MODULE 6:

Supply and Value Chain

June 7, 2019
Tagbilaran City
Batch 4
Hello! My name is Bob Cabaero.
What’s yours?
 Operations Management
u Operations management: The management of the efficient
transformation of inputs into outputs to effectively satisfy customers.
u The active role of operations:
– Inputs become Outputs after some Transformation (Process or Operation)
– Food processing example:

Inputs Transformation Outputs

Energy, Raw vegetables Cleaning Clean vegetables
Energy, Metal sheets Cutting/Rolling/Welding Cans
Energy, Vegetables Cutting/Chopping Cut vegetables
Energy, Water, Vegetables Cooking Boiled vegetables

Energy, Cans, Boiled vegetables Placing Can food

 Module 6: JUNE 7, 2019
TAGBILARAN CITY

Supply and Importance of Supply and

Value Chain
Value Chain • Integrated Supply Chain
• Supply Chain Goals
• Purchasing, Supplier
Relations and Procurement
Bob Cabaero Management
Business Consultant
Executive Coach
KMME Mentor • Supply Chain Best
Practices
RBC Business
Consultancy Services • Value Chain as a Strategy
Supply Chain Management
• Supply chain management is a set of
approaches utilized to efficiently integrate
suppliers, manufacturers, warehouses, and
stores, so that merchandise is produced and
distributed at the right quantities, to the
right locations, and at the right time, in order
to minimize system wide costs while
satisfying service level requirements.
 n
f
e
r
r
e
e
d
Functional scope for Supply Management is
d
r
r
based on four pillars.
O
O

Demand &
Replenishment
Purchasing

Logistics
Customer
Operations
Service
 Supply Chain

Consumer Purchase Information

Suppliers Factory Warehouse Customer Store

Consumer (CRM)

Product Flow

Customer Service
Logistics Operations
Demand & Replenishment
Magnitude of Supply Chain Costs
Cost Elements of a Typical Trade Book
Magnitude of SC Costs
Example: The Apparel Industry

Cost per Percent

Shirt Saving

Manufacturer Distributor Retailer Customer $52.72 0%

Manufacturer Retailer Customer $41.34 28%

Distributor

$20.45 62%
Manufacturer Distributor Retailer Customer
Key Components of Supply Chain Cost

 Material costs including inbound

transport
 Conversion including wastage
 Inventories (carrying cost)
 Distribution cost (Warehouse and
Transportation)
 Duties for imported materials/products
 Write-off and damages
 Management, IT, Administrative, and
other Costs
 STRATEGIES
Strive for speed and flexibility in every
thing - faster information flows, reduced
cycle times, flexible manufacturing,
minimized inventories & integrated inter-
company supply chain.
Select strategic partners to guarantee
value sourcing of materials and services
Use the most efficient and effective
channels of distribution (route-to-
market strategy)
 STRATEGIES
Focus selectively on aggressively
developing and managing the most
profitable customers
Segment customers based on the
service needs of distinct groups and
adapt the supply chain to serve these
segments profitably
 CUSTOMER CATEGORY
LOW MARGIN HIGH MARGIN
CATEGORY 2 – HIGH VOLUME / CATEGORY 1 – HIGH VOLUME /
LOW MARGIN HIGH MARGIN

HIGH VOLUME GOOD BEST

CATEGORY 4 – LOW VOLUME / CATEGORY 3 – LOW VOLUME /

LOW MARGIN HIGH MARGIN

LOW VOLUME BELOW AVERAGE ???? BETTER

LUNCH BREAK
 Standards of Buying
 To buy on the basis of value, recognizing that value
represents that combination of quality, service, and
price.
 To respect obligation that neither, explicitly nor
implicitly, promise a performance which one cannot
reasonably fulfill
 To be courteous and considerate to those whom we
deal with.
 To avoid statements injurious to a legitimate
competitor, and never divulge information acquired in
confidence.
 Standards of Buying
 To recognize that character is the greatest
asset in commerce, and to give it a major
consideration in the selection of sources of
supply.
 To adjust claims and settle disputes on the
basis of facts, to submit the facts to arbitration
if a mutual agreement cannot be reached, to
abide by the decision, and to resort to legal
remedies only as last resort.
 Inventory Carrying or Holding Costs
(Approximate Ranges)
Cost as a
Category % of Inventory Value
Warehousing costs (building rent, depreciation, operating 6%
cost, taxes, insurance) (3 - 10%)

Material handling costs (equipment, lease or depreciation, 3%

power, operating cost)
(1 - 3.5%)
Labor cost from extra handling
3%
(3 - 5%)
Cost of money (borrowing costs, taxes, and insurance on
inventory) 10%
(6 - 24%)
Obsolescence, damages, pilferages and other risks
3%
Overall carrying cost (2 - 5%)
25 %
 ABC INVENTORY CLASSIFICATION

Class parts are the “significant few”

A
60-70% of your companies total
purchasing spend but only around
10-15% of the total number of items
in stock. Critical items that need
tight control

Valuable Class A parts are reviewed frequently

because inventory cover is low due to their high
individual part value
20
 A-B-C Classification
 “A” Class parts will have the lowest
level of inventory cover
 These tend to be important parts
 Very tight controls need to be in place
A
 Parts are reviewed very regularly
 Ensure that potential stock-outs are
avoided

For “A” class parts we maintain high

service levels by allocating more effort
and better systems, rather than high
inventory levels
21
 A-B-C Classification

Class parts are the “trivial many” 10-15%

of your companies total purchasing spend
but more than 60-70% of the total number

C
of items in stock. Higher volume deliveries
reduce administrative costs. Often stock
control is limited to “bin” systems.

22
 A-B-C Classification
 “C” Class parts are the opposite of
“A” Class parts
 Trivial parts
 High levels of inventory cover
 Enables reductions to be made to
the time spent managing these
parts
 Large delivery quantities

23
 A-B-C Classification
A Class “B” parts fall between
“A” and “C” class parts in
terms of both inventory levels
and effort/systems used to

B
manage the parts. They
usually range from 20-30% of
both expenditure and the
number of items in stock.

C
24
 A B C CLASSIFICATION
MATERIALS MATRIX

% ANNUAL % TOTAL REVIEW

ITEM STOCK DELIVERY
INVENTORY INVENTORY AND
GROUP LEVEL SCHEDULE
VALUE ITEMS CONTROL

MOST
MOST
A 60% - 70% 10% - 20% LOW TIGHT &
FREQUENT
FREQUENT

LESS
LESS
B 20% - 30% 20% - 30% MEDIUM TIGHT &
FREQUENT
FREQUENT

LEAST
LEAST
C 10% - 20% 60% - 70% HIGH TIGHT &
FREQUENT
FREQUENT
 How SC Management can affect the bottom line

Sales Increase in Sales through:

 Time to Market Faster
 Better Quality
Bottom line Profit  Price Flexibility
 Innovation and design
= Sales Revenue –  Improve Customer Service
 Custom fulfillment flexibility
Total Cost  Responsiveness – shorter cycle
&lead time

Maximizing Lower Cost Achieved through:

profitability by driving  Purchase Cost Reduction
 Process Cost Reduction
revenue up and  Better Asset Utilization
lowering cost or  Better Product Designs
eliminating completely  Minimizing Down Time
non-value added cost  Lowering Risk
 Lower Cycle Time Cost
 Lowering Quality Cost
Cost  Lowering Conversion Cost
 Lowering Supply Chain Cost
Seven Fundamental Principles of Supply Chain Management

1. Segment Customers 2. Customise the Logistics 3. Operations From Demand

Based on Service Needs Network
Segment customers based on Customise the logistics network Listen to market signals and
the service needs of to the service requirements and align demand planning,
distinct groups and adapt the profitability of customer ensuring consistent forecasts
supply chain to serve these segments and optimal resource allocation.
segments profitably.
Suppliers Factory Factory Customer Store Consumer
Warehouse Warehouse

4. Differentiate 5. Source 6. Develop Supply 7. Use Supply Chain

Product Closer to Strategically Chain- Wide Spanning Performance
the Customer Technology Strategy Measures
Differentiate product Manage sources of Gauge collective success
and services closer to supply strategically to Support multiple levels in reaching the end-user
the customer to speed reduce the total cost of of decision-making and effectively and efficiently
conversion across the owning materials and give a clear view of the
supply chain services flow of products,
services and
information
 EXECUTIVE COACH
Coaching involves focusing on action, where the
client wants to go. Coaching has its goals set at the
future rather than the past. It’s about “what you
want” and not “why you are like this”.  
Coaching involves improving areas of a client’s life
which the client has determined need strengthening.
Coaching is the quest for results rather than
gaining a deep understanding of the past.
 EXECUTIVE COACH
• “It’s not about the goal. It’s about growing
to become the person that can accomplish
that goal” –Tony Robbins
• “You don’t concentrate on risks. You
concentrate on results. No risk is too great
to prevent the necessary job from getting
done” – Chuck Yeager
• “Don’t start a business. Start a mission and
make it your business”
 EXECUTIVE COACH
METHODOLOGY
YOURSELF • STRENGTHS
Ikigai • WEAKNESSES

YOUR SKILLS
• HABITS
Objectives • HOBBIES
Key Results

YOUR
• MISSION
BUSINESS
• VISION
Profit First
 WHICH IS WHICH?

Traditional
SALES
less
EXPENSES
equals

PROFIT
 WHICH IS WHICH?

Traditional Non-traditional
SALES SALES
less less
EXPENSES
equals PROFIT
PROFIT equals
EXPENSES
 QUESTIONS
AND
ANSWERS

habang libre pa
thanks to dti/go negosyo