chapter 8—supply chain management0 supply chain management
TRANSCRIPT
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1Chapter 8—Supply Chain Management
Supply Chain ManagementSupply Chain Management
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2Chapter 8—Supply Chain Management
Learning ObjectivesLearning Objectives
Be Able To Apply Concepts Listed In Learning Goals
Be Able To Use Formulas Listed In Equation Summary of Chapter
Avg Aggregate Inventory ValueWeeks of Supply =
Weekly Sales (at Cost)
Annual Sales (at Cost)Inventory Turnover =
Avg Aggregate Inventory Value
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3Chapter 8—Supply Chain Management
IntroductionIntroduction
Materials Are Any Commodities Used Directly or Indirectly in Producing a Product or Service. Raw Materials, Component Parts, Assemblies,
& Supplies
A Supply Chain Is the Way Materials Flow Through Different Organizations From Raw Material Supplier to Finished Goods Consumer.
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4Chapter 8—Supply Chain Management
Supply Chain ManagementSupply Chain Management
Supply Chain Management Includes All Management Functions Related to Flow of Materials From Company’s Direct Suppliers to Its Direct Customers. Includes Purchasing, Traffic, Production Control,
Inventory Control, Warehousing, & Shipping.
Materials Management & Logistics Management Includes All Decisions About Purchasing Materials and Services, Inventories, Production Levels, Staffing Patterns, Schedules, and Distribution.
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5Chapter 8—Supply Chain Management
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6Chapter 8—Supply Chain Management
Inventory at Different Stocking PointsInventory at Different Stocking Points
Supplier Manufacturing plant Distribution centerRetailer
Figure 8.1
Rawmaterials
Work inprocess
Finishedgoods
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7Chapter 8—Supply Chain Management
Supply Chain ManagementSupply Chain Managementin a Manufacturing Plantin a Manufacturing Plant
ReceivingReceivingandand
InspectionInspection
RawRawMaterials,Materials,Parts, andParts, andIn-processIn-process
Ware-Ware-HousingHousing
ProductionProduction
FinishedFinishedGoodsGoodsWare-Ware-
housinghousing
Inspection,Inspection,Packaging,Packaging,
AndAndShippingShippingSu
pplie
rs
Cust
omer
s
Materials Management
Purchasing ProductionControl
Warehousing andInventory Control
Shippingand Traffic
Physical materials flowPhysical materials flowInformation flowInformation flow
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8Chapter 8—Supply Chain Management
Four Important Activities in SCMFour Important Activities in SCM
Purchasing Logistics Warehousing Expediting
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9Chapter 8—Supply Chain Management
PurchasingPurchasing
Factors Increasing Importance of Purchasing Today:
Tremendous Impact of Material Costs on Profit -- 60-70% of Sales Dollar Paid to Material Suppliers
Popularity of JIT Manufacturing -- Supply Deliveries Must Be Exact in Timing, Quantity, & Quality
Increasing Global Competition -- More Competition for Scarce Resources, & Geographically Stretched-out Supply Chain
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10Chapter 8—Supply Chain Management
Mission of PurchasingMission of Purchasing
Develop Purchasing Plans for Each Major Product or Service Consistent With Operations Strategies: Low Production Costs Fast and On-Time Deliveries High Quality Products & Services Flexibility
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11Chapter 8—Supply Chain Management
Purchasing ManagementPurchasing Management
Maintain Database of Available, Qualified Suppliers
Select Suppliers to Supply Each Material Negotiate Contracts With Suppliers Act As Interface Between Company &
Suppliers Provide Training to Suppliers on Latest
Technologies
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12Chapter 8—Supply Chain Management
Managing the Customer InterfaceManaging the Customer Interface
Order Placement Process—Involves Activities Required to Register Need for Product or Service & to Confirm Acceptance of Order
Order Fulfillment Process—Involves Activities Required to Deliver Product or Service to Customer Inventory Pooling Forward Placement Vendor-Managed Inventories Continuous Replenishment
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13Chapter 8—Supply Chain Management
Managing the Supplier InterfaceManaging the Supplier Interface
E-Purchasing EDI—Enables Transmission of Routine
Business Documents with Standard Format over Telephone or Direct Lines
I-ERP—Allowing Portal to ERP System Between Customer and Supplier
Supplier Selection & Certification Selection—Price, Quality, Deliver, Green Certification—Verification Supplier Can Deliver
Goods Customer Requires Supplier Relations Outsourcing
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14Chapter 8—Supply Chain Management
Advantages of Centralized Advantages of Centralized PurchasingPurchasing
Buy in Large Quantities --> Better Prices More Clout With Suppliers --> Greater
Supply Continuity Larger Purchasing Department --> Buyer
Specialization Combine Small Orders --> Less Order Cost
Duplication Combine Shipments --> Lower
Transportation Costs Better Overall Control
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15Chapter 8—Supply Chain Management
Purchasing ProcessPurchasing Process
Material RequisitionMaterial Requisition
Request for QuotationsRequest for Quotations
Select Best SupplierSelect Best Supplier
Purchase OrderPurchase Order
Receive & Inspect GoodsReceive & Inspect Goods
From Purchasing, From Purchasing, To Potential SuppliersTo Potential Suppliers
From Any Department,From Any Department,To PurchasingTo Purchasing
Based on Quality, Price, Based on Quality, Price, Lead Time, DependabilityLead Time, Dependability
From Purchasing, From Purchasing, To Selected SupplierTo Selected Supplier
From Supplier, to Receiving,From Supplier, to Receiving,Quality Control, WarehouseQuality Control, Warehouse
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16Chapter 8—Supply Chain Management
Make-or-Buy AnalysisMake-or-Buy Analysis
Considerations in Make-or-Buy Decisions: Lower Cost - Purchasing or Production? Better Quality - Supplier or In-House? More Reliable Deliveries - Supplier or In-
House? What Degree of Vertical Integration Is
Desirable? Should Distinctive Competencies Be
Outsourced?
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17Chapter 8—Supply Chain Management
JIT PurchasingJIT PurchasingKey Elements of JIT Purchasing Are: Cooperative, Not Adversarial Relationships Longer-Term Relationships, Fewer Suppliers Delivery & Quality Enters Into Selecting a
Supplier JIT in Supplier’s Operation Suppliers Nearby Shipments Delivered Directly to Production
Line Deliveries in Small, Standard-Size,
Returnable Containers Minimum of Paperwork
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18Chapter 8—Supply Chain Management
LogisticsLogistics
Logistics Usually Refers to Management of: Movement of Materials Within Factory Shipment of Incoming Materials From
Suppliers Shipment of Outgoing Products to Customers
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19Chapter 8—Supply Chain Management
Movement of Materials within Movement of Materials within FactoriesFactories
Incoming Incoming VehiclesVehicles
Incoming Incoming VehiclesVehicles
ReceivingReceivingDockDock
ReceivingReceivingDockDock
QualityQualityControlControlQualityQualityControlControl WarehouseWarehouseWarehouseWarehouse
Work Work CenterCenterWork Work CenterCenter
Other Work Other Work CentersCenters
Other Work Other Work CentersCenters PackagingPackagingPackagingPackaging FinishedFinished
GoodsGoodsFinishedFinishedGoodsGoods
ShippingShippingShippingShipping ShippingShippingDockDock
ShippingShippingDockDock
OutgoingOutgoingVehiclesVehiclesOutgoingOutgoingVehiclesVehicles
Typical Locations From/To Which Material Is Moved:Typical Locations From/To Which Material Is Moved:
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20Chapter 8—Supply Chain Management
Shipments To and From FactoriesShipments To and From Factories
Traffic Departments Routinely Examine Shipping Schedules & Select: Shipping Methods Time Tables Ways of Expediting Deliveries
Traffic Management Is Specialized Field Requiring Technical Training in DOT and ICC Regulations & Rates.
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21Chapter 8—Supply Chain Management
Shipments To and From FactoriesShipments To and From Factories
Distribution, or Physical Distribution, Is Shipment of Finished Goods Through Distribution System to Customers.
A Distribution System Is Network of Shipping & Receiving Points Starting With Factory & Ending With Customers.
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22Chapter 8—Supply Chain Management
Shipments To and From FactoriesShipments To and From Factories
Distribution Requirements Planning DRP Is Planning for Replenishment of
Regional Warehouse Inventories. DRP Uses MRP-type Logic to Translate
Regional Warehouse Requirements Into Central Distribution-Center Requirements, Which Are Then Translated Into Gross Requirements in MPS at Factory.
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23Chapter 8—Supply Chain Management
Shipments To and From FactoriesShipments To and From Factories
Distribution Requirements Planning Scheduled Receipts Are Previously-placed
Orders That Are Expected to Arrive in a Given Week
Planned Receipt of Shipments Are Orders Planned, but Not Yet Placed, for the Future
Projected Ending Inventory Is Computed As: Previous Week’s Projected Ending Inventory + Planned Receipt of Shipments in Current Week + Scheduled Receipt of Shipments in Current Week -- Forecasted Demand in Current Week
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24Chapter 8—Supply Chain Management
Shipments To and From FactoriesShipments To and From Factories
DRP Time-Phased Order Point Record
Forecasted demand (units)Forecasted demand (units)
Scheduled receiptsScheduled receipts
Projected ending inventoryProjected ending inventory
Planned receipt of shipmentsPlanned receipt of shipments
Planned orders for shipmentsPlanned orders for shipments
Region. Warehouse #1Region. Warehouse #1 LT = 1 LT = 1Std. Quantity = 50 SS = 10Std. Quantity = 50 SS = 10
6060
-1-1
8080
5050
3030
4040
404011 22 33
3030
50505050
50505050
303020201010
404055444040
WeekWeek
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25Chapter 8—Supply Chain Management
Shipments To and From FactoriesShipments To and From FactoriesShipments To and From FactoriesShipments To and From Factories
Distribution Resource Planning Distribution Resource Planning Extends DRP
So That Key Resources of Warehouse Space, Workers, Cash, & Vehicles Are Provided in Correct Quantities at Correct Times.
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26Chapter 8—Supply Chain Management
Innovations in LogisticsInnovations in Logistics
New Developments Affecting Logistics Include: All-Freight Airports Inter-Modal Shipping In-Transit Rates Consolidated Shipments Air-Freight & Trucking Deregulation Advanced Logistics Software
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27Chapter 8—Supply Chain Management
WarehousingWarehousing
Warehousing Is Management of Materials While They Are in Storage.
Warehousing Activities Include: Storing Dispersing Ordering Accounting
Periodic Inventory Perpetual Inventory
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28Chapter 8—Supply Chain Management
WarehousingWarehousing
Record Keeping Within Warehousing Requires Stock Record for Each Item That Is Carried in Inventories.
The Individual Item Is Called a Stock-Keeping Unit (SKU).
Stock Records Are Running Accounts That Show: On-Hand Balance Receipts & Expected Receipts Disbursements, Promises, & Allocations
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29Chapter 8—Supply Chain Management
Inventory AccountingInventory Accounting
In Past, Inventory Accounting Based On: Periodic Inventory Accounting Systems --
Periodic (End-of-Day) Updating of Inventory Records
Physical Inventory Counts -- Periodic (End-of-Year) Physical Counting of All SKUs at One Time
Today, More and More Firms Are Using: Perpetual Inventory Accounting Systems -- Real-
Time Updating of Records As Transactions Occur Cycle Counting -- Ongoing (Daily or Weekly)
Physical Counting of Different SKUs
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30Chapter 8—Supply Chain Management
Measuring the PerformanceMeasuring the PerformanceMaterials ManagersMaterials Managers
Level and Value of In-House Inventories Percentage of Orders Delivered on Time Number of Stockouts Annual Cost of Materials Annual Cost of Transportation Annual Cost of Warehouse Number of Customer Complaints Other Factors
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31Chapter 8—Supply Chain Management
Inventory MeasuresInventory Measures
Avg Aggregate Inventory ValueWeeks of Supply =
Weekly Sales (at Cost)
Annual Sales (at Cost)Inventory Turnover =
Avg Aggregate Inventory Value