Supply Chain Management And E-Business

I NTRODUCTION Materials - any commodities used directly or indirectly in producing a product or service. Raw materials, component parts, assemblies, finished goods, and supplies Supply chain - the way materials flow through different organizations from the raw material supplier to the finished goods consumer.

S UPPLY C HAIN FOR S TEEL IN AN A UTOMOBILE D OOR MININGCOMPANY Mines iron ore STEELMILL Forms steel ingot STEELCOMPANY Forms sheet metal IronoreSteelingots AUTOMOTIVESUPPLIER Makes door AUTOMOBILEMANUFACTURER Makes automobile CARDEALERSHIP Does preparation Cardoor Car Car FINALCONSUMER Drives automobile Prepared Preparedcar Sheetmetal

S UPPLY C HAIN M ANAGEMENT Refers to all the management functions related to the flow of materials from the company’s direct suppliers to its direct customers. Includes purchasing, traffic, production control, inventory control, warehousing, and shipping. Two alternative names: Materials management Logistics management

S UPPLY C HAIN M ANAGEMENT IN A M ANUFACTURING P LANT ReceivingandInspectionRawMaterials, Parts, and In-processWare-HousingProductionFinishedGoodsWare-housingInspection,Packaging,AndShipping Suppliers Customers Materials Management PurchasingProductionControl Warehousing and Inventory Control Shipping and Traffic Physical materials flow Information flow

P URCHASING Factors increasing the importance of purchasing today: Tremendous impact of material costs on profit (60-70% of each sales dollar is paid to material suppliers) Popularity of just-in-time manufacturing (supply deliveries must be exact in timing, quantity, and quality) Increasing global competition (growing competition for scarce resources, and a geographically “stretched-out” supply chain)

M ISSION OF P URCHASING Develop purchasing plans for each major product or service that are consistent with operations strategies: Low production costs Fast and on-time deliveries High quality products and services Flexibility

P URCHASING M ANAGEMENT Maintain data base of available, qualified suppliers Select suppliers to supply each material Negotiate contracts with suppliers Act as interface between company and suppliers Provide training to suppliers on latest technologies

A DVANTAGES OF C ENTRALIZED P URCHASING Buying in large quantities - better prices More clout with suppliers - greater supply continuity Larger purchasing department - buyer specialization Combining small orders - less order cost duplication Combining shipments - lower transportation costs Better overall control

P URCHASING P ROCESS Material Requisition Request for Quotations Select Best Supplier Purchase Order Receive and Inspect Goods From purchasing, to potential suppliers From any department, to purchasing Based on quality, price, lead time, dependability From purchasing, to selected supplier From supplier, to receiving, quality control, warehouse

B UYERS ’ D UTIES Know the market for their commodities Understand the laws.... tax, contract, patent..… Process purchase requisitions and quotation requests Make supplier selections Negotiate prices and conditions of sale Place and follow-up on purchase orders Maintain ethical behavior

M AKE - OR -B UY A NALYSIS Considerations in make-or-buy decisions: Lower cost - purchasing or production? Better quality - supplier or in-house? More-reliable deliveries - supplier or in-house? What degree of vertical integration is desirable? Should distinctive competencies be outsourced?

L OGISTICS Logistics usually refers to management of: the movement of materials within the factory the shipment of incoming materials from suppliers the shipment of outgoing products to customers

M OVEMENT OF M ATERIALS WITHIN F ACTORIES IncomingVehiclesIncomingVehiclesReceivingDockReceivingDockQualityControlQualityControlWarehouseWarehouse WorkCenterWorkCenter Other Work Centers CentersPackagingPackagingFinishedGoodsFinishedGoods ShippingShippingShippingDockShippingDockOutgoingVehiclesOutgoingVehicles The typical locations from/to which material is moved: The typical locations from/to which material is moved:

S HIPMENTS T O AND F ROM F ACTORIES Traffic Traffic departments routinely examine shipping schedules and select: shipping methods time tables ways of expediting deliveries Traffic management is a specialized field requiring technical training in Department of Transportation (DOT) and Interstate Commerce Commission (ICC) regulations and rates.

S HIPMENTS T O AND F ROM F ACTORIES Distribution Distribution, or physical distribution, is the shipment of finished goods through the distribution system to customers. A distribution system is the network of shipping and receiving points starting with the factory and ending with the customers.

S HIPMENTS T O AND F ROM F ACTORIES Distribution Requirements Planning DRP is the planning for the 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 the MPS at the factory.

S HIPMENTS T O AND F ROM F ACTORIES 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

Shipments To and From Factories l Distribution Resource Planning l Distribution resource planning extends DRP so that the key resources of warehouse space, workers, cash, and vehicles are provided in the correct quantities at the correct times.

A NALYZING S HIPPING D ECISIONS 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

I NNOVATIONS IN L OGISTICS New developments affecting logistics include: All-freight airports Inter-modal shipping In-transit rates Consolidated shipments Air-freight and trucking deregulation Advanced logistics software

W AREHOUSING Warehousing is the management of materials while they are in storage. Warehousing activities include: Storing Dispersing Ordering Accounting

W AREHOUSING Record keeping within warehousing requires a stock record for each item that is carried in inventories. The individual item is called a stock-keeping unit (SKU). Stock records are running accounts that show: On-hand balance Receipts and expected receipts Disbursements, promises, and allocations

I NVENTORY A CCOUNTING In the past, inventory accounting was based on: periodic inventory accounting systems -- periodic (end-of-day) updating of inventory records physical inventory counts -- periodic (end-of-year) physical counting of all SKUs at one time Today, more and more firms are using: perpetual inventory accounting systems -- real-time updating of records as transactions occur cycle counting -- ongoing (daily or weekly) physical counting of different SKUs

M EASURING THE P ERFORMANCE M ATERIALS M ANAGERS 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