**Operations ManagementTopic 4 Supply Chain Management, JIT, Kanban and Lean Manufacturing

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**Learning ObjectivesWhen you complete this chapter you should be able to:Explain the strategic importance of the supply chain or what is the supply chain managementAble to discuss the need and benefits of Supply Chain Management

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*NY - KJP 585 2009*The Supply Chains Strategic Importance (What is Supply Chain Management)Supply chain management is the integration of the activities that a) procure materials and services,b) transform them into intermediate goods or the final product, c) and deliver them to customers

NY - KJP 585 2009*

*NY - KJP 585 2009*Supply Chain ManagementTransportation serviceGetting Suppliers Distributors systemWarehousing and inventory systemProduct information, forecasting & credit advice

For themselves and customerImportant activities include determining

NY - KJP 585 2009*

*NY - KJP 585 2009*Supply Chain Requirements in Global EnvironmentSupply chains in a global environment (international market) must be able to

React to changes in parts availability, distribution, shipping channels, import duties, and currency ratesVolcano eruption disturb air transportation, send by shipping at earlier scheduleUse the latest communication technologies to schedule and manage the shipment of parts in (import) and finished products out (export)Bring forward shipping scheduleStaff to handle duties, freight, customs and local authorityExpertise in air and sea delivery, expertise in tracking

NY - KJP 585 2009*

**Roles of Supply Chain ManagementImprove supply operations company focused to supply business Stable global outsourcing com. get raw material from specialist com. & international supplierDecrease transportation costs use best transport rate and transportation methodManaging by e-commerce good traceability expertManage Inventories for companies provide specialize storage & warehousing services

Table 11.5

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**Benefits of Supply Chain Management

FOR CUSTOMERSLower inventories (less storage cost = less cost)Higher productivity (they can focus to business, more efficient)Shorter lead times (supply on time, JIT)Higher profits(business efficiency)

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**How to Create an Effective Supply ChainDevelop strategic objectives JIT deliveryForm strategic partnership - Transport-warehouse-distributor teamIntegrate and coordinate activities in the supply chain, supplier and customers Coordinate planning and execution across the supply chain Land-sea-air coordination

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**Managing the Supply ChainMutual agreement on goalsTrustCompatible organizational cultures

The management issues in controlling a supply chain involving many organizations

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**Factors in Choosing a SupplierQuality assurance eg: Halal qualityAble to fulfill demand eg: can deliver on schedule, customize size deliveryLocation advantage eg: close by & less transport costPrice - eg offer good discount rateReputation and financial stability eg brandedSupply timing Short Lead times and on-time delivery

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*NY - KJP 585 2009*OutsourcingGet supply from outside vendorsTransfers (traditional internal activities) to outside vendorsEg: Chicken rice, get slaughtered chicken from supplier, they are specialist in chickenEg. Car manufacturer get tires from tire makersSpecialized vendors are efficientEfficiency that comes with specializationEg: Chicken supplier supply quality chicken at good price, better than own productionOutsource firms eg: Information technology-(computer, software developer, website developer), Accounting, company secretary, auditorLegal, logistics, production etc.

NY - KJP 585 2009*

**E-Procurement -1Uses the internet to purchase Credit card payment, pay for goods, servicesElectronic banking and funds transferBank website secured electronic data interchange (EDI)

Online catalog, fast quotationCatalogs provided by vendorsExchanges provided by buyers

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**E-Procurement - 2 Online AuctionsMaintained by buyers, sellersLow barriers to entry, Small feesEasy accessOnline Request For QuotesConvenient to make requests for quotes (RFQs), auto respond fast responsemore supplier, more selectionReal-time inventory tracking GPS system to track a container, a lorry, ship etc

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**Example of Internet Trading ExchangesHealth care products amway.com, cosway.com, ghx.comDefense and aerospace products exostar.comFood, beverage, consumer products transora.comSteel and metal products metalsite.comHotels avendra.com

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**Learning Objectives for JITAble to understand the concept of JIT, TPS and Lean ProductionAble to discuss the elements and benefits of JITAble to link the application of Kanban in JIT systemsAble to discuss the steps in transition into JIT systems

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**Just - in -Time (JIT) -1A coordinated processing system in which goods and services are performed, just as they are needed.JIT is a pull demand system - order by customerThe ultimate goal of JIT is a balanced systemAchieves a smooth, rapid flow of materials through the system

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**Just-In-Time (JIT)A strategy for improving operationsMaterials arrive where they are needed when they are neededIdentifying problems,reduce waste, costs and storageRequires a buyer-supplier coordination

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**Just-In-Time, TPS, and Lean Operations- defineJIT is a management problem solving by planning On-Time-Supply and reduced inventoryToyota Production System (TPS) emphasizes continuous improvement, respect for people, and standard work practicesLean production supplies the exact quantity to customer without waste

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**Benefits of Just-In-Time SystemsReduced inventory levels minimal storageHigh quality - repeat order = if good qualityFlexibility - customer interest firstReduced lead times lead time accountedIncreased productivity focused businessIncreased equipment utilizationReduced scrap and rework exact quantityReduced space requirements min. storageReduced setup costs routine, no new installationGood vendor relationships delivery promise

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**Elements of JITProduct Design Standard modular designProcess Design Small lot size 2. Reduced set-up time3. Flexible production 4. Less inventoryPersonnel/organizational elements Training lead to improvement 2. Better skillManufacturing planning and control Pull system 2. Kanban system

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**KanbanKanban is the Japanese word for card (signal or visible record)The card (or signal) is an authorization for the next container of material to be producedA sequence of kanbans pulls material through the process

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**KanbanUser removes a standard sized containerSignal is seen by the producing department as authorization to replenish

Figure 16.8

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**Advantages of KanbanReduced faulty or delayed material no fault no delayProblems are visible quick to correctCorrect poor inventory supplier on stand-by to actStandardized delivery - containers size, standard package

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**Kanban -Transitioning to a JIT SystemGet commitment from managementDecide which parts need most effortObtain support of workersStart by reducing setup times & costsConvert supplier to JITPrepare for obstacles supplier resistant

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