LOGISTICS AND SUPPLY CHAIN MANAGEMENT

M1: SUPPLY CHAIN MANAGEMENT Operations Elements

Demand Management
SUPPLY CHAIN MANAGEMENT  Matching demand to available capacity.
 The planning and management of all activities involved in sourcing and Material Requirements Planning (MRP)
procurement, conversion and all logistics management activities.  Software system for managing inventory and linked throughout the
 It includes coordination and collaboration with channel partners, organization.
which can be suppliers, intermediaries, third-party service providers, Enterprise Resource Planning (ERP)
and customers  Provide real-time sales data, inventory, and production information to
all business units.
The Importance of Supply Chain Management Inventory Visibility
 To build relationships with suppliers, customers, and fourth-party  Used to back up the supply chain reducing the likelihood of stockouts
logistics provider (4PL). and excess inventories.
 4PL Lean Production System
 A company hired to manage all of a firm’s logistics and supply chain  Just-in-time
management capabilities.  Results in faster delivery times, lower inventory levels, and better
 To address the “Bullwhip Effect” which is a supply chain forecasting, quality.
safety stock, and production problem. Six Sigma Quality
 To effectively implement the supply chain management concept called  A TQM strategy to ensure continued quality compliance among
Collaborative Planning, Forecasting and Replenishment or CPFR. suppliers and with internal production facilities.
Important Elements of Supply Chain Management Logistics Elements
 Supply Customer Relationship Management
 Operations  Strategies regarding how to meet delivery due dates
 Logistics Distribution Network
 Integration  A method of ensuring successful product delivery
Supplier Management Perfect Order Fulfillment
 Means encouraging or helping the firm’s suppliers to perform in some  Orders arriving on time, complete and damage free.
desired manner which includes assessing supplier’s current capabilities Integration Elements
and then deciding if and how they need to improve them. Process Integration
Supplier Evaluation  Processes in a supply chain are said to be integrated when members of
 Determining the current capabilities of suppliers. the supply chain work together to make purchasing inventory,
Supplier Certification production, quality, and logistics decisions.
 Company designed or administered recognition program or they can
be internationally recognized or standardized programs like ISO 9000. Supply Chain Performance
Supplier Certification  Can be utilized among supply chains to help firms keep track of their
 Allows buyers to assume the supplier will meet certain product quality supply chain management efforts.
and service requirements.
Strategic Partnerships Current Trends in Supply Chain Management
 Trading partner relationships in terms of long - term, higher-volume Expanding and Contracting the Supply Chain
sales.  Right shoring is the combination of on-shore, near-shore, or far-shore
operations into a single, flexible, low-cost approach to Supply Chain
Ethical and Sustainable Sourcing Management.
 Purchasing from suppliers that are governed by environmental Increasing Supply Chain Responsiveness
sustainability and social and ethical practices.  Firms must re-evaluate their Supply Chain relationships.
The Greening of Supply Chain
 Sustainable Supply Chain
 Issue on Greenwashing or the attempt to make environmental claims
for products or services that are exaggerated or misleading.
M2: PURCHASING MANAGEMENT
Purchasing
- An act of obtaining merchandise, capital equipment, raw materials,
services or maintenance repair and operating (MRO) supplies in exchange
for money or its equivalent.
Procurement
- Frequently used in place of purchasing, and typically includes the added
activities of specifications, development, expediting, supplier quality control
and some logistics activities.
THE ROLE OF SUPPLY MANAGEMENT IN ORGANIZATIONS
1. To ensure uninterrupted flows of raw materials at the lowest total cost
2. To improve quality of the finished goods produced
3. To maximize customer satisfaction
THE FINANCIAL SIGNIFICANCE OF SUPPLY MANAGEMENT
1. PROFIT-LEVERAGE EFFECT
- measures the impact of a change in purchase spend on a firm’s profit
before taxes, assuming gross sales and other expenses remain unchanged.
Purchasing Spend is the money a firm spends on goods and services.
2. RETURN ON ASSETS (ROA)
- is a financial ratio of a firm’s net income in relation to its total assets
- the ratio is also referred to as Return on Investment (ROI)
3. INVENTORY TURNOVER EFFECT
- inventory turnover shows how many times a firm’s inventory is
utilized and replaced over an accounting period such as a year
THE PURCHASING PROCESS
- Must have adequate operational or internal control to prevent abuse of
purchasing funds.
THE MANUAL PURCHASING SYSTEM (OR PAPER-BASED SYSTEM)
1.
 Starts when the material user initiates a request for a material by
issuing a Material Requisition (MR) in duplicate.
 A Purchase Requisition (PR), instead of a Material Requisition (MR), is
used in some firms
 In a market requisition(MR) ,the product, quantity and delivery due
date are clearly described. The number of duplicates issued depends
on the internal accounting control system of the organization.
 The issuer retains a copy and the warehouse receives the original plus
the duplicate.
 The duplicate accompanies the material as it moves from the
warehouse to the user.
 A travelling requisition is used for materials and standard parts that
are requested on a recurring basis
 Pre-printed in the travelling requisition are the product description
and other pertinent information, such as delivery lead time and lot
size.
 If the requested material is available in the warehouse, the material is
issued to the user without going through the purchasing department
or otherwise, the requisition is assigned to a Buyer who is responsible
for the material
 Planned order releases from the Material Requirements Planning
(MRP) system or a Bill of Material (BOM) can also be used to release
requisitions or to place orders directly with the suppliers
2.
 Planned order releases is suitable for firms that use the same
components to make standard goods over a relatively long period of
time.
 Next Step is the Request for Quotation(RFQ) and the Request for
Proposal (RFP)
 If the material is not available in the warehouse, the Material
Requisition is routed to the purchasing department.
 If there is no current supplier for the items, the buyer must identify a
pool of qualified suppliers and issue a Request for Quotation (RFQ)
 A Request for Proposal (RFP) may be issued instead, for a complicated
and highly technical component part, especially if the complete
specification of the part is unknown.
 RFP allows suppliers to propose new material and technology.
3.
 The Purchase Order (PO)
 When a suitable supplier is identified, or a qualified supplier is on file,
the buyer issues a Purchase Order (PO) in duplicate to the selected
supplier
 The features of the PO include the terms and conditions of the
purchase
 The PO is the buyer’s offer and becomes a legally binding contract
when accepted by the supplier
4.
 Once an order is accepted, purchasing personnel need to ensure on-
time delivery of the purchased material by using a follow-up or by
Expediting
 Follow up - is considered a proactive approach to prevent late delivery,
whereas expediting is considered a reactive approach that is used to
speed up an overdue shipment.
E-PROCUREMENT
1. Enter a purchase request and other pertinent information such as
quantity and date needed into the purchase requisition module
 The material user may recommend suppliers or potential sources for
the requisition
2. The purchase requisition is approved and transmitted electronically to a
buyer at the purchasing department
 The buyer reviews the purchase requisition for accuracy and
appropriate approval level and determine the value of the requisition
 There will be specific amount to be set to prepare an electronic PO
 If the amount of purchase is higher than the amount set, a formal Standardization and Simplification of materials and components
request for quotation is needed STANDARDIZATION - The process of making an operation conform to a
 Or if the amount exceeds a specified amount of order, a supplier must standard which guide the creation of good or service based on the
be chosen by means of a formal bidding process consensus of all relevant parties in the industry.
 Bidding time and place are opened publicly SIMPLIFICATION - Refers to a reduction of the number of components,
 The purchase is awarded to the lowest responsible bidder whose bid supplies, or standard materials used in the product or process.
conforms to all requirements of the solicitation
 Then an electronic PO (or formal contract for purchase of services) is
prepared and transmitted or mailed to a selected supplier

ADVANTAGES OF E-PROCUREMENT
TIME SAVINGS
COST SAVINGS
ACCURACY
REAL TIME
MOBILITY
TRACKABILITY
MANAGEMENT
BENEFITS TO THE SUPPLIER

SMALL VALUE PURCHASE ORDERS

- A manual purchasing system, which are supposed to be minimized and
make use of the following alternatives instead:
1. Procurement Credit Card
 Are credit cards with a predetermined credit limit, depending on the
organization
 The card allows the material user to purchase the material directly
from the supplier, without going through purchasing
 It can also be used for other purposes like meals, lodging and other
travelling expenses
2. Blanket or Open End P.O.
 A blanket PO covers a variety of items and is negotiated for repeated
supply or a fixed time period, such as quarterly or yearly
 OPEN- END P.O. - is where there is an additional item and expiration
dates that can be negotiated
 BLANKET OR OPEN-END P.O.- are suitable for buying MRO supplies

Blank Check P.O. - Is a special purchase order with a signed blank check
attached, usually at the bottom of the purchase order.
Stockless Buying or System Contracting - An extension of the blanket P.O. If
requires the supplier to maintain a minimum inventory level to ensure that
required items are readily available for the buyer.
Petty Cash - Is a small cash reserve maintained by a mid-level manager or
clerk.