???????????????????????????????Operations Management ????? 7 ????????????????????? Supply -Chain Management

1
???????????????????????????????Operations
Management????? 7?????????????????????Suppl
y -Chain Management
2
Outline

• ???????????????????? The Strategic Importance of
  the Supply-Chain
• Global Supply-Chain Issues
• ?????????? Purchasing
• Manufacturing Environments
• Service Environment
• Make-or-Buy Decisions

3
Outline - continued

• ???????????????????? Supply-Chain Strategies
• Many Suppliers
• Few Suppliers
• Vertical Integration
• Keiretsu Networks
• Virtual Companies
• ?????????????? Vendor Selection
• Vendor Evaluation
• Vendor Development
• Negotiations

4
Outline - continued

• ?????????????????????? Managing the Supply-Chain
• ????????????????? Materials Management
• Distribution Systems
• ?????????????????????? ???????????????Benchmarking
  Supply-Chain Management

5
??????????????????????

• ??????????????????????????????????????
• Explain supply chain management
• ??????????????????????????????????????????????????
  ???
• State the importance of purchasing and materials
  management

6
??????????????????????

• ???????????????????
• Compare contrast purchasing strategies
• ?????????????????????????? ??? ??????
• Summarize vendor relations issues
• ???????????????????????????????
• Describe the purchasing process and techniques

7
??????????????????????Supply-Chain Management

• ????????? ????????????? ?????????? ????????????
  ????????????????? Planning, organizing,
  directing, controlling flows of materials
• ??????????????????? Begins with raw materials
• Continues through internal operations
• ?????????????????????????????????? Ends with
  distribution of finished goods

8
?????????????????????? (???)Supply-Chain
Management

• Involves everyone in supply-chain
• Example Your suppliers supplier
• Objective Maximize value lower waste

9
?????????????The Supply-Chain
VISA
?
Credit Flow
Materiall Flow
Consumer
Manufacturing
Supplier
Retailer
Retailer
Supplier
Wholesaler
Cash
Order
Schedules
Flow
Flow
10
????????????? The Supply Chain
11
?????????????????????????????????Material Costs
in Supply-Chain
12
???????????????????????????????????????????Suppl
y-Chain Support for Overall Strategy
?????????????????????????????? Suppliers
goal Low Cost ???????????????????????????????????
??????????????????? Response ?????????????????????
??????????????????????????????????????????????????
???????????????????????????????????
Differentiation ?????????????????????????????????
?????????????????????????????
13
?????????????????? (???)?????????????????????????
Supply-Chain Support for Overall Strategy
?????????????????????? Primary Selection
Criteria Low Cost ?????????????? Response
???????????????????? ??????????? ???????????????
Differentiation ?????????????????????????????
14
?????????????????? (???)?????????????????????????
Supply-Chain Support for Overall Strategy
?????????????????? Process Characteristics Low
Cost ????????????????????????????????????????? Res
ponse ????????????????????????????????????????????
???????? Differentiation ????????????????????????
? mass customization
15
?????????????????? (???)?????????????????????????
Supply-Chain Support for Overall Strategy
????????????????????? Inventory
Characteristics Low Cost ????????????????????????
?????????????????????????????? Response
????????????????????????????????????? ?? Buffer
Stock ??????????????????????????????????? Differe
ntiation ?????????????????????????????????????????
???????
16
?????????????????? (???)?????????????????????????
Supply-Chain Support for Overall Strategy
????????????????????????????????? Lead-time
Characteristics Low Cost ????????????????????????
?????????????? ?????????????????????????? Respons
e ????????????????????????????????????????????????
???????????????? Differentiation
??????????????????????????????????????????????????
????????????????????????
17
?????????????????? (???)?????????????????????????
Supply-Chain Support for Overall Strategy
??????????????????????????? Product-Design
Characteristics Low Cost ????????????????????????
??????????? Response ????????????????????????????
??????????????????????????????????????????????????
???????????????????? Differentiation
??????????????????????????????????????????????????
????????????????????????????
18
?????????????????????????????Global Supply-Chain
Issues

• Supply chains in a global environment must be
• flexible enough to react to sudden changes in
  parts availability, distribution, or shipping
  channels, import duties, and currency rates
• able to use the latest computer and transmission
  technologies to manage the shipment of parts in
  and finished products out
• staffed with local specialists to handle duties,
  trade, freight, customs and political issues

19
?????????? Purchasing

• ???????????????????????????
• ???????????????????
• Help decide whether to make or buy
• Identify sources of supply
• Select suppliers negotiate contracts
• Control vendor performance
• Importance
• Major cost center
• Affects quality of final product

20
Purchasing Costs as a Percent of Sales
Industry
Percent of Sales

• All industry
• Automobile
• Food
• Lumber
• Paper
• Petroleum
• Transportation

• 52
• 61
• 60
• 61
• 55
• 74
• 63

21
?????????????????????????????Objectives of the
Purchasing Function

• Help identify the products and services that can
  be best obtained externally and
• Develop, evaluate, and determine the best
  supplier, price, and delivery for those products
  and services

22
The Purchasing Focus
23
???????????????????????????Traditional Purchasing
Process
Customer
Supplier
Purchase
Order
Mail
Order
Processing
Receiving
Receivables Report
Dock
Packing
List
Mail
Invoice
Accounts Payable
Accounts Receivable
Mail
Check
Reconcile
24
??????????????????Purchasing Techniques

• ???????????????????????????
• Drop shipping and special packaging
• ??????????????????????????????????????
• Blanket orders
• ?????????????????????????????????
• Invoiceless purchasing

25
?????????????????? (???)Purchasing Techniques

• ??????????????? ???????????????????????
  ???????????
• Electronic ordering and funds transfer
• Electronic data interchange (EDI)
• ???????????????????????????????????????????
• Stockless purchasing
• ?????????????????????
• Standardization

26
?????????????????????????????????????????????
Make/Buy Considerations
??????????????? Making
??????????????? Buying

• ??????????????????
• lower production cost
• ??????????????????????????????????
• unsuitable suppliers
• ????????????????????????????????????
• assure adequate supply
• ??????????????????????????????????????????????????
  ???????????????
• utilize surplus labor and make a marginal
  contribution
• ???????????????????????????????
• obtain desired quantity

• ???????????????????
• lower acquisition cost
• ????????????????????????????????????
• preserve supplier commitment
• ?????????????????????????????????????
• obtain technical or management ability
• ??????????????????????
• inadequate capacity
• ????????????????????
• reduce inventory costs

27
?????????????????????????????????????????????
(???) Make/Buy Considerations
??????????????? Making
??????????????? Buying

• ???????????????????????????????????????????
• remove supplier collusion
• ??????????????????????????????????????????????????
  ?????????
• obtain a unique item that would entail a
  prohibitive commitment from the supplier
• ?????????????????????????????????????
• maintain organizational talent
• ???????????????????????????????
• protect proprietary design or quality
• ?????/??????????????????
• increase/maintain size of company

• ??????????????????????????????????????????????????
  
• ensure flexibility and alternate source of supply
• ??????????????????????????????
• reciprocity
• ??????????????????????????????????????????????????
  
• item is protected by patent or trade secret
• ??????????????????????????????????????????????????
  ???
• frees management to deal with its primary business

28
???????????????????Purchasing Strategies
Plan

• Plans to help achieve company mission
• Affect long-term competitive position
• ???????
• ?????????????????????????? Many suppliers
• ??????????????????????????? Few suppliers
• ????????? Keiretsu
• ??????????????? Vertical integration
• ?????? Virtual

29
????????????????????Supply-Chain Strategies

• Negotiate with many suppliers play one supplier
  against another
• Develop long-term partnering arrangements with
  a few suppliers who will work with you to satisfy
  the end customer
• Vertically integrate buy the actual supplier
• Keiretsu - have your suppliers become part of a
  company coalition
• Create a virtual company that uses suppliers on
  an as-needed basis.

30
?????????????????????????????????Many Suppliers
Strategy

• Many sources per item
• Adversarial relationship
• Short-term
• Little openness
• Negotiated, sporadic POs
• High prices
• Infrequent, large lots
• Delivery to receiving dock

? 1995 Corel Corp.
31
?????????????????????????????????? Few Suppliers
Strategy

• 1 or few sources per item
• Partnership (JIT)
• Long-term, stable
• On-site audits visits
• Exclusive contracts
• Low prices (large orders)
• Frequent, small lots
• Delivery to point of use

? 1995 Corel Corp.
32
??????????????????????Vertical Integration
Strategy

• Ability to produce goods previously purchased
• Setup operations
• Buy supplier
• Make-buy issue
• Major financial commitment
• Hard to do all things well

Raw Material (Suppliers)
Backward Integration
Current Transformation
Forward Integration
Finished Goods (Customers)
33
Forms of Vertical Integration
Iron Ore
Silicon
Farming
Raw Material (Suppliers)
Steel
Flour Milling
Backward Integration
Integrated Circuits
Current Transformation
Automobiles
Distribution System
Forward Integration
Circuit Boards
Computers Watches Calculators
Finished Goods (Customers)
Dealers
Baked Goods
34
???????????????? Keiretsu Keiretsu Network
Strategy

• Japanese word for affiliated chain
• System of mutual alliances and cross-ownership
• Company stock is held by allied firms
• Lowers need for short-term profits
• Links manufacturers, suppliers, distributors,
  lenders
• Partnerships extend across entire supply chain

35
????????????? Virtual Virtual Company Strategy

• Network of independent companies
• Linked by technology
• PCs, faxes, Internet etc.
• Each contributes core competencies
• Typically provide services
• Payroll, editing, designing
• May be long or short-term
• Usually, only until opportunity is met

? 1995 Corel Corp.
36
??????????????????????????Vendor Selection Steps

• ???????????????? Vendor evaluation
• Identifying selecting potential vendors
• ?????????????? Vendor development
• Integrating buyer supplier
• Example Electronic data exchange
• ?????????????? Negotiations
• Results in contract
• Specifies period of agreement, price, delivery
  terms etc.

37
?????????????????????????????????????Supplier
Selection Criteria

• Service
• Delivery on time
• Condition on arrival
• Technical support
• Training

• Company
• Financial stability
• Management
• Location
• Product
• Quality
• Price

38
???????????????????????Negotiation Strategies

• Three types
• 1. ??????????????????????????????
• cost-based price model - supplier opens its books
  to purchaser price based upon fixed clause plus
  escalation clause for materials and labor

39
??????????????????????? (???)Negotiation
Strategies

• Three types
• 2. ????????????????????????????????
• market-based price model - published price or
  index

40
??????????????????????? (???)Negotiation
Strategies

• Three types
• 3. ????????????????????????
• competitive bidding - potential suppliers bid for
  contract

41
??????????????????????Managing the Supply-Chain

• Options
• Postponement
• Channel assembly
• Drop shipping
• Blanket orders
• Invoiceless purchasing
• Electronic ordering and funds transfer
• Stockless purchasing
• Standardization

42
?????????????????????? Managing the Supply-Chain
- Other Options

• Establishing lines of credit for suppliers
• Reducing bank float
• Coordinating production and shipping schedules
  with suppliers and distributors
• Sharing market research
• Making optimal use of warehouse space

43
?????????????????Materials Management

• Integrates all materials functions
• ??????????
• Purchasing
• ?????????????????????
• Inventory management
• ????????????????
• Production control
• Inbound traffic
• ???????????????
• Warehousing and stores
• ???????????????
• Incoming quality control
• Objective Efficient, low cost operations

44
????????????????????Goods Movement Options

• ???????? Trucking
• ???? Railways
• ???????? Airfreight
• ?????? Waterways
• ?????? Pipelines

45
?????????????????????????????????????Benchmarking
Supply-Chain Management
Benchmark Firms
46
Supply-Chain Performance Compared