1. Chapter4 Procurement and Manufacturing

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

3. 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

4. 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

5. 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

6. Procurement

7. 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

8. 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

9. 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

10. 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

11. 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

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

13. 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

14. 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

15. 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

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

17. 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

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

19. 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

20. 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

21. 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)
双语PPT

22. 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

23. 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