount of materials and products that need to be stored. This can help to lower storage costs and free up capital that can be used for other purposes.

Increase in productivity

A well-organized material flow can help increase productivity by ensuring that the right materials are available at the right time and place. This can help avoid delays and downtime, and increase overall productivity.

Improving customer satisfaction

Efficient management of goods and materials can play a vital role in ensuring that products are delivered to customers on time and in good condition. This can lead to improved customer satisfaction levels, which in turn can boost customer loyalty. By promoting customer loyalty, a business can grow and expand its customer base.

Process of a material flow optimization

At the beginning there is the target definition. Which target variables are to be examined, what are the visualization requirements? Then the data basis is collected and the current status is determined from the system processes. Data from the ERP system and the company’s own tracking systems are used for this purpose. Work schedules and employee surveys also play a role to really get a comprehensive picture. Material flow optimization software can only deliver good results if the data entered is of high quality. This is followed by data evaluation, where material flow optimization software really comes into its own. It is used to determine the costs of the material flows as available or planned. The results are displayed graphically at the end.

Why is a material flow optimization virtually necessary in logistics?

Processes that are not fully optimized mean nothing other than wasted resources. A material flow optimization can therefore directly reduce costs. These lower costs are a competitive advantage for the company. If this optimization is not carried out by a company, competitors apply this process and in turn gain this advantage.