Direct Materials
Definition:
Direct materials are the raw materials, components, and parts that are directly incorporated into a company's finished products. These materials are a fundamental part of the production process and can be easily traced to specific products or batches, unlike indirect materials.
Example:
Acme Manufacturing produces electronic devices, and its direct materials include components such as circuit boards, displays, batteries, and casings. These materials are purchased by the procurement team and used in the assembly process to create the finished products.
Why are Direct Materials important to Procurement teams?
Direct materials are critical to the production process and have a significant impact on product quality, cost, and time-to-market. Procurement teams play a crucial role in ensuring a reliable and cost-effective supply of direct materials by developing strategic sourcing plans, negotiating contracts with suppliers, and managing supplier relationships. By closely collaborating with engineering, quality, and production teams, procurement can help to optimize material specifications, reduce lead times, and drive continuous improvement in the supply chain.