Chapter4 Procurement and Manufacturing

Outline Dimensions of Product Quality Procurement Manufacturing Lean and Six Sigma Logistical Interfaces Summary 双语PPT

Three performance cycles were identified that must be linked through effective logistics. Procurement cycle links an organization with its suppliers The manufacturing support cycle involves the logistics of supporting production The customer accommodation cycle links a firm with its markets. 双语PPT

The 8 Dimensions of Product Quality Performance How well the product performs in comparison to how it was designed to perform Reliability Likelihood that the product will perform throughout its expected life Durability The actual life expectancy of the product Conformance Does the product meet its specifications as designed Features What different functions or tasks can the product perform Aesthetics Is the styling, color, workmanship pleasing to the customer Serviceability What is the ease of fixing or repairing the product if it fails Perceived Quality Based on customer’s experience before, during and after they purchase a product 双语PPT

Total Quality Management A philosophy by a managerial system （1）top management commitment and support; （2）maintaining a customer focus in product, service, and process performance; （3）integrated operations within and between organizations; （4）commitment to continuous improvement. 双语PPT

Procurement

Purchasing vs. Procurement (cont’d) Purchasing Mentality Sourcing Mentality One contract at a time Continual Improvement Win-lose Win-win Immediate returns Long-term perspective Secretive Trusting Current needs can be met Strategic fit exists Lowest purchase price Total cost of ownership Multiple suppliers Supply-base reduction Infrequent interaction Frequent interaction Criticism Constructive evaluations Buyer-sales relationship Cross-functional relationship Safety in numbers Safety in knowledge Quality inspected Quality at source Inventory as safeguard Information as safeguard 双语PPT 双语PPT 7

Procurement perspectives The emphasis has shifted from adversarial, transaction-focused negotiation with suppliers to ensuring that the firm is positioned to implement its manufacturing and marketing strategies with support from its supply base. 双语PPT

Procurement perspectives Continuous supply: Stockouts of raw materials or component parts can shut down or force a change in production plans, resulting in unexpected cost. Minimize inventory investment One goal of procurement is to maintain supply continuity with the minimum inventory investment possible. This requires balancing the costs of carrying material against the possibility of a production stoppage. 双语PPT

Procurement perspectives Quality improvement Supplier development It is important to develop close relationships with those suppliers in order to share information and resources to achieve better results. Lowest total cost of ownership 双语PPT

Lowest total cost of ownership Purchase price + service price + life cycle costs Bidding: purchase price & discounts For the benefits of quantity discounts to be factored into the total cost, the buyer must quantify inventory holding costs. Supplier terms of sale and cash discount structures also impact the total cost of ownership. Transportation costs (analysis further) Figure 4.1 双语PPT

Figure 4-1 Major Categories for the Components of Total Cost of Ownership 双语PPT

4.2.2 Procurement Strategies Realize Volume consolidation through reduction in the number of suppliers. Multiple sources Low prices: Potential suppliers were continually bidding for a buyer’s business. Reduce the buyer’s dependence: Maintaining multiple sources reduces the buyer’s dependence on any one supplier. 双语PPT

and Volume consolidation It increases the buyer’s negotiating strength in relationship to the supplier. Provides a number of advantage for those suppliers. It allows the supplier to improve economies of scale by spreading fixed cost over a larger volume of output. Risk increases. Supply base reduction programs are almost always accompanied by rigorous supplier screening, selection, and certification programs. 双语PPT

Supplier Operational Integration Many different forms: 1. into another’s sales and ordering information; Detailed sales information. Cost reduction occurs because of reducing reliance on cost-inefficient practices, such as forecasting and expediting. 双语PPT

Supplier Operational Integration Many different forms: 2. Working together to identify processes. Continuous replenishment. Vendor-managed inventory. 双语PPT

Vendor Managed Inventory The supplier usually owns the inventory at the customer’s location The supplier manages the inventory by any means appropriate and plans shipment sizes and delivery frequency The buyer provides point of sale information to the supplier The buyer pays for the merchandise at the time of sale The buyer dictates the level of stock availability required 双语PPT 双语PPT 17

Supplier Operational Integration Many different forms: 3. Reduce total cost through two-way learning 双语PPT

The Pareto effect in procurement A small percentage of the materials, items, and services acquired account for a large percentage of the dollars spent. Many firms have pay attention to segmented purchase requirements. 双语PPT

4.3 Manufacturing perspective A firm’s manufacturing competency is based on: Brand power Volume The principle of economy of scale, which defines a relationship wherein the average cost of producing a product declines as its manufacturing volume increases. 双语PPT

and Varity As contrasted to economy of scale, manufacturing processes that feature variety rapidly switching production from one product to another while retaining efficiency are referred to as having economy of scope. Variety also refers to the range of product variations that are capable of being manufactured by using a given process. Constraints (TOC, theory of constraints) Lead-time (operational and inter-operational time) 2011-3-16 双语PPT

Manufacturing perspectives continued Constraints interact with volume and variety to create realistic manufacturing plans Capacity is how much can you produce in a given unit of time Equipment considers how flexible it is Is one particular piece a bottleneck? Setup/Changeover considers how quickly can you change from one variety of product to another Leadtime is the measure of elapsed time between release of a work order to the shop floor and completion of all work on the product to achieve ready-to-ship status 双语PPT

Alternative manufacturing strategies MTP (make-to-plan，make-to-stock作成存货 ), its strategies are characteristic of industries exploiting economy of scale gained from long production runs. MTO (make-to-order ), its strategies seek to manufacture to customer specification. 双语PPT