1. Chapter 8 Supply Chain Management and E-Business

2. Materials Management System in Manufacturing

3. Inventory Items in Annual-Dollar-Volume Order – Universal Motor Supply Company Stock NumberAnnual DemandUnit CostAnnual Dollar VolumePercent 40740,000$35.50$1,420,00059.53% 2101,000700.00700,00029.35 0212,00055.00110,0004.61 38820,0004.0080,0003.35 4134,40010.0044,0001.84 19550036.0018,0000.76 33040214.008,5600.36 11410043.004,3000.18 2742801.002800.01 3596000.251500.00 Totals$2,385,290~100.0%

4. ABC Classification – Universal Motor Supply Company 88.9% A Items (407 and 210) 9.8% 1.3% B Items (021, 388 and 413) C Items (195, 330, 114, 274 and 359)

5. ItemUnit CostAnnual DemandAnnual Cost A1.356,200 B53.00900 C5.2050 D92.00120 E800.002 F.255,000 G9,000.005 H15.0018,000 ABC Analysis Example

6. Annual CostClass% Annual Value

7. How ABC Analysis is Used DecisionsABC PurchasingExecutive Department Head Buyer Physical Inv. Counting DailyMonthlyAnnually Forecasting Several Models 1 Simple Model Guess Safety StockNone1 Week1 Month

8. Cycle Counting 250 working days per year On average, a full time worker can count 22 part types per day. How many part types per day should be counted? How many cycle counting workers are needed? # part types Counted # counts per year # part type counts/year % A100weekly B500monthly C3000quarterly

9. Supply Chain Management Vendor’s vendor Your vendor Your company Your customer Customer’s customer Material flow Information flow

10. What Information Should be Shared? Forecasts and sales data –Vendor  You  Customer Capacity and output changes –Vendor  You  Customer Sales promotion plans –Vendor  You  Customer Current inventory levels –Vendor  You  Customer Ideas for improvement –Vendor  You  Customer

11. Risk of Sharing Information  Vendors or customers might share your information with your competitors Try to Avoid Risk Establish long-term contracts with vendors and customers that requires confidentiality Relationships based on mutual trust

12. Examples of Supply Chain Management Partners and Innovations Wal-Mart Requires that all vendors communicate with them electronically (EDI) Shares forecasts and sales data with large vendors, such as Proctor & Gamble Results: shorter lead times and lower inventory costs

13. Examples of Supply Chain Management Partners and Innovations Ryder (trucking) Distributes vendor parts to Ford Motor Co. Installed Global Positioning Systems and computer chips on all their trucks Now they know exactly where trucks are Faster customer status response Early diagnosis of engine problems – reduced maintenance costs

14. Examples of Supply Chain Management Partners and Innovations UPS and Fedex Deliver antibiotics from Europe manufacturers to U.S. farmers Mfgs. postponed packaging of drugs and let UPS or Fedex package it on plane Faster lead time