Supply Chain Management

Introduction

Supply Chain Management

Management of the flow of goods or services between entities in the chain to realize delivery of end products or

services, satisfying customers at minimum cost.

OR Set of approaches utilized to efficiently integrate suppliers, manufacturers, warehouses and stores, so that merchandise

is produced and distributed in the right quantities, to the right locations at the right time in order to

minimize system wide costs while satisfying service level requirements.

Supply Chain Management

Supply Chain Management1. PURCHASING2. MANUFACTURING3. WAREHOUSING4. INVENTORY MANAGEMENT5. LOGISTICS

Supply Chain Management

Supply Chain ManagementMore Realistic Supply Chain

Flow within a Supply Chain

Cash Flow

Material Flow

Consumer

Retailer

FactorySupplier

Supplier Distr. Center

Retailer

Information Flow

Returned Goods

Why is SCM difficult?Different facilities may have different, conflicting

objectives◦ Suppliers want manufacturers to commit themselves to

purchasing large quantities in stable volumes with flexible delivery dates

◦ Manufacturers want large production runs◦ Warehouses and Distribution Centers want to reduce

inventory ◦ Reduction in inventory levels increase transportation costs

Supply Chain Management

Supply Chain Management

Conclusion Supply chains compete, not companies Most of the opportunities for cost reduction and

value enhancement lie at the interface between supply chain partners

Supply chain integration implies process integration

Purchasing

Supply Chain Management

Purchasing

The acquisition of goods and services needed to support the various activities of an organization, at the best possible cost and from reliable suppliers.

Supply Chain Management

Purchasing Topics• Importance of Purchasing Today• Purchasing Processes• Import Documentation• Negotiation Skills• Make – or – Buy Analysis• Ethics in Buying

Supply Chain Management

Importance of purchasing:• Competition • Material cost• Lead time• Customer Demand• Quality

Supply Chain Management

Negotiation

Supply Chain Management

Negotiation Definition and Comments:

 

The process whereby two or more parties decide what each will give and take in an Exchange between them.” (Lysons & Farrinton)

“Negotiation is the process by which we search for terms to obtain what we want from somebody who wants something from us.”

(Total Success Training)  “Negotiation is discussing or bargaining in order to reach

agreement.” (Owen)

Supply Chain Management

Types of negotiation: Adversarial Negotiation Collaborative Negotiation Adversarial Negotiation (distributive or win-losenegotiation)Collaborative Negotiation (integrative or win-win negotiation)

Supply Chain Management

MakeOR

Buy

Supply Chain Management

Why would we buy something(items, components, services)

when we could provide it ourselves?

Supply Chain Management

Reasons to buy: The unit cost is cheaper, We don't use it enough, We don't have space, We don't understand the technology, We don't have the skill, It's not our core business/expertise, It's expensive to set up the process,

Supply Chain Management

Reasons to provide in-house: The unit cost is cheaper, It's critical to the business, Retain specialist knowledge/skills, We have control over the supply, Quality issues are critical, No suitable supplier, It's part of our core business/expertise

Supply Chain Management

Manufacturing

Supply Chain Management

Manufacturing is all about converting raw material into consumer or industrial products.

A firms manufacturing competency is based on Brand power Volume Variety Lead time

Supply Chain Management

WarehousingSupply Chain Management

Warehouse A warehouse is a commercial building for storage of

goods.

They are usually large plain buildings in industrial areas of cities and towns.

Today warehouses are not used to store things but rather to receive, breakdown, repackage and distribute components to a manufacturing location or finished products to customers

Supply Chain Management

FUNCTIONS OF A WAREHOUSE

Supply Chain Management

Receiving, Storing, switching, change SKU size, Allows stock rotation (FIFO, LIFO), Buffer stock for customers – retail or commercial, Command and control centre – inventory control, Enables off-the-shelf (JIT) for customers, Provides a more-local 'Market Presence'.

FUNCTIONS OF A WAREHOUSE Consolidation and Break-Bulk Assortment (Cross Docking, Mixing) Postponement (Packaging, Labelling) Stockpiling (Seasonal, Bulk-Buy) Reverse Logistics

Supply Chain Management

Plant 1

Plant 2

Plant 3

Consolidation Warehouse Store B

Store C

Store A

Supply Chain Management

PlantBreak-BulkWarehouse Store B

Store C

Store A

Supply Chain Management

CROSS-DOCK =

No storage(?)Cross-dock (from multiple suppliers):● goods sorted as they arrive,● goods moved across dock and loaded onto trailers,● benefits - optimal vehicle use and low handling

costs,● requires sophisticated planning techniques.

Supply Chain Management

Supply Chain Management

Cross Docking• Transferring goods

• from incoming trucks at receiving docks

• to outgoing trucks at shipping docks

• Avoids placing goods into storage

• Requires suppliers provide effective addressing (bar codes) and packaging that provides for rapid transshipment

In-comin

g Outgoing

Safety and Maintenance Health and safety Incidents Environment

Supply Chain Management

Warehouse management System (WMS)

• Computer software designed to manage the storage and movement of items throughout the warehouse.

Supply Chain Management

Inventory Management

Supply Chain Management

Supply Chain Management

Inventory is one of the most expensive assets of many companies.

It represents as much as 60% of total invested capital.

Inventory Management

Why do we hold Inventory? Improve customer service Reduce certain costs such as

◦ ordering costs◦ stockout costs

Contribute to the efficient and effective operation of the production system

Supply Chain Management

Why we do not hold Inventory? Certain costs increase such as

◦ Carrying costs, Handling cost◦ Labor Cost◦ Warehouse Cost◦ Logistics Cost◦ cost of return on investment◦ reduced-capacity costs (Storage, warehouse)◦ cost of production problems (Excess Inventory)

Supply Chain Management

Two Fundamental Inventory Decisions

How much to order of each material when orders are placed with either outside suppliers or production departments within organizations

When to place the orders

Supply Chain Management

Logistics

Supply Chain Management

Logistics is“The process of planning, implementing and

controlling the efficient, effective flow and storage of goods, services and related information from point of origin to point of consumption for the purpose of customer Satisfaction”

(council of logistics management)

Supply Chain Management

THE PURPOSE OF LOGISTICS SYSTEM Right quantities of the Right goods to the Right places at the Right time in the Right condition at the Right cost.

Supply Chain Management

A Simple Logistics Channel

Supply Chain Management

Raw materials

supply point

Raw materials

supply point

Production facility

MarketCustomers

MarketCustomers

MarketCustomers

Product Flow

Supply Chain ManagementA Multi-Echelon Logistics Channel

Raw materials

supply point

Raw materials

supply point

Production facility

Retailer

Product Flow

Retailer

Retailer

Retailer

Retailer

Retailer

Warehouse

Warehouse

Raw materials

supply point

Two Main Types Inbound logistics:  The management of materials

from suppliers and vendors into production processes or storage facilities.

Outbound Logistics:  The process related to the movement and storage of products from the end of the production line to the end user.

Supply Chain Management

Steps toward improving Logistics performance

• Make transport a customer service activity instead of a cost

• Reduce your stock pipeline to cut costs and improve service (go easy by low inventory)

• Pick as soon as you can (pick once, pick right and cut the cost time and error)

• Is everything you are doing is really necessary

Supply Chain Management