Supply Chain Management Chapter 16 Supply Chain Management

Supply Chain Management Management of the network of suppliers, warehouses, operations, and retail outlets Supplier Warehouse Supplier Supplier Operations Retail Outlet Supplier Supplier Warehouse Supplier MTSU Management 362

Figure 16-1 Materials Management Management of the purchasing, storage, and movement of materials during production, and the distribution of finished goods Purchasing Receiving Storage Operations Production Distribution MTSU Management 362

Purchasing Interfaces Figure 16-2 Purchasing Interfaces Purchasing Legal Accounting Operations Data processing Design Receiving Suppliers MTSU Management 362

Purchasing Cycle Requisition received Supplier selected Order is placed Monitor orders Receive orders Purchasing Legal Accounting Operations Data processing Design Receiving Suppliers MTSU Management 362

Value Analysis vs Outsourcing Examination of the function of purchased parts and materials in an effort to reduce cost and/or improve performance Outsourcing Buying goods or services from outside sources rather than making or providing them in-house MTSU Management 362

Cost to make vs cost to buy Stability of demand Quality from suppliers Outsourcing Cost to make vs cost to buy Stability of demand Quality from suppliers Maintaining close control Idle capacity available MTSU Management 362

Goals of Just-in-Time Purchasing elimination of unnecessary activities elimination of in-plant inventory exposes problems elimination of in-transit inventory location of supplier consignment quality and reliability improvement MTSU Management 362 11 11 13 13 11 11 11 11 11 11 11 11

Characteristics of JIT Purchasing (1 of 2) Suppliers Quantities Few suppliers Nearby suppliers Repeat business with same suppliers Active use of analysis to enable desirable suppliers to become/stay price competitive Clusters of remote suppliers Competitive bidding mostly limited to new part numbers Steady output rate(a desirable prerequisite) Frequent deliveries in small lot quantities Long-term contract agreements Minimal release paperwork Delivery quantities vary from release to release but fixed for whole contract term Little or no permissible overage or underage of receipts MTSU Management 362 12 12 12 12 12 12 12 12 12 12 12 12

Characteristics of JIT Purchasing (2 of 2) Quality Shipping Minimal product specification imposed on supplier Help suppliers to meet quality requirements Close relationships between buyers’ and suppliers’ quality assurance people Suppliers encouraged to use process control charts instead of lot sampling inspections Scheduling of inbound freight Gain control by use of company-owned or contract shipping, contract warehousing, and trailers for freight consideration/store where possible – instead of using common carriers MTSU Management 362 13 13 11 13 11 13 13 13 13 13 13 13

Determining Prices Published price lists Competitive bidding fixed or predetermined prices Competitive bidding e.g. government purchases of standard goods or services Negotiating win-win transaction MTSU Management 362

Centralized vs Decentralized Purchasing Purchasing is handled by one special department Decentralized purchasing Individual departments or separate locations handle their own purchasing requirements MTSU Management 362

Evaluating sources of supply Supplier audits Supplier certification Suppliers Choosing suppliers Evaluating sources of supply Supplier audits Supplier certification Supplier partnerships MTSU Management 362

Considerations When Choosing a Supplier Lead times and on-time delivery Quality and quality assurance Flexibility Location Price Product or service charges Reputation and financial stability Other accounts MTSU Management 362

Evaluating Sources of Supply Vendor analysis: Evaluating the sources of supply in terms of price, quality, reputation, and service Vendor Score Sheet MTSU Management 362

Means of keeping current on suppliers’ performance Supplier Audits Means of keeping current on suppliers’ performance Factors covered in an audit management style quality assurance materials management design process used process improvement policies procedures for corrective action and follow-up MTSU Management 362

Supplier Certification Detailed examination of the policies and capabilities of a supplier Verifies that a supplier meets or exceeds the requirements of a buyer Use of certified suppliers can eliminate much or all of the inspection and testing of delivered goods ISO 9000 MTSU Management 362

Supplier as a Partner MTSU Management 362

Supplier Partnerships Ideas from suppliers could lead to improved competitiveness Reduce cost of making the purchase Reduce transportation costs Reduce production costs Improve product quality Improve product design Reduce time to market Improve customer satisfaction Reduce inventory costs Introduce new products or services MTSU Management 362

Movement within the facility Incoming and outgoing shipments Logistics Movement within the facility Incoming and outgoing shipments Evaluating shipping alternatives Bar coding EDI Distribution Requirements Planning (DRP) JIT Deliveries 214800 232087768 MTSU Management 362 14s-10

Materials Movement Figure 16-3 Customer Supplier Warehouse Work center Storage Work center Storage Storage Customer Supplier Warehouse Shipping Receiving MTSU Management 362