Unit11 - Supply Chain Management
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Transcript of Unit11 - Supply Chain Management
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Dr. Rameez Khalid, PMP, CQSSBBFaculty, Department of Management
Institute of Business Administration, Karachi
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Volkswagen
Brazilian plant employs 1000 workers
200 work for VW
800 work for other contractors:
Rockwell International, Cummins Engines, Deluge Automotiva,MWM, Remon and VDO, etc.
VW responsible for overall quality, marketing,
research and design
VW looks to innovative supply-chain to improvequality and drive down costs
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Planning, organizing, directing, & controlling flows
of materials
Begins with raw materials
Continues through internal operations
Ends with distribution of finished goods
Involves everyone in supply-chain
Example: Your suppliers supplier
Objective: Maximize value & lower waste
Supply-Chain Management
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consumer
Retailer
Manufacturing
Material Flow
VISA
Credit Flow
Supplier
Supplier Wholesaler
Retailer
CashFlow
OrderFlow
Schedules
Flowsin a Supply Chain
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Supply-Chain Support for Overall Strategy
Suppliers
goal
Suppliers
goal
Primary
SelectionCriteria
Primary
SelectionCriteria
Supply demandat lowestpossible cost
Supply demandat lowestpossible cost
Select
primarily forcost
Select
primarily forcost
Low CostLow Cost
Respondquickly tochangingrequirementsand demandto minimizestockouts
Respondquickly tochangingrequirementsand demandto minimizestockouts
Select
primarily forcapacity,speed, andflexibility
Select
primarily forcapacity,speed, andflexibility
Response
Response
Share marketresearch;
jointly developproducts andoptions
Share marketresearch;
jointly developproducts andoptions
Select primarily
for productdevelopmentskills
Select primarily
for productdevelopmentskills
DifferentiationDifferentiation
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Process
Characteristics
Process
Characteristics
Maintain highaverageutilization
Maintain highaverageutilization
Low CostLow Cost
Invest inexcesscapacity andflexibleprocesses
Invest inexcesscapacity andflexibleprocesses
Response
Response
Modularprocesses thatlend themselvesto masscustomization
Modularprocesses thatlend themselvesto masscustomization
InventoryCharacteristicsInventoryCharacteristics
Minimizeinventory
throughoutthe chain tohold downcosts
Minimizeinventory
throughoutthe chain tohold downcosts
Developresponsive
system, withbuffer stockspositioned toensure supply
Developresponsive
system, withbuffer stockspositioned toensure supply
Minimizeinventory in
the chain toavoidobsolescence
Minimizeinventory in
the chain toavoidobsolescence
DifferentiationDifferentiation
Supply-Chain Support for Overall Strategy -continued
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Supply-Chain Support for Overall Strategy -continued
Lead-time
Characteristics
Lead-time
Characteristics
Shorten lead-time as long asit does notincrease costs
Shorten lead-time as long asit does notincrease costs
Low CostLow Cost
Investaggressivelyto reduceproduction
lead-time
Investaggressivelyto reduceproduction
lead-time
Response
Response
Investaggressively toreducedevelopment
lead-time
Investaggressively toreducedevelopment
lead-time
DifferentiationDifferentiation
Product-design
Characteristics
Product-design
Characteristics
Maximize
performance
and minimize
cost
Maximize
performance
and minimize
cost
Use product
designs that
lead to low
set-up time
and rapid
production
ramp-up
Use product
designs that
lead to low
set-up time
and rapid
production
ramp-up
Use modular
design to
postpone
product
differentiation
for as long as
possible
Use modular
design to
postpone
product
differentiation
for as long as
possible
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Global Supply-Chain Issues
Supply chains in global environment must be:
Flexible enough to react to sudden changes in partsavailability, distribution, or shipping channels,
import duties, and currency ratesAble to use the latest computer and transmission
technologies to schedule and manage the shipmentof parts in and finished products out
Staffed with local specialists to handle duties, trade,freight, customs and political issues
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Purchasing Function Objectives
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
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Make/BuyConsiderations
1. Maintain core
competencies and protect
personnel from layoff
2. Lower production cost
3. Unsuitable suppliers
4. Assure adequate supply
5. Utilize surplus labor
1. Frees management to
deal with its primary
business
2. Lower acquisition cost
3. Preserve supplier
commitment
4. Obtain technical or
management ability
5. Inadequate capacity
Reasons for Making Reasons for Buying
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Bullwhip Effect
Tier 2
Suppliers
Tier 1
SuppliersProducer Distributor Retailer
Final
Customer
Amount of
inventory=
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Plans to help achieve company mission
Affect long-term competitive position
Strategic options
Many suppliers
Few suppliers
Keiretsu network
Vertical integration
Virtual company
Plan
Supply-ChainStrategies
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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 companythat uses suppliers on an as-neededbasis.
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Many sources per item
Adversarial relationship
Short-term
Little openness
Negotiated, sporadic POs
High prices
Infrequent, large lots Delivery to receiving dock
Many Suppliers Strategy
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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.
FewSuppliers Strategy
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Raw Material(Suppliers)
Backward
Integration
CurrentTransformation
Forward
Integration
Finished Goods
(Customers)
Ability to produce goods
previously purchased
Setup operations
Buy supplier
Make-buy issue
Major financial
commitment
Hard to do all things well
Vertical IntegrationStrategy
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Virtual Company Strategy
Companies that rely on a variety of supplier
relationships to provide services on demand.
Also known as hollow corporations, or network
corporations
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
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Successful
Supply-Chain Management Requires:
A mutual agreement on goals
Trust Compatible organizational cultures
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VendorManaged Inventory (VMI)
Postponement keeps product generic as long as possible Channel Assembly sends to distributor individual
components and modules rather than finished goods
Drop Shipping and Special Packaging supplier will ship toend consumer rather than to seller
Blanket Orders a long-term purchase commitment to asupplier for items that are to be delivered against short-term releases to ship
Standardization reducing the number of variations in
materials and components Electronic Ordering and Funds Transfer paperless
ordering and 100% material acceptance, payment by wire
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Vendor evaluation
Identifying & selecting potential vendors
Vendor development
Integrating buyer & supplier
Example: Electronic data exchange
Negotiations
Results in contractSpecifies period of agreement, price, delivery
terms etc.
Vendor Selection Steps
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LogisticsManagement
Integrates all materials functions Purchasing
Inventory management
Production control Inbound traffic
Warehousing and stores
Incoming quality control
Objective: Efficient, low cost operations
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Goods Movement Options
Trucking
Railways
Airfreight Waterways
Pipelines
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REFERENCES
Operations Management
William J. Stevenson
Operations Management
Barry Render & Jay Heizer