Operations

Management
Supply-Chain Management
Week 15

1
 10 Keputusan Kritis MO
♦ Desain Produk dan Jasa"""""" Ch. 5
♦ Manajemen Mutu/Kualitas""""" Ch. 6, 6S
♦ Desain Proses dan Kapasitas""" Ch. 7, 7S
♦ Lokasi """""."""""""" Ch. 8
♦ Desain Tata Letak"""""""" Ch. 9
♦ Pengukuran Kerja, Desain Pekerjaan Ch. 10, 10S
♦ Manajemen Supply-chain Ch. 11,11s
♦ Manajemen Persediaan (Inventory)" Ch. 12, 14, 16
♦ Perencanaan Agregat dan Ch. 3, 13, 15
Penjadwalan
Ch. 17
♦ Pemeliharaan
""""..""""""". 13-2 2
 Siklus Manufaktur
Perancangan Perancangan
Pemasaran
Produk Process

Perancangan
Metoda Kerja,
Pengendalian Perencanaan
Waktu Standar,
Persediaan Produksi dan Perbaikan
Produktivitas

Pemasok
Konsumen

Penyimpanan
Proses
Penerimaan
Pembuatan
Pengiriman

Pengendalian Pengendalian Pengendalian Pengendalian

Kualitas Produksi Proses Peralatan

3
 Outline
• GLOBAL COMPANY PROFILE:
VOLKSWAGEN
• THE STRATEGIC IMPORTANCE OF
THE SUPPLY-CHAIN
– Global Supply-Chain Issues
• SUPPLY-CHAIN ECONOMICS
– Make-or-Buy Decisions
– Outsourcing

4
 Outline - Continued

• SUPPLY-CHAIN STRATEGIES
– Many Suppliers
– Few Suppliers
– Vertical Integration
– Keiretsu Networks
– Virtual Companies
• Managing the Supply Chain
– Issues In an Integrated Supply Chain
– Opportunities in an Integrated Supply
Chain 5
 Outline - Continued
• INTERNET PURCHASING
• VENDOR SELECTION
– Vendor Evaluation
– Vendor Development
– Negotiations
• MATERIALS MANAGEMENT
• BENCHMARKING SUPPLY-CHAIN
MANAGEMENT

6
 Learning Objectives
When you complete this chapter, you
should be able to :
Identify or Define:
– Supply-chain management
– Purchasing
– Outsourcing
– E-procurement
– Materials management
– Keiretsu
– Virtual companies

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 Learning Objectives
When you complete this chapter, you
should be able to :
Describe or Explain:
– Supply-Chain Strategies
– Purchasing strategies
– Approaches to negotiations

8
 Supply-Chain Management
• Planning, organizing, directing, &
controlling flows of materials
– Begins with raw materials
– Continues through internal operations
– Ends with distribution of finished goods
• Involves everyone in supply-chain
– Example: Your supplier’s supplier
• Objective: Maximize value & lower
waste

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 The Supply-Chain
®

VISA

Material Flow Credit Flow

Supplier Manufacturing Retailer Consumer

Supplier Wholesaler Retailer

Schedules Order Cash

Flow Flow

10
 The Supply Chain
Market research data
Scheduling information
Engineering and design data
Supplier Order flow and cash flow Customer
Ideas and design to
Inventory satisfy end customer
Material flow
Supplier Credit flow

Manufacturer Customer
Inventory Inventory
Supplier

Distributor Customer
Inventory

11
 Material Costs in
Supply-Chain
Wholesale
8% 9%
COGS
Manufacturing
Payroll
31% Material 83%
Other
11% Dir Wages
58% Retail
Other
16% COGS
13%
Payroll
71%
Other

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 Diskusi Kelompok
• Ambil satu organisasi sebagai contoh (Super market, industri,
dll)
• Gambarkan struktur rantai pasok yang terlibat di dalamnya.
Struktur itu harus mampu memperlihatkan:
– Arus material, Arus uang, Arus informasi
• Bagaimana strategi rantai pasok yang diterapkan pada
organisasi itu?
– Cost , fast respons, atau differensias? (jelaskan)
– Jumlah supplier: Many suppliers, Few suppliers, Keiretsu network,
Vertical integration, Virtual company
• Bagaimana kemungkinan integrasi yang mungkin dilakukan?
• Bagaimana cara mengukur performansi sistem rantai pasok
tersebut?

13
 Supply-Chain Support for
Overall Strategy
Low Cost Response Differentiation
Supplier’s Supply demand Respond Share market
goal at lowest quickly to research; jointly
possible cost changing develop
requirements products and
and demand to options
minimize
stockouts

Primary Select Select Select primarily

Selection primarily for primarily for for product
Criteria cost capacity, development
speed, and skills
flexibility

14
 Supply-Chain Support for
Overall Strategy - continued
Low Cost Response Differentiation
Process Maintain high Invest in Modular
Characteristics average excess processes that
utilization capacity and lend themselves
flexible to mass
processes customization

Inventory Minimize Develop Minimize

Characteristics inventory responsive inventory in the
throughout the system, with chain to avoid
chain to hold buffer stocks obsolescence
down costs positioned to
ensure supply

15
 Supply-Chain Support for
Overall Strategy - continued
Low Cost Response Differentiation
Lead-time Shorten lead- Invest Invest
Characteristics time as long as it aggressively to aggressively to
does not reduce reduce
increase costs production development
lead-time lead-time

Product-design Maximize Use product Use modular

Characteristics performance designs that design to
and minimize lead to low set- postpone
cost up time and product
rapid production differentiation for
ramp-up as long as
possible
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 Global Supply-Chain Issues
Supply chains in a global environment must
be:
– Flexible enough to react to sudden changes in
parts availability, distribution, or shipping
channels, import duties, and currency rates
– Able to use the latest computer and transmission
technologies to schedule and manage the
shipment of parts in and finished products out
– Staffed with local specialists to handle duties,
trade, freight, customs and political issues

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 Importance of Purchasing
• Major cost center
• Affects quality of final product
• Aids strategy of low cost, response,
and differentiation

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Supply-Chain Costs as a
Percent of Sales
Industry Percent of Sales
• All industry • 52%
• Automobile • 67%
• Food • 60%
• Lumber • 61%
• Paper • 55%
• Petroleum • 79%
• Transportation • 62%

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Dollars of Additional Sales Needed
to Equal 1$ Saved Through
Purchasing
Percent of Sales Spent in the Supply-Chain
Percent 30% 40% 50% 60% 70% 80% 90%
Net
Profit of
Firm
2 $2.78 $3.23 $3.85 $4.76 $6.25 $9.09 $16.67
4 $2.70 $3.13 $3.70 $4.55 $5.88 $8.33 $14.29
6 $2.63 $3.03 $3.57 $4.35 $5.56 $7.69 $12.50
8 $2.56 $2.94 $3.45 $4.17 $5.26 $7.14 $11.11
10 $2.50 $2.86 $3.33 $4.00 $5.00 $6.67 $10.00

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 Objectives of the Purchasing
Function
• Help identify the products and services
that can be best obtained externally;
and
• Develop, evaluate, and determine the
best supplier, price, and delivery for
those products and services

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The Purchasing Focus
Materials Management Supply Management
-High transportation cost -High costs
-High inventory costs -Scarcity: national or
international
Purchasing
Management
-Commodity items
-Standard products

Source Management
-Unique items
-Custom-made items
-High technology items

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 Traditional Purchasing
Process
Customer Supplier
Purchase Mail Order
Order Processing
Receiving
Receivables Dock
Report Packing
List

Accounts Mail Invoice

Payable

Check Mail Accounts

Reconcile
Receivable

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 Purchasing Techniques
• Drop shipping and special packaging
• Blanket orders
• Invoiceless purchasing
• Electronic ordering and funds transfer
• Electronic data interchange (EDI)
• Stockless purchasing
• Standardization
• Outsourcing

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 Make/Buy Considerations
Reasons for Making
1. Maintain core
competencies and protect
personnel from layoff
2. Lower production cost
3. Unsuitable suppliers
4. Assure adequate supply
5. Utilize surplus labor and
make a marginal
contribution
Reasons for Buying
1. Frees management to
deal with its primary
business
2. Lower acquisition cost
3. Preserve supplier
commitment
4. Obtain technical or
management ability
5. Inadequate capacity
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 Make/Buy Considerations -
Continued
Reasons for Making
6. Obtain desired quantity
7. Remove supplier collusion
8. Obtain a unique item that
would entail a prohibitive
commitment from the
supplier
9. Protect proprietary design
or quality
10. Increase or maintain size
of company
Reasons for Buying
6. Reduce inventory costs
7. Ensure flexibility and
alternate source of supply
8. Inadequate managerial or
technical resources
9. Reciprocity
10. Item is protected by
patent or trade secret
26
 Supply-Chain Strategies
• Plans to help achieve company mission
• Affect long-term competitive position
• Strategic options
– Many suppliers
– Few suppliers
– Keiretsu network
– Vertical integration
Plan
– Virtual company
© 1995 Corel Corp.

27
 Supply-Chain Strategies
• Negotiate with many suppliers; play one supplier
against another
• Develop long-term “partnering” arrangements with a
few suppliers who will work with you to satisfy the
end customer
• Vertically integrate; buy the actual supplier
• Keiretsu - have your suppliers become part of a
company coalition
• Create a virtual company that uses suppliers on an
as-needed basis.

28
 Many Suppliers Strategy
• Many sources per item
• Adversarial relationship
• Short-term
• Little openness
• Negotiated, sporadic PO’s
• High prices
• Infrequent, large lots
© 1995 Corel Corp.

• Delivery to receiving dock

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 Few Suppliers Strategy
• 1 or few sources per item
• Partnership (JIT)
• Long-term, stable
• On-site audits & visits
• Exclusive contracts
• Low prices (large orders) © 1995
Corel
Corp.

• Frequent, small lots

• Delivery to point of use

30
 Tactics for Close Supplier
Relationships
Tactic Results
• Reduce total number of • Average 20% reduction in 5
suppliers years
• Certify suppliers
• Almost 40% of all companies
surveyed were themselves
• Ask for JIT delivery from currently certified
key suppliers • About 60% ask for this
• Involve key suppliers in new
product design • About 54% do this
• Develop software linkages
to suppliers • Almost 80% claim to do this
About 50% claim this

31
 Vertical Integration Strategy
• Ability to produce Raw Material
goods previously (Suppliers)
purchased Backward
– Setup operations Integration
– Buy supplier
Current
• Make-buy issue Transformation
• Major financial Forward
commitment Integration
• Hard to do all things Finished Goods
well (Customers)

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Forms of Vertical Integration
Iron Ore Silicon Farming Raw Material
(Suppliers)

Steel Flour Milling Backward

Integration

Integrated Current
Automobiles
Circuits Transformation

Distribution Forward
Circuit Boards
System Integration

Computers
Finished Goods
Dealers Watches Baked Goods
(Customers)
Calculators

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 Vertical Integration Can be
Forward or Backward
Vertical Examples of Vertical
Integration Integration
Raw material Iron ore Silicon Farmi
(suppliers) ng
Backward Integration Steel
Current Automobi Integrated Flour
Transformation les Circuits Milling
Forward Integration Distributi Circuit boards
on
System
Finished goods Dealers Computers, Baked
34
(customers) watches, Good
 Keiretsu Network Strategy

• Japanese word for ‘affiliated chain’

• System of mutual alliances and
cross-ownership
– Company stock is held by allied firms
• Lowers need for short-term profits
• Links manufacturers, suppliers,
distributors, & lenders
– ‘Partnerships’ extend across entire supply
chain
35
 Virtual Companies
• Companies that rely on a variety of
supplier relationships to provide services
on demand.
• Also known as hollow corporations, or
network corporations

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 Virtual Company Strategy
• Network of independent companies
– Linked by technology
• PC’s, faxes, Internet etc.
– Each contributes core competencies
– Typically provide services
• Payroll, editing, designing
• May be long or short-term
– Usually, only until opportunity is met

© 1995 Corel Corp.

37
 Managing the Supply-Chain
• Options:
– Postponement
– Channel assembly
– Drop shipping
– Blanket orders
– Invoiceless purchasing
– Electronic ordering and funds transfer
– Stockless purchasing
– Standardization
– Internet purchasing (e-procurement)

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 Managing the Supply-Chain -
Other Options
• Establishing lines of credit for suppliers
• Reducing bank “float”
• Coordinating production and shipping
schedules with suppliers and distributors
• Sharing market research
• Making optimal use of warehouse space

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 Successful Supply-Chain
Management Requires:
• A mutual agreement on goals
• Trust
• Compatible organizational cultures

40
Issues in an Integrated Supply-
Chain
• Local optimization
• Incentives
• Large lots

41
 Opportunities in an Integrated
Supply-Chain
• Generation of accurate “pull” data
• Reduction of lot size
• Single stage control of replenishment

42
 Vendor Managed Inventory
(VMI)
• Postponement – keeps product generic as long as possible
• Channel Assembly – sends to distributor individual
components and modules rather than finished goods
• Drop Shipping and Special Packaging – supplier will ship to
end consumer rather than to seller
• Blanket Orders – a long-term purchase commitment to a
supplier for items that are to be delivered against short-term
releases to ship
• Standardization – reducing the number of variations in
materials and components
• Electronic Ordering and Funds Transfer – “paperless”
ordering and 100% material acceptance, payment by “wire”

43
 Vendor Selection Steps

• Vendor evaluation
– Identifying & selecting potential vendors
• Vendor development
– Integrating buyer & supplier
• Example: Electronic data exchange
• Negotiations
– Results in contract
– Specifies period of agreement, price,
delivery terms etc.
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 Supplier Selection Criteria

• Company • Service
– Financial stability – Delivery on time
– Management – Condition on
– Location arrival
• Product – Technical support
– Quality – Training
– Price

45
Vendor Selection Rating Form

46
 Negotiation Strategies
• Three types:
– cost-based price model - supplier opens
its books to purchaser; price based upon
fixed cost plus escalation clause for
materials and labor
– market-based price model - published
price or index
– competitive bidding - potential suppliers
bid for contract

47
 Logistics Management
• Integrates all materials functions
– Purchasing
– Inventory management
– Production control
– Inbound traffic
– Warehousing and stores
– Incoming quality control
• Objective: Efficient, low cost
operations
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Goods Movement Options
• Trucking
• Railways
• Airfreight
• Waterways
• Pipelines

49
 Supply-Chain Performance
Compared
Benchmark
Typical Firms Firms
Administrative costs as 3.3% 0.8%
percent of purchases
Lead time (weeks) 15 8
Time spent in placing order 42 minutes 15 minutes
Percentage of late deliveries 33% 2%
Percentage of rejected material 1.5% .0001%
Number of shortages per year 400 4

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