Procurement management in supply chain

Submitted by Ratnadeep subhash hiwrale Roll no. p-26

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4/28/12

Submitted to Prof. Arloph Vieira

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New paradigms in inventory and purchase department JIT, elements and benefits Vender manage inventory VMI business model Steps in setting up VMI, benefits challenges and limitation Overcoming limitation of VMI

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What is procurement?

Procurement is the process starting from material requisition to material acquisition

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New paradigms in Inventory and purchase management

MRP(material requirements planning) JIT(just in time) VMI(vender managed inventory)

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JIT

It is a Japanese management philosophy, which has been in practice since the early 1970s in many Japanese manufacturing organizations. Activity should not take place until there is need for it. What, When and How?
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Taiichi Ohno is father of JIT

7 types of wastage

Overproduction Due to Waiting time Transportation waste Processing waste Inventory waste Waste of motion Waste from product defects
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Elements of JIT

Continuous improvement Attacking fundamental problemsanything that does not add value to the product Devising systems to indentify problems Striving for problems- simpler systems may be easier to understand, easier to manage and 4/28/12 less likely to go wrong

Conti

Quality control at source Kanbans- simple tools to pull products and components through the process Jidoka(Autonomation) Andon(trouble lights)- to signal problems ti initiate corrective action
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Benefits of JIT Systems

Reduced levels of in-process inventories, purchased goods, and finished goods. Reduced space requirements Increased product quality reduced scrap and rework Reduced manufacturing lead times. Greater flexibility in changing the production mix. 4/28/12

Vender Managed Inventory

It is streamlined approach to inventory and order fulfillment. With it, the supplier and not the retailer, is responsible for managing and replenishing inventory using an integral part of VMI

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VMI Business Model

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Steps in setting up VMI

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Benefits of VMI
Data entry errors are reduced due to computer-to-computer communications.

Both parties are interested in giving better service to the end customer.

A true partnership is formed between the manufacturer and the distributer.

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Challenges and limitations of VMI

Some companies continue to manufacturer to stock without leveraging customer specific data effectively for production planning Insufficient level of system integration results in incomplete visibility. High expectations from retailers. Lack of trust and skepticism from employees. Retailers have higher expectations of 4/28/12

Overcoming the limitation

Redefine incentive programs based on partnership building instead of sales volume. Build strong with managements commitment to effective communication Conduct simulations and pilots before actual implementation. Organize training sessions before 4/28/12 launching VMI program.

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