om week 10 supply chain management

7/28/2019 OM Week 10 Supply Chain Management

1/24

SUPPLY CHAIN MANAGEMENT

6/22/2013 1


2/24


3/24

Low-Cost Strategy Response Strategy DifferentiationStrategy

Suppliers goal Supply demand at

lowest possible cost.

Respond quickly to

changing requirementand demand tominimize stockouts

Share market

research; jointlydevelop products andoptions.

Primaryselectioncriteria

Select primarily forcost

Select primarily forcapacity, speed, andflexibility

Select primarily forproduct developmentskills

Process

characteristics

Maintain high

average utilization

Invest in excess

capacity and flexibleprocesses

Use modular

processes that lendthemselves to masscustomization

Inventorycharacteristics

Minimize inventorythroughout thechain to hold downcosts

Develop responsivesystem, with bufferstocks positioned toensure supply

Minimize inventory inthe chain to avoidobsolescence

Lead-timecharacteristics

Shorten lead timeas long as it doesnot increase costs

Invest aggressively toreduce productionlead time

Invest aggressivelyto reducedevelopment leadtime

Product-designcharacteristics

Maximizeperformance andminimize cost.

Use product designthat lead to low setuptime and rapidproduction ramp-up

Use modular designto postpone productdifferentiation for aslong as possible

How supply chain decisions affect strategy

6/22/2013 3


4/24

Global Supply Chain Issues

Supply chain in a global environment mustbe able to:

Research to sudden changes in parts

availability, distribution or shipping channels,import duties, and currency rates.

Use the latest computer and transmissiontechnologies to schedule and manage the

shipment of parts in and finished products out. Staff with local specialists who handle duties,

freight, customs, and political issues.

6/22/2013 4


5/24

SUPPLY CHAIN ECONOMICS

Make-or-Buy Decisions

A choice between producing a component orservice in-house or purchasing it from an

outside source. Outsourcing

Outsourcing transfers some of what aretraditional internal activities and resources of a

firm to outside vendors, making it slightlydifferent from the traditional make-or-buydecision.

6/22/2013 5


6/24

Considerations for the Make-or-Buy

Decision

Reasons for Making Reasons for Buying

1. Maintain core competence2. Lower production cost3. Unsuitable suppliers4. Assure adequate supply (quantity or

delivery)5. Utilize surplus labor or facilities and

make a marginal contribution6. Obtain desired quality7. Remove supplier collusion8. Obtain unique item that would entail a

prohibitive commitment for a supplier

9. Protect personnel from a layoff10. Protect proprietary design or quality11. Increase or maintain size of the

company (management preference)

1. Frees management to deal with its corecompetence.

2. Lower acquisition cost3. Preserve supplier commitment

4. Obtain technical or management ability5. Inadequate capacity6. Reduce inventory costs7. Ensure alternative sources8. Inadequate managerial or technical

resources9. Reciprocity

10. Item is protected by a patent or tradesecret.

6/22/2013 6


7/24

ETHICS IN SUPPLY CHAIN

LOYALTY TO YOUR ORGANIZATION; JUSTICE TOTHOSE WITH WHOM YOU DEAL; FAITH IN YOURPROFESSION

Avoid the intent and appearance of unethical or

compromising practice.

Demonstrate loyalty to the employer by diligentlyfollowing the lawful instructions of the employer.

Avoid any activity that would create a conflict betweenpersonal and employer interest.

Avoid any activity that might influence, or appear toinfluence, supply management decisions.

Handle confidential or proprietary information with duecare and proper consideration.

6/22/2013 7


8/24

ETHICS IN SUPPLY CHAIN

Promote positive supplier relationships.

Avoid improper reciprocal agreements.

Know and obey the letter and spirit of laws.

Encourage support for small, disadvantaged, and

minority-owned businesses. Acquire and maintain professional competence.

Conduct activities in accordance with national andinternational laws, customs, practices, and ethics.

Enhance the stature of the supply management

profession.

6/22/2013 8


9/24

SUPPLY CHAIN STRATEGIES

Many suppliers A supplier responds to the demand and specifications of

a request for quotation, with the order usually going tothe low bidder.

Few suppliers Low cost, a buyer is better of forming a long-term

relationship with a few dedicated suppliers.

Vertical integration Developing the ability to produce goods or services

previously purchased or actually buying a supplier or adistributor.

6/22/2013 9


10/24

SUPPLY CHAIN STRATEGIES

Keiretsu networks A Japanese term that describes suppliers who become

part of a company coalition.

Virtual companies Companies that rely on a variety of supplierrelationships to provide services on demand. Also knownas hollow corporations or network companies.

6/22/2013 10


11/24

MANAGING THE SUPPLY CHAIN

Mutual Agreement on Goals Partners in the chain must appreciate that the only

entity that puts money into a supply chain is the endcustomer.

Trust Members of the chain must enter into a relationship that

share information.

Compatible Organizational Cultures A positive relationship between the purchasing and

supplying organizations that comes with compatibleorganizational cultures can be a real advantage whenmaking a supply chain hum.

6/22/2013 11


12/24

Issues in an Integrated Supply Chain

Local optimization Members of the chain are inclined to focus on

maximizing local profit or minimizing immediate costbased on their limited knowledge.

Incentives (sales incentives, quantitydiscounts, quotas, and promotions) Incentives push merchandise into the chain for sales

that have not occurred.

Large lots Bullwhip effect is the increasing fluctuation in orders that

often occurs as orders move through the supply chain.

6/22/2013 12


13/24

Opportunities in an

Integrated Supply Chain

Accurate Pull Data Accurate sales data that initiate transactions to pull

product through the supply chain.

Lot Size Reduction Developing economical shipments of less than truckloadlots.

Providing discounts based on total annual volume ratherthan size of individual shipment

Reducing the cost of ordering through techniques suchas standing orders and various forms of electronicpurchasing.

6/22/2013 13


14/24

Opportunities in an


Single Stage Control of Replenishment Fixing responsibility for monitoring and managing

inventory for the retailer.

Vendor-Managed Inventory (VMI) A system in which a supplier maintain material for thebuyer, often delivering directly to the buyers usingdepartment.

Blanket Orders A long-term purchase commitment to a supplier for

items that are to be delivered against short-termreleases to ship.

6/22/2013 14


15/24

Opportunities in an


Standardization The purchasing department should make special efforts

to increase levels of standardization.

Postponement Delaying any modifications or customization to a productas long as possible in the production process.

Drop Shipping and Special Packaging Shipping directly from the supplier to the end consumer

rather than from the seller, saving both time andreshipping costs.

6/22/2013 15


16/24

Opportunities in an


Pass-through Facility Expedites shipment by holding merchandise and

delivering from shipping hubs.

Channel Assembly Postpones final assembly of a product so the distributionchannel can assemble it.

6/22/2013 16


17/24

E-PROCUREMENT E-procurement uses the Internet to facilitate

purchasing. E-purchasing speeds purchasing, reduces costs,

and integrates the supply chain, enhancing anorganizations competitive advantage.

Electronic Ordering and Funds Transfers aretraditional approaches to speeding transactionsand reducing paperwork.

Electronic data interchange (EDI) is a

standardized data-transmittal format forcomputerized communications betweenorganizations.

Advanced shipping notice (ASN) is a shippingnotice delivered directly from vendor to

purchaser.6/22/2013 17


18/24

E-PROCUREMENT

Online Catalogs

Auctions

RFQs When purchasing requirement are nonstandard, time

spent preparing requests for quote (RFQ) and therelated bid package can be substantial.

Real-Time Inventory Tracking

6/22/2013 18


19/24

VENDOR SELECTION

Vendor Evaluation Involves finding potential vendors and determining the

likelihood of their becoming good suppliers.

Vendor Development How integrate the supplier into the system. Include everything from training, to engineering and

production help, to procedures for information transfer.

Negotiations Approaches taken by supply chain personnel to develop

contractual relationships with suppliers.

6/22/2013 19


20/24

Negotiations

Cost-Based Price Model Requires that the supplier open its books to the

purchaser.

The contract price is based on time and materials or on

a fixed cost with an escalation clause to accommodatechanges in the vendors labor and materials cost.

Market-Based Price Model Price is based on a published, auction, or index price.

Competitive Bidding When suppliers are not willing to discuss costs or where

near-perfect markets do not exist, competitive bidding isoften appropriate.

6/22/2013 20


21/24

LOGISTICS MANAGEMENT

Logistics management is an approach thatseeks efficiency of operations through theintegration of all material acquisition,movement, and storage activities.

Distribution Systems Trucking, railroads, airfreight, pipelines, and

waterways.

Third-Party Logistics

Supply chain managers may find that outsourcing

logistics is advantageous in driving down inventoryinvestment and costs while improving deliveryreliability and speed.

Cost of Shipping Alternatives

Logistics, Security, and JIT6/22/2013 21


22/24

MEASURING SUPPLY CHAIN

PERFORMANCE

Supply Chain Performance

Typical Firms Benchmark Firms

Lead time (weeks)

Time spent placing an order

Percent of late deliveries

Percent of rejected material

Number of shortages per year

15

42 minutes

33%

1.5%

400

8

15 minutes

2%

0.0001%

4

6/22/2013 22


23/24

MEASURING SUPPLY CHAIN

PERFORMANCE

Assets Committed to Inventory

The amount of money invested in inventory

(total inventory investment / total assets) X 100

Inventory turnoverCost of goods sold / inventory investment

Weeks of supply

Inventory investment / (Annual of CGS / 52 weeks)

6/22/2013 23


24/24

GOOD LUCK

6/22/2013 24

om week 10 supply chain management

Documents