Material substitution refers to the practice of replacing one raw material or component with an alternative in response to availability, cost, or regulatory changes. This flexibility is crucial for managing disruptions in supply. Substitutions may be temporary (e.g., during a shortage) or permanent (due to innovation or cost savings). Managing substitutions requires coordination across procurement, production, and quality assurance. Inventory optimization systems that handle material substitution can dynamically adjust replenishment plans, bills of materials, and inventory valuations. This helps maintain production continuity while managing risks and costs.
