Chapter 13 Supply chain planning and control

Source: Tibbett and Britten

Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007

Supply chain planning and control

Supply chain planning and control The market requires … specified time, quantity and quality of products and services The operation supplies … the coordinated delivery of products and services from the supply chain

Operations strategy Operations management

Design

Improvement

Planning and control

Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007

Operations Management 5th Edition © Nigel Slack. Chambers and Johnston.What is supply chain management? ‘Supply chain management is the management of the interconnection of organizations that relate to each other through upstream and downstream linkages between the processes that produce value to the ultimate consumer in the form of products and services.’ Slack. Stuart Chambers. and Robert Johnston 2007 .

and Robert Johnston 2007 . Chambers and Johnston. Operations Management 5th Edition © Nigel Slack.Supply chain management is concerned with managing the flow of materials and information between a string of operations that form the strands or ‘chains’ of a supply network Flow between processes Flow between processes Flow between processes Flow between processes Supply network management concerns flow between operations Flow between processes Supply chain management concerns flow between a string of operations Flow between processes Flow between processes Slack. Stuart Chambers.

Stuart Chambers. Operations Management 5th Edition © Nigel Slack. and Robert Johnston 2007 .Supply chain management is concerned with the flow of information as well as the flow of products and services ‘Upstream’ flow of customer •Long-term plans and requirements •Market research information •Individual orders •Payment •Potential new products and services Flow between processes Consumer requirements Flow between processes Flow between processes •Products and services •New products and services •Delivery information •Payment request / Credit ‘Downstream’ flow of products and services for customer fulfilment Slack. Chambers and Johnston.

Chambers and Johnston. Stuart Chambers.Second-tier supplier First-tier supplier First-tier customer Second-tier customer End customer Supply side Purchasing and supply management Information flow Physical flow Demand side Physical distribution management Logistics Materials management Supply chain management Slack. and Robert Johnston 2007 . Operations Management 5th Edition © Nigel Slack.

Chambers and Johnston.Taking a customer perspective of supply performance can lead to very different conclusions Customer requirements 100 From the customer’s perspective – 8% satisfaction N 20 Product/ Y service 80 appropriate? Product/ service available? N 10 70 Y Y 20 Customer orders? N 50 From the operations perspective – 90% satisfaction N 40 N Y 1 10 Y 9 N 10 10 Y 1 9 Y 1 8 Y N N Customer satisfaction 8 N 1 8 Y Meets price and delivery requirements? Produced as promised? Received as promised? Slack. Operations Management 5th Edition © Nigel Slack. Stuart Chambers. and Robert Johnston 2007 .

Chambers and Johnston. delivery. Stuart Chambers. etc. and Robert Johnston 2007 . Purchasing function Requests The operation Request for products and services Demand from customers Request for quotations Select supplier(s) Prepare purchase order Deliver Liaison between purchasing and the operation Quotations Produce products and services Order Receive products and services Supply to customers Slack. Operations Management 5th Edition © Nigel Slack. price.The purchasing function brings together the operation and its suppliers Suppliers Prepare quotation for specification.

Operations Management 5th Edition © Nigel Slack. and Robert Johnston 2007 . Chambers and Johnston. Stuart Chambers.Factors for rating alternative suppliers Short-term ability to supply •Range of products or services provided •Quality of products or services •Responsiveness •Dependability of supply •Delivery and volume flexibility •Total cost of being supplied •Ability to supply in the required quantity Longer-term ability to supply •Potential for innovation •Ease of doing business •Willingness to share risk •Long-term commitment to supply •Ability to transfer knowledge as well as products and services •Technical capability •Operations capability •Financial capability •Managerial capability Slack.

and Robert Johnston 2007 . Chambers and Johnston.Weighted supplier selection criteria for the hotel chain Factor Cost performance Quality record Delivery speed promised Delivery speed achieved Dependability record Range provided Innovation capability Total weighted score Weight 10 10 7 7 8 5 4 Supplier A score 8 (8 x 10 = 80) 7 (7 x 10 = 70) 5 (5 x 7 = 35) 4 (4 x 7 = 28) 6 (6 x 8 = 48) 8 (8 x 5 = 40) 6 (6 x 4 = 24) 325 Supplier B score 5 (5 x 10 = 50) 9 (9 x 10 = 90) 5 (5 x 7 = 35) 8 (8 x 7 = 56) 8 (8 x 8 = 64) 5 (5 x 5 = 25) 9 (9 x 4 = 36) 356 Slack. Stuart Chambers. Operations Management 5th Edition © Nigel Slack.

Supply chain relationships Business B2B Relationship: Most common. Chambers and Johnston.com. E-commerce examples: Internet retailers Amazon. etc. Operations Management 5th Edition © Nigel Slack. Business Consumer Slack. etc. business responds E-commerce examples: Some airline ticket operators Priceline.com. etc. all but the last link in the supply chain E-commerce examples: EDI networks Tesco information exchange C2B Relationship: Consumer ‘offers’.com. and Robert Johnston 2007 . Stuart Chambers. C2C Relationship: Trading ‘swap’ and auction transactions E-commerce examples: Specialist ‘collector’ sites eBay. Consumer B2C Relationship: Retail operations Catalogue operations. etc.

Operations Management 5th Edition © Nigel Slack. and Robert Johnston 2007 . Chambers and Johnston. Stuart Chambers.Types of supply relationship Character of internal operations activity Do everything Vertically integrated operation Traditional supply management Do everything important ‘Partnership’ supply management Virtual spot trading Long-term virtual operation Do nothing Transactional – many suppliers Type of inter-firm contact Close – few suppliers Slack.

Stuart Chambers. and Robert Johnston 2007 .Elements of process partnership relationships Trust Long-term expectations Joint learning Closeness of relationship Attitudes Sharing success Multiple points of contact Joint coordination of activities Joint problem solving Dedicated assets Few relationships Information transparency Actions Slack. Chambers and Johnston. Operations Management 5th Edition © Nigel Slack.

Stuart Chambers. Operations Management 5th Edition © Nigel Slack. Chambers and Johnston.The effects of supply chain compression Supply chain time compression Schedule changes impact market faster so can respond to market changes better Forecasts made closer to demand time Defects are detected faster New products and service faster to market so improved forecasts so easier to improve quality so fewer lost sales from delayed launch so reduced risk of obsolescence so less need for safety stocks so revenues are maximized so reduced stockholding costs so reduced wastage costs so revenues are maximized so less discounted sales Improved profitability Slack. and Robert Johnston 2007 .

Operations Management 5th Edition © Nigel Slack. Stock Prodn. Chambers and Johnston.The bullwhip effect Pe ri o Prodn. Stock Prodn. Stock Prodn. Stuart Chambers. and Robert Johnston 2007 De m Third-level supplier Second-level supplier First-level supplier Original equipment manufacturer 100 95 95 95 95 95 an d d . Stock 1 2 3 4 5 6 100 20 180 60 100 95 3 100 100 100 60 60 120 120 90 90 95 95 95 100 60 120 90 95 95 2 100 100 100 80 80 100 100 95 95 95 95 95 100 80 100 95 95 95 1 100 100 100 90 90 95 95 95 95 95 95 95 100 90 95 95 95 95 OEM 100 100 100 95 95 95 95 95 95 95 95 95 MARKET ALL OPERATIONS HOLD ONE PERIOD’S STOCK Slack.

Chambers and Johnston. Stock Prodn. Stock Prodn. Stuart Chambers. Operations Management 5th Edition © Nigel Slack. Stock Prodn.The bullwhip effect Pe ri o Prodn. Stock 1 2 3 4 5 6 100 100 100 100 100 100 100 100 100 100 100 100 100 3 2 1 OEM MARKET ALL OPERATIONS HOLD ONE PERIOD’S STOCK Slack. and Robert Johnston 2007 De m Third-level supplier Second-level supplier First-level supplier Original equipment manufacturer 100 95 105 95 105 95 an d d .

Manufacturer’s orders to its suppliers Orders Orders Wholesaler’s orders to manufacturer Orders Store’s orders to wholesaler Orders Sales from store 0 Time 0 Time 0 Time 0 Time Supplier Manufacturer Wholesaler Retail Store Consumers Slack. Operations Management 5th Edition © Nigel Slack. and Robert Johnston 2007 . Chambers and Johnston. Stuart Chambers.

Chambers and Johnston. Stuart Chambers. Operations Management 5th Edition © Nigel Slack.Supply chain dynamics Supply chains with different end objectives need to be managed in different ways Slack. and Robert Johnston 2007 .

and Robert Johnston 2007 .Matching the supply chain with market requirements Nature of demand Functional products Innovative products Predictable Few changes Low variety Price stable Long lead-times Low margin Unpredictable Many changes High variety Price markdowns Short lead-times High margin Supply chain objectives Responsive Efficient Low throughput times High utilization Deployed inventory Flexible suppliers Lean supply chain management Mismatch Low cost High utilization Minimum inventory Low-cost suppliers Mismatch Agile supply chain management Slack. Stuart Chambers. Chambers and Johnston. Operations Management 5th Edition © Nigel Slack.

Depot Supplier Manufacturer Customer-responsive supply Depot Outlets Depot Products Supplier Manufacturer Information Efficient fast-throughput supply Depot Outlets Slack. Chambers and Johnston. Operations Management 5th Edition © Nigel Slack. Stuart Chambers. and Robert Johnston 2007 Information Products .

Stuart Chambers.Matching supply chain characteristics to the nature of demand Nature of demand Functional products Predictable Few changes Low variety Price stable Long lead-time Low margin Innovative products Unpredictable Many changes High variety Price markdowns Short lead-time High margin Minimum inventory Supply chain objectives High utilization Efficient Low-cost suppliers Low cost Match Mismatch Low throughput time Deployed inventory Flexible suppliers Responsive Fast response Mismatch Match Slack. and Robert Johnston 2007 . Operations Management 5th Edition © Nigel Slack. Chambers and Johnston.

Key Terms Test Supply network The network of supplier and customer operations that have relationships with an operation. all the operations linked together to provide goods and services. Chambers and Johnston. Slack. Supply chain risk A study of the vulnerability of supply chains to disruption. within a supply network several supply chains will cross through an individual operation. Stuart Chambers. Supply chain A linkage or strand of operations that provides goods and services through to end customers. Operations Management 5th Edition © Nigel Slack. and Robert Johnston 2007 .

that forms contracts with suppliers to buy in materials and services. Multi-sourcing The practice of obtaining the same type of product. Stuart Chambers. as opposed to multi-sourcing. Single-sourcing The practice of obtaining all of one type of input product.Key Terms Test Purchasing The organizational function. and Robert Johnston 2007 . component or service from more than one supplier in order to maintain market bargaining power or continuity of supply. component or service from a single supplier. Operations Management 5th Edition © Nigel Slack. often part of the operations function. Slack. Chambers and Johnston.

Chambers and Johnston. Logistics A term in supply chain management broadly analogous to physical distribution management. Stuart Chambers. this may include identifying potential suppliers and auctions as well as the administrative tasks of issuing orders. Physical distribution management Organizing the integrated movement and storage of materials.Key Terms Test E-procurement The use of the Internet to organize purchasing. Slack. and Robert Johnston 2007 . etc. Operations Management 5th Edition © Nigel Slack.

often used in e-retailing but now also used in other types of operation. seen as the ultimate in outsourcing. Slack. Chambers and Johnston.Key Terms Test Order fulfilment All the activities involved in supplying a customer’s order. Stuart Chambers. rather it organizes a network of supplier operations. Merchandising A term used to describe a role in retail operations management that often combines inventory management and purchasing with organizing the layout of the shop floor. if any. Virtual operation An operation that performs few. and Robert Johnston 2007 . Operations Management 5th Edition © Nigel Slack. value-adding activities itself.

Bullwhip effect The tendency of supply chains to amplify relatively small changes at the demand side of a supply chain such that the disruption at the supply end of the chain is much greater. Slack.Key Terms Test Partnership relationship A type of relationship in supply chains that encourages relatively enduring cooperative agreements for the joint accomplishment of business goals. Operations Management 5th Edition © Nigel Slack. Stuart Chambers. and Robert Johnston 2007 . Chambers and Johnston.

Sign up to vote on this title
UsefulNot useful