Purchasing and Supply Chain Management

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Purchasing and Supply Chain Management

• Creating a Lean Supply Chain

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Creating a Lean Supply Chain

• What is lean?
• A philosophy that seeks to shorten the time
  between the customer order and the shipment to
  customer by eliminating waste John Shook
• We can reduce lean to three elements (Womack and
  Jones)--
• Flow
• Pull
• Striving for excellence

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Elements of a Lean Supply Chain

• JIT Purchasing
• JIT Transportation
• JIT Operations

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JIT Purchasing

• Characteristics of JIT Purchasing--
• Purchase in small lots with frequent deliveries
• Mutual, consistent improvement by the buyer and
  supplier
• Collaborative efforts between buyer and supplier
• Efficient point-to-point communication linkages
• The rights--
• right quantity
• right time
• right quality

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JIT Purchasing
What kind of items are best suited for a
just-in-time purchasing system?
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Traditional Communication Linkages
Engineering
Engineering
Quality Control
Quality Control
Purchasing
Sales
Production Planning
Production Planning
Transportation
Transportation
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Point-to-Point Communication Linkages
Engineering
Engineering
Quality Control
Quality Control
Purchasing
Sales
Production Planning
Production Planning
Transportation
Transportation
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JIT Purchasing

• Challenges facing U.S. firms when pursuing JIT
  Purchasing with suppliers--
• Size of supply base
• Geographic dispersion
• Incomplete communication and information sharing
• Inconsistent supplier quality
• Poor relationship between buyers and sellers
• How can firms counter these challenges?

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JIT Purchasing--Supplier Expectations

• A longer-term business arrangement
• Fair financial return
• Adequate time for planning
• Accurate forecasts

• Correct and firm material and product
  specifications
• Parts designed to match the suppliers process
  capability
• Smoothly timed order releases
• Minimum number of change orders

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JIT Transportation
Production
Supplier
Production
Inspection
Packing
Storage
Shipping
Transport
Trucking
Transport
Receiving
Inspection
Storage
Production
Customer
Production
Traditional
Just-in-Time
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JIT Transportation

• Replacement of expendable packaging with reusable
  containers
• Frequent deliveries made to the point of use
• Regular and repeatable delivery schedules (closed
  loop systems)

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JIT Transportation

• Long-term dedicated contract carriage replaces
  commercial carriage as the primary mode of
  transportation
• Focus on frequent deliveries of small quantities
  of many parts versus large quantities of fewer
  parts
• Modified shipping and handling equipment
• Side loading trucks
• Smaller trucks (similar to beverage trucks)
• Point of use doors at production facilities

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Designing a JIT Transportation System
Organizational Structure Change the
organization to meet JIT requirements
Number of Carriers Reduce the number of carriers
to four or fewer--one for each region
Contract Basis Put 100 percent of
transportation services on a contract basis
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Designing a JIT Transportation System
Computer Interface Establish extensive computer
interface with all contracted carriers
Regular Pick up and Delivery Pick up all freight
from suppliers and deliver on a scheduled basis
Efficient Handling Equipment Use
state-of-the-art technology and handling equipment
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JIT Operations

• Inventory pull systems/visible signals
• Facility layout changes/work cells
• Set up reductions
• Level build schedules
• Uniform loading
• Total quality and continuous improvement
• Standardized material handling/containers
• Product and process simplification
• Total preventive maintenance
• Flexible workforce
• Teamwork
• Right performance measures