Supply Chain

Management
SHAIRA BETHA B. LUCAS
 Supply Chain Management
• Management of the network of suppliers, warehouses, operations,
and retail outlets

Supplier
Supplier
Warehouse
Supplier
Supplier
Supplier
Supplier

Operations Retail
Operations
Outlet
Supplier
Supplier
Supplier
Supplier
Supplier
Supplier
Warehouse
 Figure 16-1
Materials Management
• Management of the purchasing, storage, and movement of
materials during production, and the distribution of finished
goods

Production Distribution
Purchasing Receiving Storage Operations Storage
Figure 16-2
Purchasing Interfaces
Legal

Operations Accounting

Data
Purchasing processing

Design

Receiving
Suppliers
16-
4
 Purchasing Cycle

• Requisition received Legal

• Supplier selected Operations Accounting

• Order is placed Purchasing

Data
processing

• Monitor orders
Design
• Receive orders Receiving
Suppliers
 Value Analysis vs Outsourcing

• Value analysis
• Examination of the function of purchased parts and
materials in an effort to reduce cost and/or improve
performance
• Outsourcing
• Buying goods or services from outside sources rather
than making or providing them in-house
 Outsourcing
• Cost to make vs cost to buy
• Stability of demand
• Quality from suppliers
• Maintaining close control
• Idle capacity available
 Goals of Just-in-Time Purchasing

elimination of unnecessary activities

elimination of in-plant inventory
• exposes problems
elimination of in-transit inventory
• location of supplier
• consignment
quality and reliability improvement
 Characteristics of JIT Purchasing (1 of 2)
Suppliers
• Few suppliers
• Nearby suppliers
• Repeat business with same
suppliers
• Active use of analysis to enable
desirable suppliers to
become/stay price competitive
• Clusters of remote suppliers
• Competitive bidding mostly
limited to new part numbers
Quantities
• Steady output rate(a desirable
prerequisite)
• Frequent deliveries in small lot
quantities
• Long-term contract agreements
• Minimal release paperwork
• Delivery quantities vary from
release to release but fixed for
whole contract term
• Little or no permissible overage or
underage of receipts
 Characteristics of JIT Purchasing (2 of 2)
Quality Shipping

• Minimal product specification • Scheduling of inbound freight

imposed on supplier
• Gain control by use of company-
• Help suppliers to meet quality owned or contract shipping,
requirements contract warehousing, and
trailers for freight
• Close relationships between
consideration/store where
buyers’ and suppliers’ quality
possible – instead of using
assurance people
common carriers
• Suppliers encouraged to use
process control charts instead of
lot sampling inspections
 Determining Prices

• Published price lists

• fixed or predetermined prices
• Competitive bidding
• e.g. government purchases of standard goods or services
• Negotiating
• win-win transaction
 Centralized vs Decentralized
Purchasing
• Centralized purchasing
• Purchasing is handled by one special department
• Decentralized purchasing
• Individual departments or separate locations handle their
own purchasing requirements
 Suppliers

• Choosing suppliers
• Evaluating sources of supply
• Supplier audits
• Supplier certification
• Supplier partnerships
Considerations When Choosing a Supplier
• Lead times and on-time delivery
• Quality and quality assurance
• Flexibility
• Location
• Price
• Product or service charges
• Reputation and financial stability
• Other accounts
 Evaluating Sources of Supply
• Vendor analysis: Evaluating the sources of supply in terms
of price, quality, reputation, and service

Vendor Score Sheet

Vendor A Vendor B Vendor C

P r ic e
Q u a lit y
S e r v ic e
R e p u t a t io n
 Supplier Audits
• Means of keeping current on suppliers’ performance
• Factors covered in an audit
• management style
• quality assurance
• materials management
• design process used
• process improvement policies
• procedures for corrective action and follow-up
 Supplier Certification

• Detailed examination of the policies and

capabilities of a supplier
• Verifies that a supplier meets or exceeds the
requirements of a buyer
• Use of certified suppliers can eliminate much or all
of the inspection and testing of delivered goods
• ISO 9000
 Supplier as a Partner
Aspect Partner Adversary
Number of suppliers One or a few Many; play one off
Length of Long-term others
relationship Moderately important May be brief
Low price High Major consideration
Reliability High May not be high
Openness Insured at the source Low
Quality High Buyer inspects
Volume of business Proximity may be May be - many suppliers
Location stressed for short lead Widely dispersed
times
Flexibility Relatively high Relatively low
 Supplier Partnerships
• Ideas from suppliers could lead to improved competitiveness
• Reduce cost of making the purchase
• Reduce transportation costs
• Reduce production costs
• Improve product quality
• Improve product design
• Reduce time to market
• Improve customer satisfaction
• Reduce inventory costs
• Introduce new products or services
 Logistics

• Movement within the facility

• Incoming and outgoing shipments
• Evaluating shipping alternatives 0

• Bar coding
214800 232087768
• EDI
• Distribution Requirements Planning (DRP)
• JIT Deliveries

14s-10
Figure 16-3
Materials Movement
Work center
Work center Work
center

Work Storage
center

Storage

Storage
Customer

Supplier Warehouse
Shipping

Receiving