Professional Documents
Culture Documents
Procurement Chain Management
Procurement Chain Management
Management
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Paper
Manufacturer
P&G or other
Manufacturer
Corn
manufacturer
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Plastic
Producer
Tenneco
Packaging
Wal- Mart
Customer
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Conflicting Objectives
in the Procurement Chain
1. Purchasing wants
Stable volume requirements
Flexible delivery time
Little variation in mix
Large quantities
2. Manufacturing wants
Long run production
High quality
High productivity
Low production cost
Tell me why some of these objectives are
conflicting.
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Conflicting Objectives
in the Procurement Chain
3. Warehousing wants
Low inventory
Reduced transportation costs
Quick replenishment capability
4. Customers want
Short order lead time
High in stock
Enormous variety of products
Low prices
Tell me why some of these objectives are
conflicting.
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Operations
Distribution Service
procurement Strategy
Supplier
Strategy
Operations
Strategy
Logistics
Strategy
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Demand uncertainty
(customer-induced)
Usually products that are less mature (electronics,
computers) have greater demand uncertainty (unlike
Salt or milk).
Forecasting demand for such products is very difficult
and usually not very accurate.
With forecasting difficulties, matching demand against
product and services supply is difficult.
For uncertain demand products, prices are not steady
and varies depending on demand levels.
At the same time, a firm could earn greater margin
from uncertain demand products.
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Where do we compromise?
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Low
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High
Low
Cost
Responsive
Primary goal
Modularity to allow
postponement
Pricing strategy
Lower margins
Higher margins
Mfg strategy
High utilization
Capacity flexibility
Inventory strategy
Minimize inventory
Buffer inventory
Transportation strategy
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