unit11 - supply chain management

8/12/2019 Unit11 - Supply Chain Management

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Dr. Rameez Khalid, PMP, CQSSBBFaculty, Department of Management

Institute of Business Administration, Karachi


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Volkswagen

Brazilian plant employs 1000 workers

200 work for VW

800 work for other contractors:

Rockwell International, Cummins Engines, Deluge Automotiva,MWM, Remon and VDO, etc.

VW responsible for overall quality, marketing,

research and design

VW looks to innovative supply-chain to improvequality and drive down costs

Unit-11: SCM [email protected] 2


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Planning, organizing, directing, & controlling flows

of materials

Begins with raw materials

Continues through internal operations

Ends with distribution of finished goods

Involves everyone in supply-chain

Example: Your suppliers supplier

Objective: Maximize value & lower waste

Supply-Chain Management



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consumer

Retailer

Manufacturing

Material Flow

VISA

Credit Flow

Supplier

Supplier Wholesaler

Retailer

CashFlow

OrderFlow

Schedules

Flowsin a Supply Chain

4


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Supply-Chain Support for Overall Strategy

Suppliers

goal

Suppliers

goal

Primary

SelectionCriteria

Primary

SelectionCriteria

Supply demandat lowestpossible cost

Supply demandat lowestpossible cost

Select

primarily forcost

Select

primarily forcost

Low CostLow Cost

Respondquickly tochangingrequirementsand demandto minimizestockouts

Respondquickly tochangingrequirementsand demandto minimizestockouts

Select

primarily forcapacity,speed, andflexibility

Select

primarily forcapacity,speed, andflexibility

Response

Response

Share marketresearch;

jointly developproducts andoptions

Share marketresearch;

jointly developproducts andoptions

Select primarily

for productdevelopmentskills

Select primarily

for productdevelopmentskills

DifferentiationDifferentiation


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Process

Characteristics

Process

Characteristics

Maintain highaverageutilization

Maintain highaverageutilization

Low CostLow Cost

Invest inexcesscapacity andflexibleprocesses

Invest inexcesscapacity andflexibleprocesses

Response

Response

Modularprocesses thatlend themselvesto masscustomization

Modularprocesses thatlend themselvesto masscustomization

InventoryCharacteristicsInventoryCharacteristics

Minimizeinventory

throughoutthe chain tohold downcosts

Minimizeinventory

throughoutthe chain tohold downcosts

Developresponsive

system, withbuffer stockspositioned toensure supply

Developresponsive

system, withbuffer stockspositioned toensure supply

Minimizeinventory in

the chain toavoidobsolescence

Minimizeinventory in

the chain toavoidobsolescence


Supply-Chain Support for Overall Strategy -continued


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Supply-Chain Support for Overall Strategy -continued

Lead-time

Characteristics

Lead-time

Characteristics

Shorten lead-time as long asit does notincrease costs

Shorten lead-time as long asit does notincrease costs

Low CostLow Cost

Investaggressivelyto reduceproduction

lead-time

Investaggressivelyto reduceproduction

lead-time

Response

Response

Investaggressively toreducedevelopment

lead-time

Investaggressively toreducedevelopment

lead-time


Product-design

Characteristics

Product-design

Characteristics

Maximize

performance

and minimize

cost

Maximize

performance

and minimize

cost

Use product

designs that

lead to low

set-up time

and rapid

production

ramp-up

Use product

designs that

lead to low

set-up time

and rapid

production

ramp-up

Use modular

design to

postpone

product

differentiation

for as long as

possible

Use modular

design to

postpone

product

differentiation

for as long as

possible


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Global Supply-Chain Issues

Supply chains in global environment must be:

Flexible enough to react to sudden changes in partsavailability, distribution, or shipping channels,

import duties, and currency ratesAble to use the latest computer and transmission

technologies to schedule and manage the shipmentof parts in and finished products out

Staffed with local specialists to handle duties, trade,freight, customs and political issues



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Purchasing Function Objectives

Help identify the products and services

that can be best obtained externally; and

Develop, evaluate, and determine the best

supplier, price, and delivery for those

products and services



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Make/BuyConsiderations

1. Maintain core

competencies and protect

personnel from layoff

2. Lower production cost

3. Unsuitable suppliers

4. Assure adequate supply

5. Utilize surplus labor

1. Frees management to

deal with its primary

business

2. Lower acquisition cost

3. Preserve supplier

commitment

4. Obtain technical or

management ability

5. Inadequate capacity

Reasons for Making Reasons for Buying


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Bullwhip Effect

Tier 2

Suppliers

Tier 1

SuppliersProducer Distributor Retailer

Final

Customer

Amount of

inventory=



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Plans to help achieve company mission

Affect long-term competitive position

Strategic options

Many suppliers

Few suppliers

Keiretsu network

Vertical integration

Virtual company

Plan

Supply-ChainStrategies



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Supply-Chain Strategies

Negotiate with many suppliers; play one supplier against

another

Develop long-term partnering arrangements with a few

suppliers who will work with you to satisfy the end customer Vertically integrate; buy the actual supplier

Keiretsu- have your suppliers become part of a company

coalition

Create a virtual companythat uses suppliers on an as-neededbasis.



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Many sources per item

Adversarial relationship

Short-term

Little openness

Negotiated, sporadic POs

High prices

Infrequent, large lots Delivery to receiving dock

Many Suppliers Strategy

Unit-11: SCM [email protected]


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1 or few sources per item

Partnership (JIT)

Long-term, stable

On-site audits & visits

Exclusive contracts

Low prices (large orders)

Frequent, small lots Delivery to point of use

1995

Corel

Corp.

FewSuppliers Strategy



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Raw Material(Suppliers)

Backward

Integration

CurrentTransformation

Forward

Integration

Finished Goods

(Customers)

Ability to produce goods

previously purchased

Setup operations

Buy supplier

Make-buy issue

Major financial

commitment

Hard to do all things well

Vertical IntegrationStrategy



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Virtual Company Strategy

Companies that rely on a variety of supplier

relationships to provide services on demand.

Also known as hollow corporations, or network

corporations

Network of independent companies

Linked by technology

PCs, faxes, Internet etc.

Each contributes core competencies

Typically provide services

Payroll, editing, designing May be long or short-term

Usually, only until opportunity is met


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Successful

Supply-Chain Management Requires:

A mutual agreement on goals

Trust Compatible organizational cultures



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VendorManaged Inventory (VMI)

Postponement keeps product generic as long as possible Channel Assembly sends to distributor individual

components and modules rather than finished goods

Drop Shipping and Special Packaging supplier will ship toend consumer rather than to seller

Blanket Orders a long-term purchase commitment to asupplier for items that are to be delivered against short-term releases to ship

Standardization reducing the number of variations in

materials and components Electronic Ordering and Funds Transfer paperless

ordering and 100% material acceptance, payment by wire


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Vendor evaluation

Identifying & selecting potential vendors

Vendor development

Integrating buyer & supplier

Example: Electronic data exchange

Negotiations

Results in contractSpecifies period of agreement, price, delivery

terms etc.

Vendor Selection Steps



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LogisticsManagement

Integrates all materials functions Purchasing

Inventory management

Production control Inbound traffic

Warehousing and stores

Incoming quality control

Objective: Efficient, low cost operations



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Goods Movement Options

Trucking

Railways

Airfreight Waterways

Pipelines



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REFERENCES

Operations Management

William J. Stevenson

Operations Management

Barry Render & Jay Heizer

[email protected] 27

unit11 - supply chain management

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