© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X Chapter 13 MANAGING THE SUPPLY CHAIN Terry Hill

© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X OVERVIEW WHAT is a supply chain? Supply chain MANAGEMENT The MAKE-OR-BUY decision The REALITY of make-or-buy decisions ADVANTAGES and DISADVANTAGES of making and buying Domestic vs offshore SOURCING options and strategic fit ALTERNATIVES to the make-or-buy option

© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X OVERVIEW Supply chain management ISSUES DEVELOPING the supply chain Aspects of CHANGE E-PROCUREMENT Process TOOLS within supply chain management Distribution and transportation SYSTEMS E-COMMERCE

© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X WHAT IS A SUPPLY CHAIN? Exhibit 13.1 from page 480 (Examples)

© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X WHAT IS A SUPPLY CHAIN? (Examples)

© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X SUPPLY CHAIN MANAGEMENT Exhibit 13.2 from page 481 (Managing the supply chain)

© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X THE MAKE-OR-BUY DECISION Retaining CORE TECHNOLOGIES STRATEGY considerations - reflecting order-winners and qualifiers Impact on SPAN of process Service and product VOLUMES GLOBALISATION of world trade

© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X THE REALITY OF MAKE-OR-BUY DECISIONS HISTORY Once made, make-or-buy decision often remain unchallenged Dominance of COST and TECHNOLOGY arguments Initial check is whether have technical capability in-house Then comes the issue of cost Other order-winners and qualifiers are not part of the review

© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X ADVANTAGES AND DISADVANTAGES OF MAKING AND BUYING Benefits of VERTICAL INTEGRATION or providing more in-house BENEFITS of outsourcing DISADVANTAGES of outsourcing

© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X ADVANTAGES AND DISADVANTAGES OF MAKING AND BUYING Improved MARKET INTELLIGENCE Able to forecast trends more accurately More readily available technological INNOVATIONS and OPTIONS Increased CONTROL over firms competitive environment Reduce dependency on suppliers Forward integration and market penetration Low cost OPPORTUNITIES (Benefits of vertical integration)

© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X ADVANTAGES AND DISADVANTAGES OF MAKING AND BUYING Freed RESOURCES Reduced COSTS Easier to control costs - SIMPLER Superior DESIGN - suppliers as specialists Market PENETRATION of sound design Access to CAPACITY Up-to-date TECHNOLOGY Access to WORLD-CLASS capabilities Increased focus on own CORE TASKS (Benefits of outsourcing)

© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X ADVANTAGES AND DISADVANTAGES OF MAKING AND BUYING Loss of CONTROL - order-winners and qualifiers Increased VULNERABILITY Intellectual property - EXPOSED to outside Reversibility - difficult to CHANGE decision in the future Needs new management SKILLS (Disadvantages of outsourcing)

© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X DOMESTIC VS OFFSHORE SOURCING OPTIONS AND STRATEGIC FIT Exhibit 13.3 from page 487 (Sourcing location and discounts)

© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X DOMESTIC VS OFFSHORE SOURCING OPTIONS AND STRATEGIC FIT Exhibit 13.4 from page 487 (Sourcing location and flexibility)

© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X ALTERNATIVES TO THE MAKE-OR-BUY OPTION JOINT ventures CO-SOURCING Non-equity-based COLLABORATION

© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X ALTERNATIVES TO THE MAKE-OR-BUY OPTION (Joint ventures as a viable alternative) Exhibit 13.5 from page 489

© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X ALTERNATIVES TO THE MAKE-OR-BUY OPTION (Reasons for joint ventures)

© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X SUPPLY CHAIN MANAGEMENT ISSUES TRENDS GLOBALISATION Incorporating UNCERTAINTY Types of supplier RELATIONSHIPS

© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X SUPPLY CHAIN MANAGEMENT ISSUES (Trends) Exhibit 13.7 from page 491

© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X SUPPLY CHAIN MANAGEMENT ISSUES (Trends) Exhibit 13.8 from page 492

© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X SUPPLY CHAIN MANAGEMENT ISSUES (Types of supplier relationships) Exhibit from page 493

© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X SUPPLY CHAIN MANAGEMENT ISSUES (Types of supplier relationships) TRAWLING the market Ongoing RELATIONSHIPS PARTNERSHIPS Strategic ALLIANCES Backward INTEGRATION

© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X SUPPLY CHAIN MANAGEMENT ISSUES (Strategic alliances) Exhibit from page 494

© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X DEVELOPING THE SUPPLY CHAIN 1.ORIGIN 2.INTEGRATING activities within a business 3.CO-ORDINATING activities between businesses 4.SYNCHRONISING across the supply chain PHASES

© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X DEVELOPING THE SUPPLY CHAIN (Origin) Exhibit from page 496

© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X DEVELOPING THE SUPPLY CHAIN (Integrating activities) Exhibit from page 496

© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X DEVELOPING THE SUPPLY CHAIN (Co-ordinating activities) Exhibit from page 496

© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X DEVELOPING THE SUPPLY CHAIN (Synchronising across the supply chain) Exhibit from page 497

© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X DEVELOPING THE SUPPLY CHAIN (Key issues) Overcoming the BARRIERS to integration Helps RESPOND to shorter lead-times Eliminates COST - inventory and duplication Moving INFORMATION, not inventory

© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X ASPECTS OF CHANGE Effective CONSUMER response Changes in ATTITUDE Increasing use of IT Strategic PARTNERING

© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X ASPECTS OF CHANGE (Phases in changing attitudes to suppliers)

© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X ASPECTS OF CHANGE (Increasing use of IT) 1.MAINFRAMES 2.Personal Computers (PCs) 3.NETWORK computing 4.E-COMMERCE - issues Fraud Vulnerability Focusing on non-value-added activities PHASES

© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X ASPECTS OF CHANGE (Evolving role of IT) Exhibit from page 501

© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X ASPECTS OF CHANGE (Fraud)

© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X ASPECTS OF CHANGE (Vulnerability) Exhibit from page 502

© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X E-PROCUREMENT Changing CULTURE more than technology Electronic CATALOGUES at heart of development BENEFITS Increased contract compliance Leveraging the purchasing spend Lower processing costs Increased involvement of people Optimising corporate tax savings Provides early e-business success

© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X E-PROCUREMENT (System overview) Exhibit from page 505

© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X PROCESSING TOOLS WITHIN SUPPLY CHAIN MANAGEMENT SOURCING DEVELOPING supplier base Supplier SELECTION Internal review Evaluation Process MAINTAINING supplier base

© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X PROCESSING TOOLS WITHIN SUPPLY CHAIN MANAGEMENT (Sourcing) Good suppliers MORE THAN providers of goods and services INVALUABLE resource to an organisations success Suppliers are part of SUPPLY CHAIN

© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X PROCESSING TOOLS WITHIN SUPPLY CHAIN MANAGEMENT (Developing the supplier base) IN-HOUSE supplier information files Supplier CATALOGUES TRADE registers, directories and journals Trade EXHIBITIONS Professional COLLEAGUES

© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X PROCESSING TOOLS WITHIN SUPPLY CHAIN MANAGEMENT (Supplier selection) INTERNAL REVIEW Make-up of team EVALUATION Viability of supplier organisation Technical know-how of supplier Assess managerial capabilities Assess operations capabilities Check how well meets relevant order-winners and qualifiers

© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X PROCESSING TOOLS WITHIN SUPPLY CHAIN MANAGEMENT (Supplier selection) PROCESS Site visits Checking specific capabilities - e.g. ISO 9000 and future growth potential Selecting the supplier

© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X PROCESSING TOOLS WITHIN SUPPLY CHAIN MANAGEMENT (Weighed-factor approach)

© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X PROCESSING TOOLS WITHIN SUPPLY CHAIN MANAGEMENT (Maintaining the supplier base) Agree performance MEASURES Both customer and supplier keep RECORDS of performance Regular MEETINGS

© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X DISTRIBUTION AND TRANSPORTATION SYSTEMS (Comparison of systems)

© AMD Publishing/ T. Hill 2005 T. Hill, Operations Management 2e. Palgrave Macmillan ISBN: / X E-COMMERCE B2C and B2B opportunities Changing GOALS Exhibit from page 513