OPERATIONS MANAGEMENT

(TOTAL QUALITY MANAGEMENT)

 Logistics
&
Procurement
 LEARNING OBJECTIVES
• Explain the term supply chain and logistics
• Discuss procurement in terms of purchasing
interfaces and the purchasing cycle
• Discuss the logistics aspects of supply chain
management
• Discuss the issues involved in managing returns

OM-TQM 3
 Procurement
• The purchasing department of an organization is responsible
for obtaining the materials, parts, supplies, and services
needed to produce a product or provide a service.

• The importance of purchasing is more than just the cost of

goods purchased; other important factors include the quality
of goods and services and the timing of goods and services,
both of which can have a significant impact on operations.

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 Purchasing Interfaces
Purchasing has interfaces with a number of other functional areas, as well as
with outside suppliers. It is the connecting link between the organization and
its suppliers.

• Operations - constitute the main source of requests for purchased

materials. Close cooperation between these units is vital if quality,
quantity, and delivery goals are to be met. Ex. Cancellation, change in
specs, changes in quantity, or delivery period.

• Accounting - is responsible for handling payments to suppliers and must

be notified promptly. In many firms, data processing is handled by this
department , which keeps inventory records, checks invoices, etc.

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 Purchasing Interfaces
• Design and engineering - usually prepare materials specifications.
Because of its contacts with suppliers, purchasing is often in the position
to pass details about new products and material improvements to design
personnel.

• Receiving – checks incoming shipments of purchased items to determine

whether quantity, quality, and timing objectives have been met, and it
moves the goods to storage.

• Suppliers - or vendors work closely with purchasing to learn what

materials will be purchased and what kinds of specifications will be
required in terms of quality, quantity, and deliveries.

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 Purchasing Interfaces

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 The Purchasing Cycle
The Purchasing Cycle begins with a request from
within the organization to purchase materials,
equipment, supplies, or other items from
outside the organization, and the cycle ends
when the purchasing department has been
notified that a shipment has been received in
satisfactory conditions.

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 MAIN STEPS
1. Receives the requisition – the requisition includes (a) description of the
material or item (b) quantity and quality (c) delivery dates (d) who is
requesting the purchase.
2. Selects a supplier – identify suppliers who have the capability of supplying
the goods. If no suppliers are currently listed in the files, new ones must be
sought.
3. Places the order with a vendor
4. Monitoring orders – routine follow-up on orders, especially those with
lengthy lead times to project potential delays. Communicate changes in
quantity and delivery needs to supplier to allow them time to change plans.
5. Receiving orders – check incoming shipments for quality and quantity. Notify
purchasing, the accounting, and the operating units that requested the
goods. If goods are not satisfactory, they may have to be returned to supplier
or subjected to further inspection.

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 Materials Requisition Form

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 Logistics
• Logistics refers to the movement of materials, service, cash
and information in a supply chain (forward and reverse
flow). Materials include all of the physical items used in a
production process. Logistics includes movement within a
facility, overseeing incoming and outgoing shipments of goods
and materials, and information flow throughout the supply
chain.
• Logistics management includes management of inbound and
outbound transportation, material handling, warehousing,
inventory, order fulfillment and distribution, third-party
logistics, and reverse logistics (the return of goods from
customers)

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 Movement Within a Facility

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 Movement within a Facility
The illustration shows the many steps where materials
move within a manufacturing facility:
1. From incoming vehicles to receiving
2. From receiving to storage
3. From storage to the point of use (work center)
4. From one work center to the next or to temporary
storage
5. From the last operation to final storage
6. From storage to packaging/shipping
7. From shipping to outgoing vehicles

OM-TQM 13
 Managing Returns
Products are returned to companies or third-party handlers for a
variety of reasons, and in a variety of conditions. Among them
are the following:

• Defective products
• Recalled products
• Obsolete products
• Unsold products returned from retailers
• Parts replaced in the field
• Items for recycling
• Waste

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 Managing Returns
Reverse logistics is the process of physically transporting
returned items.

Two key elements for managing returns are gatekeeping and

avoidance.
Gatekeeping oversees the acceptance of returned goods with
the intent of reducing the cost of returns by screening at the
point of entry.
Avoidance refers to finding ways to minimize the number of
items that are returned. It can involve product design and
quality assurance.

OM-TQM 15
 3-PL
Third party logistics (3-PL) is the term used to describe the
outsourcing of logistics management. According to the
website of the Council of Supply Chain Management
Professionals , the legal definition of a 3PL is “A person who
solely receives, holds, or otherwise transports a consumer
product in the ordinary course of business but who does
not take title to the product.”
For example, some companies use third-party providers just
for shipping, others include warehousing and distribution.

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 THANK
YOU!
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