supply chain management introduction. session agenda 1) introduction to module 2) assessments 3)...
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Supply Chain Management
Introduction
Session Agenda1) Introduction to module2) Assessments3) Source of information Text Books On-line sources Digital Library
Supply Chain Management
Text Books Lysons, K. Farrington, B. Purchasing and
Supply Chain Management. FT Prentice Hall. 7th Edition 2006
Slack, N et al. Operations Management. FT Prentice Hall. 4th Edition 2004
Donald J. Bowersox, David J. Closs, M. Bixby Cooper, Supply Chain Logistics Management, McGraw-Hill, First Edition.
Simchi-Levi, D and E and Kaminsky, P. (2003), Designing and Managing the Supply Chain, McGraw-Hill, Second Edition
Supply Chain Management
Supply Chain ManagementManagement 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 ManagementMore Realistic Supply Chain
Flow within a Supply Chain
Cash Flow
Material Flow
Consumer
Retailer
FactorySupplier
Supplier Distr. Center
Retailer
Information Flow
Returned Goods
EXTERNAL
SUPPLIER
INFORMATION
PAYMENT £££
GOODS/SERVICES
A BUSIN
ESS
EXTERNAL
CUSTOMER
GOODS/SERVICES
INFORMATION
PAYMENT £££
Supply Chain Management
Why is SCM difficult?1. 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 competitiveness is based upon the value-added activities through the SC
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 professional's goal to a company
should be to provide:
The best pricing Communication Research in finding sources Supplier performance Evaluation Service level agreements (SLA’s)
Supply Chain Management
Purchasing Topics to Cover:• Importance of Purchasing Today• Purchasing Processes• Letter of Credit• 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
Cost of manufacturing company, 1979 Cost of same manufacturing company, 1999
The bigger the percentage of total spend is allocated to purchasing, the bigger the
potential saving to the organisation by cutting the purchasing costs. (Lysons (2000), pp3-4)
Supply Chain Management
Labour
45%
Other costs
17%
Bought-out materials, components, etc.
38%
Labour
22%
Other costs
18%
Bought-out materials, components, etc.
60%
Cost of a manufacturing company, 1979 Costs of the same manufacturing company, 1979
Labour
45%
Other costs
17%
Bought-out materials, components, etc.
38%
Labour
45%
Other costs
17%
Bought-out materials, components, etc.
38%
Labour
22%
Other costs
18%
Bought-out materials, components, etc.
60%
Labour
22%
Other costs
18%
Bought-out materials, components, etc.
60%
Cost of a manufacturing company, 1979 Costs of the same manufacturing company, 1979
Single SourcingAdvantages Potentially better quality because more
SQA possibilities. Strong relationships Greater dependency encourages more
commitment and effort. Better communication. Easier to cooperate on new
product/service development. More scale economies. Higher confidentiality.
Disadvantages More vulnerable to disruption if a failure
to supply occurs. Individual supplier more affected by
volume fluctuations. Supplier might exert upward pressure on
prices if no alternative supplier is available.
Multi-sourcingAdvantages Purchaser can drive price down by
competitive tendering. Can switch sources in case of supply
failure. Wide sources of knowledge and
expertise to tap.
Disadvantages Difficult to encourage commitment
by supplier. Less easy to develop effective SQA. More effort needed to communicate. Suppliers less likely to invest in new
processes. More difficult to obtain scale
economies.
Supply Chain Management
Purchasing Process
• Recognize, describe and define the need• Transmit the need (requisitions)• Determine sources, investigate, and select
supplier/analyze • bids• Prepare and issue the PO• Follow-up the order (including expediting and de-• expediting) • Receive and inspect the material • Clearance of the invoice and payment to supplier
Supply Chain Management
Supply Chain Management
The purchasing function brings together the operation and its suppliers
(Slack. 2001. p417)
Suppliers The internal operationPurchasing Function
Requestsfor productsand services
Preparerequests forquotations
Selectthe preferred
supplier
Preparepurchase order
Producegoods/services
Receivegoods/services
Suppliersprepare quotations of
specifications price delivery etc.
Requests
QuotationsDiscuss with the
Operation
Order Liaise with the Operation
Deliver Goods /Services
Inform Purchasing
Function
Input to the Operation
Suppliers The internal operationPurchasing Function
Requestsfor productsand services
Preparerequests forquotations
Selectthe preferred
supplier
Preparepurchase order
Producegoods/services
Receivegoods/services
Suppliersprepare quotations of
specifications price delivery etc.
Requests
QuotationsDiscuss with the
Operation
Order Liaise with the Operation
Deliver Goods /Services
Inform Purchasing
Function
Input to the Operation
Suppliers The internal operationPurchasing Function
Requestsfor productsand services
Preparerequests forquotations
Selectthe preferred
supplier
Preparepurchase order
Producegoods/services
Receivegoods/services
Suppliersprepare quotations of
specifications price delivery etc.
Suppliers The internal operationPurchasing Function
Requestsfor productsand services
Preparerequests forquotations
Selectthe preferred
supplier
Preparepurchase order
Producegoods/services
Receivegoods/services
Suppliersprepare quotations of
specifications price delivery etc.
Requests
QuotationsDiscuss with the
Operation
Order Liaise with the Operation
Deliver Goods /Services
Inform Purchasing
Function
Input to the Operation(Slack, 2001, p417)
Letter of Credit (L/C)• Written commitment to pay from buyer bank to
seller bank.
Types of L/C:• Revocable• Irrevocable
Supply Chain Management
Import Documents:• Bill of Lading• Commercial Invoice• Packing List• Weight Memo• Certificate of Inspection• Certificate of Origin• Insurance Policy• Sales Contract
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)
“Negotiating is a trading game. There is only one way to play thegame; that is to trade what we want from somebody else for what
they want from us. The best way of being able to do this is to know what we want and what we are prepared to give to get it.”
(Total success Training)
“Negotiation is discussing or bargaining in order to reach agreement.”
(Owen)
Supply Chain Management
Negotiation (What it isn’t): • Negotiation is not selling.• Negotiation is not ‘giving in’ or conceding.
(Owen)
Supply Chain Management
Types of negotiation:
Adversarial and Collaborative Adversarial Negotiation (distributive or win-losenegotiation) Is an approach in which the focus is on ‘positions’
staked out by the participants and the assumption is that every time one party wins, the other loses, so, as a result the other party is regarded as an adversary (opponent).
(Lysons & Farrington)
Supply Chain Management
Collaborative Negotiation (integrative or win
-win negotiation)
Is an approach in which the assumption is that, by means of creative problem solving, one or both parties can gain without the other having to lose and, as other party is regarded as a collaborator rather than an adversary, the participants may be more willing to share concerns, ideas and expectations than would otherwise be the case.
(Lysons & Farrington)
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
HBL Sacks over 2,000 employees
An announcement of HBL said on Friday that the bank had abolished the entire cadres of manual workers with immediate effect under a retrenchment order of March 10.
The order further said that it had been decided to concentrate on core banking activities and retrench all non-clerical cadres including guards, messengers, godown guards, drivers, maintenance staff and other categories of manual workers.
The bank has also decided to outsource services with service providers for providing quality and efficient services at competitive market rate.
Currently, there are over 2,300 employees working in the HBL dedicated to
non-core activities including security, transport and other manual work.
The announcement said the administration and management of theseactivities like business development and customer services.
All Manual (I.e. Non-Clerical) Workmen in Habib Bank Ltd. Retrenchment (cutback)
In order to focus on core banking activities and rationalize our staffstrength, HBL had introduced Voluntary Separation Schemes in the past.
Currently there are over 2300 employees working in HBL dedicated to non-core activities including Security, Driver and other manual work.
The administration and management of these activities is causing a severelack of focus on core activities like business development and customerservice etc. the market practices amongst progressive Bank dictates an Urgent need for outsourcing such services.
Ethics in Buying:
• Child Labor• Environment• Green Supply Chain• Fair Trade
Supply Chain Management
End of Topic
Supply Chain Management