Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007 Chapter 13 Supply chain planning and control Source: Tibbett and Britten

Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007 Supply chain planning and control Operations strategy Design Improvement Planning and control Operations management Supply chain planning and control The operation supplies … the coordinated delivery of products and services from the supply chain The market requires … specified time, quantity and quality of products and services

Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007 What is supply chain management? ‘Supply chain management is the management of the interconnection of organizations that relate to each other through upstream and downstream linkages between the processes that produce value to the ultimate consumer in the form of products and services.’

Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007 Supply chain management is concerned with managing the flow of materials and information between a string of operations that form the strands or ‘chains’ of a supply network Flow between processes Supply chain management concerns flow between a string of operations Supply network management concerns flow between operations Flow between processes

Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007 Supply chain management is concerned with the flow of information as well as the flow of products and services Products and services New products and services Delivery information Payment request / Credit ‘Downstream’ flow of products and services for customer fulfilment ‘Upstream’ flow of customer requirements Long-term plans and requirements Market research information Individual orders Payment Potential new products and services Flow between processes Consumer Flow between processes

Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007 First-tier supplier Second-tier supplier First-tier customer Second-tier customer End customer Demand side Supply side Purchasing and supply management Physical distribution management Logistics Materials management Supply chain management Information flow Physical flow

Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007 From the operations perspective – 90% satisfaction Customer requirements Product/ service available? Product/ service appropriate? Meets price and delivery requirements? Customer orders? Produced as promised? Received as promised? Y N Y N Y N Y N 10 Y N 9 1 Y N 8 1 Y N Customer satisfaction From the customer’s perspective – 8% satisfaction Taking a customer perspective of supply performance can lead to very different conclusions Y N 9 1 Y N

Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007 The operation Purchasing functionSuppliers Request for products and services Demand from customers Supply to customers Request for quotations Prepare purchase order Prepare quotation for specification, price, delivery, etc. Requests Select supplier(s) Quotations Produce products and services Order Receive products and services Deliver Liaison between purchasing and the operation The purchasing function brings together the operation and its suppliers

Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007 Short-term ability to supplyLonger-term ability to supply Range of products or services provided Potential for innovation Quality of products or servicesEase of doing business ResponsivenessWillingness to share risk Dependability of supplyLong-term commitment to supply Delivery and volume flexibilityAbility to transfer knowledge as well as products and services Total cost of being suppliedTechnical capability Ability to supply in the required quantity Operations capability Financial capability Managerial capability Factors for rating alternative suppliers

Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007 FactorWeightSupplier A scoreSupplier B score Cost performance108 (8 x 10 = 80)5 (5 x 10 = 50) Quality record107 (7 x 10 = 70)9 (9 x 10 = 90) Delivery speed promised 75 (5 x 7 = 35) Delivery speed achieved 74 (4 x 7 = 28)8 (8 x 7 = 56) Dependability record 86 (6 x 8 = 48)8 (8 x 8 = 64) Range provided 58 (8 x 5 = 40)5 (5 x 5 = 25) Innovation capability 46 (6 x 4 = 24)9 (9 x 4 = 36) Total weighted score Weighted supplier selection criteria for the hotel chain

Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007 B2B Relationship: Most common, all but the last link in the supply chain E-commerce examples: EDI networks Tesco information exchange B2C Relationship: Retail operations Catalogue operations, etc. E-commerce examples: Internet retailers Amazon.com, etc. C2B Relationship: Consumer ‘offers’, business responds E-commerce examples: Some airline ticket operators Priceline.com, etc. C2C Relationship: Trading ‘swap’ and auction transactions E-commerce examples: Specialist ‘collector’ sites eBay.com, etc. Business Consumer Supply chain relationships Business Consumer

Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007 ‘Partnership’ supply management Character of internal operations activity Do nothing Do everything important Do everything Transactional – many suppliers Close – few suppliers Type of inter-firm contact Virtual spot trading Long-term virtual operation Vertically integrated operation Traditional supply management Types of supply relationship

Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007 Attitudes Actions Trust Elements of process partnership relationships Joint problem solving Joint co- ordination of activities Joint learning Long-term expectations Sharing success Multiple points of contact Few relationships Information transparency Dedicated assets Closeness of relationship

Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007 Improved profitability Supply chain time compression Schedule changes impact market faster so can respond to market changes better so revenues are maximized so improved forecasts so reduced stockholding costs Forecasts made closer to demand time so less need for safety stocks Defects are detected faster so easier to improve quality so reduced wastage costs New products and service faster to market so fewer lost sales from delayed launch so reduced risk of obsolescence so revenues are maximized so less discounted sales The effects of supply chain compression

Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007 MARKET Third-level supplier Second-level supplier First-level supplier Original equipment manufacturer Demand Period Prodn.Stock Prodn.Stock Prodn.Stock Prodn.Stock OEM ALL OPERATIONS HOLD ONE PERIOD’S STOCK The bullwhip effect

Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston Third-level supplier Second-level supplier First-level supplier Original equipment manufacturer Demand Period Prodn.Stock Prodn.Stock Prodn.Stock Prodn.Stock OEM MARKET ALL OPERATIONS HOLD ONE PERIOD’S STOCK The bullwhip effect

Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007 Orders 0 Time Sales from store Consumers Orders 0 Time Store’s orders to wholesaler Time Wholesaler’s orders to manufacturer Orders 0 Manufacturer’s orders to its suppliers Orders 0 Time Retail Store Whole- saler Manu- facturer Supplier Time

Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007 Supply chain dynamics Supply chains with different end objectives need to be managed in different ways

Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007 Matching the supply chain with market requirements Lean supply chain management Mismatch Agile supply chain management Nature of demand Functional products Innovative products Predictable Few changes Low variety Price stable Long lead-times Low margin Unpredictable Many changes High variety Price markdowns Short lead-times High margin Supply chain objectives Responsive Efficient Low cost High utilization Minimum inventory Low-cost suppliers Low throughput times High utilization Deployed inventory Flexible suppliers

Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007 Products Information SupplierManufacturer Depot Outlets Depot Efficient fast-throughput supply SupplierManufacturer Depot Outlets Depot Customer-responsive supply Products Information

Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007 Matching supply chain characteristics to the nature of demand Nature of demand Functional products Innovative products Predictable Unpredictable Few changes Many changes Low variety High variety Price stable Price markdowns Long lead-time Short lead-time Low margin High margin Supply chain objectives Responsive Efficient Fast response Low cost Low throughput time High utilization Deployed inventory Minimum inventory Flexible suppliers Low-cost suppliers MatchMismatch Match

Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007 Key Terms Test Supply network The network of supplier and customer operations that have relationships with an operation; all the operations linked together to provide goods and services. Supply chain A linkage or strand of operations that provides goods and services through to end customers; within a supply network several supply chains will cross through an individual operation. Supply chain risk A study of the vulnerability of supply chains to disruption.

Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007 Key Terms Test Purchasing The organizational function, often part of the operations function, that forms contracts with suppliers to buy in materials and services. Single-sourcing The practice of obtaining all of one type of input product, component or service from a single supplier, as opposed to multi-sourcing. Multi-sourcing The practice of obtaining the same type of product, component or service from more than one supplier in order to maintain market bargaining power or continuity of supply.

Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007 Key Terms Test E-procurement The use of the Internet to organize purchasing; this may include identifying potential suppliers and auctions as well as the administrative tasks of issuing orders, etc. Logistics A term in supply chain management broadly analogous to physical distribution management. Physical distribution management Organizing the integrated movement and storage of materials.

Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007 Key Terms Test Order fulfilment All the activities involved in supplying a customer’s order; often used in e-retailing but now also used in other types of operation. Merchandising A term used to describe a role in retail operations management that often combines inventory management and purchasing with organizing the layout of the shop floor. Virtual operation An operation that performs few, if any, value-adding activities itself; rather it organizes a network of supplier operations, seen as the ultimate in outsourcing.

Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007 Key Terms Test Partnership relationship A type of relationship in supply chains that encourages relatively enduring cooperative agreements for the joint accomplishment of business goals. Bullwhip effect The tendency of supply chains to amplify relatively small changes at the demand side of a supply chain such that the disruption at the supply end of the chain is much greater.