pom ch-25

PRODUCTION AND OPERATIONS

MANAGEMENT

Chapter 25SUPPLY CHAIN MANAGEMENT

Himalaya Publishing HouseProduction and Operations ManagementBy K. Aswathappa & K. Shridhara Bhat

Chapter 25Supply Chain Management

Supply Chain Management Supply chain Management: Integration of various

activities encompassed by the supply chain through improved supply chain relationships to achieve a sustainable competitive advantage.

Supply chain: A sequence of suppliers, warehouses, operations and retail outlets, i.e., Organistions that are involved in producing and delivering a product or service.

A basic purpose of supply chain management is to control inventory by managing the flow of materials throughout the supply chain.



Objectives of a Supply Chain The objectives are :

1. To maximise the overall value generated. The value a supply chain generates is the difference between what the final product is worth to the customer and the effort the supply chain expends in filling the customer’s request.

2. To achieve maximum supply chain profitability. Supply chain profitability is the total profit to be shared across all supply chain stages.

3. To reduce the supply chain costs to the minimum possible level.



Activities Involved in Supply Chain Management

Four major activities involved in supply chain management are:1. Purchasing

2. Logistics

3. Warehousing

4. Expediting.



Purchasing Cycle

Series of steps that begins with a request for purchase and ends with notification of shipment received by the customer in satisfactory condition.

Outsourcing

Out sourcing: Buying goods or services instead of producing or providing them in-house..

JIT Purchasing

JIT purchasing involves long-term relationship with a few suppliers.



Evaluating Sources of Supply (Vendor Analysis)

Vendor analysis is the process of evaluating vendors in terms of price, quality, reputation and service.

Supplier Partnerships

Supplier partnership is crucial to the success of supply chain management.

Logistics

Logistics: The movement of materials and information in a supply chain.



Warehousing

Warehousing includes storing, dispersing, ordering and accounting for all kinds of materials used for production and distribution.

Contemporary Developments in Warehousing• Bar Coding• Electronic data interchange• Distribution requirement planning• JIT deliveries



Supply Chain Strategies

Supply chain strategies include

1. Multiple suppliers

2. Few suppliers

3. Vertical integration

4. Keiretsu network

5. Virtual companies



Supply Chain Strategies

Supply chain strategies include1. Multiple suppliers

2. Few suppliers

3. Vertical integration

4. Keiretsu network

5. Virtual companies



Managing the Supply Chain1. Postponement

2. Channel assembly

3. Drop shipping and special packaging

4. Blanket orders

5. Invoiceless purchasing

6. Electronic ordering and funds transfer

7. Stockless purchasing8. Standardisation



Benchmarking Supply Chain Management

Process Tools for Supply Chain Management

A. Make-or Buy decisions Make-or-Buy Decision : The most basic supply chain

management decision as to whether to make a given product in-house or buy it from a supplier..

B. Supplier scheduling

C. Value analysis/Value engineering

D. Supplier Certification and Evaluation



Supply Chain Dynamics

Three keypoints about supply chain dynamics are:

1. The supply chain is a highly interactive system.

2. There is an accelerator effect of demand changes.

3. The best way to improve the supply chain is to reduce the total replinishment time and to feed back actual demand information to all levels.



Coordination in the Supply Chain

To improve efficiency and effectiveness of a supply chain it is crucial to increase co-ordination both across firms and within firms which are members of the supply chain.



Measuring Supply Chain Performance

Four measures of supply chain performance are:1. Delivery

2. Quality

3. Time

4. Cost



Structural Improvement

There are two basic ways to improve supply chains, by changing structure or infrastructure.

Infrastructure Structural change in a supply chain involves :

• Vertical Integration• Process Simplification• Configuration• Changes• Product redesign• Outsourcing logistics



Improvements in Infrastructure Infrastructure changes in supply chain

involves1. Cross-functional teams

2. Partnerships

3. Set-up time reduction

4. Information systems

5. Cross-docking



Virtual supply chain

Virtual Supply Chain: A supply chain which consists of at least one virtual company that co-ordinates all of the activities of the supply chain.

pom ch-25

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