MATERIAL

MANAGEMENT
CONCEPTs &
FORECASTING
Material management concept emerged as
a formal organization
due to the greater need for a separate
system in the flow of materials to the
production floor.

need of customers for new & better products

resulted in the management awareness to

formally give attention to the need to
systematically develop the flow of materials
The future outlook in the supply chain management
is that majority of the purchases in peso value will
continue to use the conventional way of buying and
delivering the needed inputs for their daily needs.
On the other hand, bigger and more organized firms
with greater supply chain will tend to be centralized.

They would aim for the supply of raw materials and

other production inputs.
 The advent of more sophisticated
computerized system available in the
coming paperless system of purchasing
and canvassing of materials

will result in lean logistics

management organization.
DEVELOPMENT FIRMS will focus
on CENTRALIZED PURCHASING.

FIRMS will negotiate for more long

term supply agreement

in order to (a) stabilize the price

and (b) continue supply of more
standardized parts and products.
 THE
CHANGING
LOGISTICS
MANAGEMENT
PROCESS
 Material management process
exists in the organization with the
view of exploring the new
business opportunities.

Organization will implement

supply strategies that will give
most possible value for its
products or services for its
supplies and to its customers.
STRATEGIC SUPPLY MANAGEMENT
in the organization will focus on
INTELLIGENCE GATHERING.
The changing management
process will give the
materials management
value in the organization
due to the following:
1.) It will serve as intelligence
network of material inputs.

2.) It will contribute to greater

organizational profitability.
 3.) It will contribute to increase
efficiency in the delivery of needed
materials.

4.) It will enhance greater

productivity for the organization.
 5.) It will develop continuous
improvement in better products.

6.) It will develop better

competitive position in the industry.
7.) It will give customers better
satisfaction for quality products.

8.) It will develop better

organizational image.
 MATERIALS
REQUIREMENT
PLANNING
 Materials requirement is the first
stage in the procurement of any
materials for processing into
finished products or for sale to the
direct consumer.
It must be implemented in order to
deliver its goods on time and of
the right quality.
 Material planning is the
determination of the course of
action in the procurement and
delivery of the materials at the
plant site.
It involves the process of
forecasting the general and
specific framework with the utmost
efficiency and economy.
 Materials Requirement Planning
(MRP) involves the development of
systems and procedure.

In its modern sense, computerized

programs are developed to help
expedite the procurement and
delivery of materials.
Materials Requirement
Planning (MRP) has the
following objectives:
 1.) Maintain adequate
supply of materials

Adequate supply of materials in the production

line or for sale must be available at all times.
 2.) Maintenance of high quality
standards

The items in the supply chain must meet the

quality standard required for the processing or for
sale.
 3.) Economy fund management

Wise investment in materials supply is the reality

that operational funds are limited. Careful value
analysis of the supply and demand is weighed
against the operation’s cash position.
4.) Maintain corporate competitive
position

Choose the supplier that will provide the best

combination of price and service
5.) Get the lowest possible price

The lowest possible price must be obtained.

Nevertheless, it must be within the specification
requirements in terms of quality
Materials
Logistics
Planning
General
Objectives:
1.) Logistics organization must clearly
define its objectives and goals
.

2.) It must be able to identify first its

SWOT
 3.) Review the present supply
requirements and relate it with
present environment in the local and
international market forces in the
supply chain
4.) It must provide a systematic
budgetary requirement for all its
specific activities

5.) Sets measures and control

mechanism to achieve its goals and
objectives
 How To Have An Effective Logistics
Management System?

The bigger the organization, the more materials

requirement is involved. It also differs in the
type of industry and extent of its operation either
locally or internationally.

The method of logistics planning depends

also on the top management and the people
who handle the operational requirement.
 How To Have An Effective Logistics
Management System?

Forecasting is a systematic approach to probe the

future demand material of the industry.
A good manager to be
able to make a sensible
forecast must possess
the ff:
1. Experience
2. Good judgement based on data analysis
3. Technical expertise
Forecast Accuracy
Decreases as Time
Horizon Increases

Short term forecast tends to be more

accurate. Long period forecasting tends to
have uncertainties as there occur changes
in the business environment.
Forecast Accuracy Decreases
as Time Horizon Increases

The steps that managers must understand and avoid.

1. Forecasts are never perfect

2. Forecast for groups of items tends to be more
accurate than forecast for individual items
3. Some forecasting techniques assume the same
underlying demand for a certain period

the responsibility for making material forecast in the

business organization lies with the production and
distribution departments.
Forecast Accuracy Decreases
as Time Horizon Increases

A. Determine the purpose of forecast

They need information to determine the objectives and
purpose of the forecast it needs and the budgetary
requirement

B. Establish time frame on the needed

materials
The demand analysis must be revised from
time to time and be updated based on needs
of the producing unit.

C. Select the most appropriate forecasting

technique
Varies according to the needs and demand of the
organization, based on what technique is most
appropriate and based on the experiences.
Forecast Accuracy Decreases
as Time Horizon Increases

D. Gather the data and analyze according to the

technique chosen
It requires relevant data and information to be able to make a
valid and reliable forecast.

E. Forecast preparation
Chart must be prepared based in the time
frame of delivery

F. Forecast monitoring
Forecast has to be monitored as to its functional validity
Elements of a
Good Forecast
 Elements of a Good Forecast

Requirements for Properly Prepared

Forecast
1. Forecast should be timely
There is no single
technique that 2. Forecast should be accurately stated
works best in It must state the accuracy of possible errors so that
every supply those involved will be able to make adjustments on
chain. positive or negative variances

3. Material requirement
forecast must be reliable
4.) Material forecasting must be
stated in meaningful units.
It must be stated in quantifiable units or peso
value.

5.) Forecast must be submitted in

hard copies.
 6.) The information must be
simple and easy to understand.
FORECASTING AND DEMAND ANALYSIS

The customer demand is the most

important component in forecasting.

Forecasting for materials is greatly

dependent on the development of new
technology.
TWO APPROACHES IN FORECASTING

1.) Qualitative method

2.) Quantitative method

TWO APPROACHES IN FORECASTING

1.) Qualitative method

The qualitative method consists

mainly of subjective information given by
those in direct contact with the end user of
the product.
TWO APPROACHES IN FORECASTING

2.) Quantitative method

It uses historical data as to material

improvements and the development of new
component that goes into a new product.
 ORGANIZING SUPPLY CHAIN

Bigger organizations designed their

structure in the most appropriate operational
system that would be more efficient and
economical in the delivery of needed materials.

Sound logistics management design

develops people operating effectively in the
delivery of goods in the production line.
 ORGANIZING SUPPLY CHAIN

The selection process for people in the supply

chain management must focus on
honesty
that will build strong confidence and focus
attention to the organization's economic
objective.
Effective implementation in
the organizing process of
the purchasing functions
should be toward the
following:
1.) Management must establish clear
objectives for all concerned.

2.) Identification and classification of the

activities with clear and definite
assignment of functions.
3.) Group related activities in the light of
human and material resources.

4.) Proper delegation of authority and

accountability to line executives.
5.) Define the vertical and horizontal
relationship to improve condition.

6.) Develop effective control system.

Two major factors to be considered in the
organizing process

1.) The organizational place of the purchasing

functions.
 In the smaller organizations, some purchasing
functions are under the finance or
administrative department.

 In bigger manufacturing organizations, this

function is under the production department.
Two major factors to be considered in the
organizing process

2.) The level of authority and responsibility.

 Authority carries with it a heavy responsibility

for result and wise expenditure of the
organization's financial resources.