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Supply Chain Management AND e-Business

Supply Chain Management AND e-Business


Supply Chain Management & e-Business e-

Chapter 11—Supply Chain

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Overview
Introduction Supply Chain Management Purchasing Just-in-Time Purchasing Logistics Warehousing Expediting Benchmarking Performance of Materials Managers Third-Party Logistics Management Providers E-Business and Supply Chain Management
Chapter 11—Supply Chain 1

Introduction
Materials Are Any Commodities Used Directly or Indirectly in Producing a Product or Service.
Raw Materials, Component Parts, Assemblies, & Supplies

A Supply Chain Is the Way Materials Flow Through Different Organizations From Raw Material Supplier to Finished Goods Consumer.

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Supply Chain Management
Supply Chain Management Includes All Management Functions Related to Flow of Materials From Company’s Direct Suppliers to Its Direct Customers.
Includes Purchasing, Traffic, Production Control, Inventory Control, Warehousing, & Shipping.

Materials Management & Logistics Management Are Two Alternative Names for Supply Chain Management.
Chapter 11—Supply Chain 3

Chapter 11—Supply Chain

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Supply Chain Management
Refers to All Management Functions Related to Flow of Materials From Company’s Direct Suppliers to Its Direct Customers. Includes Purchasing, Traffic, Production Control, Inventory Control, Warehousing, & Shipping. Two Alternative Names:
Materials Management Logistics Management

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Supply Chain Management in a Manufacturing Plant
Raw Materials, Parts, and In-process InWareWareHousing Finished Goods WareWarehousing Inspection, Packaging, And Shipping Customers
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Suppliers

Receiving and Inspection

Production

Materials Management Purchasing Production Control Warehousing and Inventory Control Shipping and Traffic

Physical materials flow Information flow
Chapter 11—Supply Chain

Four Important Activities in SCM
Purchasing Logistics Warehousing Expediting

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Purchasing
Factors Increasing Importance of Purchasing Today: Tremendous Impact of Material Costs on Profit -- 60-70% of Sales Dollar Paid to Material Suppliers Popularity of JIT Manufacturing -Supply Deliveries Must Be Exact in Timing, Quantity, & Quality Increasing Global Competition -- More Competition for Scarce Resources, & Geographically Stretched-out Supply Chain
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Mission of Purchasing
Develop Purchasing Plans for Each Major Product or Service Consistent With Operations Strategies:
Low Production Costs Fast and On-Time Deliveries High Quality Products & Services Flexibility

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Purchasing Management
Maintain Database of Available, Qualified Suppliers Select Suppliers to Supply Each Material Negotiate Contracts With Suppliers Act As Interface Between Company & Suppliers Provide Training to Suppliers on Latest Technologies

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Advantages of Centralized Purchasing
Buy in Large Quantities --> Better Prices More Clout With Suppliers --> Greater Supply Continuity Larger Purchasing Department --> Buyer Specialization Combine Small Orders --> Less Order Cost Duplication Combine Shipments --> Lower Transportation Costs Better Overall Control
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Purchasing Process
Material Requisition From Any Department, To Purchasing From Purchasing, To Potential Suppliers Based on Quality, Price, Lead Time, Dependability From Purchasing, To Selected Supplier From Supplier, to Receiving, Quality Control, Warehouse

Request for Quotations

Select Best Supplier

Purchase Order

Receive & Inspect Goods

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Buyers’ Duties
Know Market for Their Commodities Understand Laws.... Tax, Contract, Patent..… Process Purchase Requisitions & Quotation Requests Make Supplier Selections Negotiate Prices & Conditions of Sale Place & Follow-up on Purchase Orders
Changes in Delivery Date, Quantities, etc.

Maintain Ethical Behavior
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Make-orMake-or-Buy Analysis
Considerations in Make-or-Buy Decisions: Lower Cost - Purchasing or Production? Better Quality - Supplier or In-House? More Reliable Deliveries - Supplier or InHouse? What Degree of Vertical Integration Is Desirable? Should Distinctive Competencies Be Outsourced?

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JIT Purchasing
Key Elements of JIT Purchasing Are: Cooperative, Not Adversarial Relationships Longer-Term Relationships, Fewer Suppliers Delivery & Quality Enters Into Selecting a Supplier JIT in Supplier’s Operation Suppliers Nearby Shipments Delivered Directly to Production Line Deliveries in Small, Standard-Size, Returnable Containers Minimum of Paperwork
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Logistics
Logistics Usually Refers to Management Of:
Movement of Materials Within Factory Shipment of Incoming Materials From Suppliers Shipment of Outgoing Products to Customers

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Movement of Materials within Factories
Typical Locations From/To Which Material Is Moved:
Incoming Vehicles Receiving Dock Quality Control Warehouse

Work Center

Other Work Centers

Packaging

Finished Goods

Shipping

Shipping Dock

Outgoing Vehicles
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Chapter 11—Supply Chain

Shipments To and From Factories
Traffic Departments Routinely Examine Shipping Schedules & Select:
Shipping Methods Time Tables Ways of Expediting Deliveries

Traffic Management Is Specialized Field Requiring Technical Training in DOT and ICC Regulations & Rates.

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Shipments To and From Factories
Distribution, or Physical Distribution, Is Shipment of Finished Goods Through Distribution System to Customers. A Distribution System Is Network of Shipping & Receiving Points Starting With Factory & Ending With Customers.

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Shipments To and From Factories
Distribution Requirements Planning
DRP Is Planning for Replenishment of Regional Warehouse Inventories. DRP Uses MRP-type Logic to Translate Regional Warehouse Requirements Into Central Distribution-Center Requirements, Which Are Then Translated Into Gross Requirements in MPS at Factory.

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Shipments To and From Factories
Distribution Requirements Planning
Scheduled Receipts Are Previously-placed Orders That Are Expected to Arrive in a Given Week Planned Receipt of Shipments Are Orders Planned, but Not Yet Placed, for the Future Projected Ending Inventory Is Computed As:
Previous Week’s Projected Ending Inventory + Planned Receipt of Shipments in Current Week + Scheduled Receipt of Shipments in Current Week -- Forecasted Demand in Current Week

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Shipments To and From Factories
DRP Time-Phased Order Point Record
Region. Warehouse #1 LT = 1 Std. Quantity = 50 SS = 10 Forecasted demand (units) Scheduled receipts Projected ending inventory Planned receipt of shipments Planned orders for shipments Week -1 1
30 50 60 80 40 10 50 20 50 50 30 50

2
40

3
30

4
40

5
40

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Shipments To and From Factories
Distribution Resource Planning
Distribution Resource Planning Extends DRP So That Key Resources of Warehouse Space, Workers, Cash, & Vehicles Are Provided in Correct Quantities at Correct Times.

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Analyzing Shipping Decisions
The “Transportation Problem”
Problem Involves Shipping a Product From Several Sources (Ex. Factories) With Limited Supply to Several Destinations (Ex. Warehouses) With Demand to Be Satisfied Per-unit Cost of Shipping From Each Source to Each Destination Is Specified Optimal Solution Minimizes Total Shipping Cost and Specifies the Quantity of Product to Be Shipped From Each Source to Each Destination

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Innovations in Logistics
New Developments Affecting Logistics Include:
All-Freight Airports Inter-Modal Shipping In-Transit Rates Consolidated Shipments Air-Freight & Trucking Deregulation Advanced Logistics Software

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Warehousing
Warehousing Is Management of Materials While They Are in Storage. Warehousing Activities Include:
Storing Dispersing Ordering Accounting
Periodic Inventory Perpetual Inventory

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Warehousing
Record Keeping Within Warehousing Requires Stock Record for Each Item That Is Carried in Inventories. The Individual Item Is Called a StockKeeping Unit (SKU). Stock Records Are Running Accounts That Show:
On-Hand Balance Receipts & Expected Receipts Disbursements, Promises, & Allocations

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Inventory Accounting
In Past, Inventory Accounting Based On:
Periodic Inventory Accounting Systems -Periodic (End-of-Day) Updating of Inventory Records Physical Inventory Counts -- Periodic (End-ofYear) Physical Counting of All SKUs at One Time

Today, More and More Firms Are Using:
Perpetual Inventory Accounting Systems -- RealTime Updating of Records As Transactions Occur Cycle Counting -- Ongoing (Daily or Weekly) Physical Counting of Different SKUs

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Measuring the Performance Materials Managers
Level and Value of In-House Inventories Percentage of Orders Delivered on Time Number of Stockouts Annual Cost of Materials Annual Cost of Transportation Annual Cost of Warehouse Number of Customer Complaints Other Factors

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