Materials Mgt N Supply Chain
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Chapter
9 Materials Management and Supply Chain
Copyright © 2007, Upendra Kachru
9-1
Excel Books
Supply Chain The Concept of Supply Chain Management is based on two core ideas. 1. The first is that practically every product that reaches an end user represents the cumulative effort of multiple organization. These organizations are referred to collectively as the supply chain. 2. The second idea is that organizations have to pay attention to what is happening outside their “four walls” and manage the entire chain of activities that ultimately delivers products to the final customer in order to maximize profits.
Copyright © 2007, Upendra Kachru
9-2
Production And Operations Management Text and cases, Upendra Kachru Excel Books
EXAMPLE OF SUPPLY CHAIN KALYANI BREWERIES
NALCO
Supertech industry
Kalyani Brewries
UBSN Ltd
DSIDC
FINAL CUSTOMER TRANSPORT CO.
Copyright © 2007, Upendra Kachru
9-3
Production And Operations Management Text and cases, Upendra Kachru Excel Books
What is ‘Supply Chain Management’?
‘Supply Chain management’ is defined as the integration-oriented skills required for providing competitive advantage to the organization that are basis for successful supply chains. A typical supply chain may involve a variety of stages. These supply chain stages include: 1. Customers 2. Retailers 3. Wholesalers/Distributors 4. Manufactures 5. Component/Raw material suppliers
Copyright © 2007, Upendra Kachru
9-4
Production And Operations Management Text and cases, Upendra Kachru Excel Books
Supply Chain is part of the value chain SUPPORT ACTIVITIES S3 > S2 S3 S3 > S2 S3 S3 S3 > S2
S U P P L
Inbound logistic
operation
Firm Infrastructure, HRM, Technology development, Purchase Outbound logistic
Marketing sales
Customer service
I E R
Customers
Value chain Primary Activity/ Supply Chain
Material/ Supply management
Physical distribution/Channel mgmt
Extended Value Chain/ Total supply chain/ Total Logistic Management Copyright © 2007, Upendra Kachru
9-5
Production And Operations Management Text and cases, Upendra Kachru Excel Books
Decisions of Supply Chain
Supply Chain Design
Supply Chain Planning
Supply Chain Operating
External Supply Chain
Internal Supply Chains
Copyright © 2007, Upendra Kachru
9-6
Production And Operations Management Text and cases, Upendra Kachru Excel Books
Supply Chain Process Pull and Push Processes: Pull processes are processes in a supply chain initiated by a customer order. Push processes are processes in a supply chain initiated and performed in anticipation of customer orders.
Copyright © 2007, Upendra Kachru
9-7
Production And Operations Management Text and cases, Upendra Kachru Excel Books
PULL/PUSH PROCESS Customer order cycle
PULL
Customer order cycle
Replenishment cycle
Customer
Retailer
Distributor Manufacturing cycle Procurement Manufacturing cycle
Manufacturer PUSH
Procurement cycle Supplier Copyright © 2007, Upendra Kachru
9-8
Production And Operations Management Text and cases, Upendra Kachru Excel Books
Supply Chain Models SCOR Model 1. 2. 3. 4. 5.
Plan Source Make Deliver Return
Copyright © 2007, Upendra Kachru
9-9
Production And Operations Management Text and cases, Upendra Kachru Excel Books
Cycle View Model of Supply Chain Customer order cycle
Replenishment cycle
Manufacturing cycle
Procurement cycle
Customer
Retailer
Distributor
Manufacturer Supplier Copyright © 2007, Upendra Kachru
9-10
Production And Operations Management Text and cases, Upendra Kachru Excel Books
Logistics Logistics is involved in facilitating all the required parts and raw materials in the right sequence, the right quantity, the right quality and the right time to manufacturing and service. Category items.
Copyright © 2007, Upendra Kachru
9-11
Production And Operations Management Text and cases, Upendra Kachru Excel Books
Stores
Overhead Cranes and Hoists
Conveyors
Industrial Trucks
Forklifts
Automated Guided Vehicles (AGVs)
Elevators and Lifts
Copyright © 2007, Upendra Kachru
9-12
Production And Operations Management Text and cases, Upendra Kachru Excel Books
Out-bound Logistics: Distribution and Shipping The Distribution System 1. The supplier’s facility 2. In transit 3. A regional warehouse 4. A distribution Center 5. The customer’s facility
Copyright © 2007, Upendra Kachru
9-13
Production And Operations Management Text and cases, Upendra Kachru Excel Books
Shipping
Warehouse stock is reduced by the delivery quantity
Value changes are posted to the balance sheet account in inventory accounting
Requirements are reduced by the delivery quantity.
The serial number status is updated.
The goods issue posting is automatically recorded in the document flow.
Stock determination is executed for the vendor’s consignment stock.
A work list for the proof of delivery is generated.
Copyright © 2007, Upendra Kachru
9-14
Production And Operations Management Text and cases, Upendra Kachru Excel Books
Supply Chain Relationship Focus 1.
Customer Relationship Management (CRM): All processes that focus on the interface between the firm and its customers.
2.
Internal Supply Chain Management (ISCM): All process those are internal to the firm.
3.
Supplier Relationship Management (SRM): All processes that focus on the interface between the firm and its suppliers.
Copyright © 2007, Upendra Kachru
9-15
Production And Operations Management Text and cases, Upendra Kachru Excel Books
Supply Chain Macro Processes SRM (Supplier Focus)
ISCM (Firm Focus) CRM (Customer Focus)
Source
Strategic Planning
Market Trends
Negotiate
Demand Planning
Sales and Marketing
Buy
Supply Planning
Information on Customers
Design Collaboration
Fulfillment
Order Management
Supply Collaboration
Field Service
Call Center Management
Copyright © 2007, Upendra Kachru
9-16
Production And Operations Management Text and cases, Upendra Kachru Excel Books
Summary of Key Operations and Supply Chain Activities Operations & Supply Chain Activities
Purpose
Key: InterFunctional Participants
Key: InterOrganizational Participants
Process Selection
Design and Implement the Engineering Customers transformation processes that best Marketing Fiance meet the needs of the customer Human Resource IT and firm.
Forecasting
Develop the planning numbers needed for effective decision making.
Marketing Finance Suppliers Accounting Customers
Capacity Planning
Establish strategic capacity levels (“bricks and mortar”) and tactical capacity levels (workforce, Inventory levels).
Finance Accounting Marketing Human Resources
Suppliers Customers
Copyright © 2007, Upendra Kachru
9-17
Production And Operations Management Text and cases, Upendra Kachru Excel Books
Summary of Key Operations and Supply Chain Activities Inventory management
Manage the amount and placement IT of inventory within the company and Finance the supply chain.
Suppliers Customers
Planning and Control
Schedule and manage the flow of work through an organization and the supply chain; match up customer demand to supply chain activities
Suppliers Customers
Purchasing
Identify & Quality suppliers of goods Engineering & Services; manage the ongoing Finance buyer-supplier relationships. Marketing
Suppliers
Logistics
Manage the movement of physical goods throught the supply chain
Suppliers Customers
Marketing IT Suppliers
Marketing Engineering
Copyright © 2007, Upendra Kachru
9-18
Production And Operations Management Text and cases, Upendra Kachru Excel Books
Summary of Key Operations and Supply Chain Activities Operations & Supply Chain Activities
Purpose
Key: Inter-Functional Participants
Recovery & Recycling
“Close the loop’ by Marketing recovering and recycling Engineering used products and Engineering materials
Key: InterOrganizational Participants Suppliers Customers
Copyright © 2007, Upendra Kachru
9-19
Production And Operations Management Text and cases, Upendra Kachru Excel Books
Effect of Interdependence in Supply Chain Relationships
Partner Relatively Powerful
High Level of Interdependence
Organization Relatively Powerful
Low Level of Interdependence
Copyright © 2007, Upendra Kachru
9-20
Production And Operations Management Text and cases, Upendra Kachru Excel Books
Purchasing Metrics 1.
Purchase cost savings/avoidance
2.
Managing supplier base. This includes time to market, supplier satisfaction, partnerships, supplier health (financial and/or management stability)
3.
Internal customer satisfaction
4.
Purchasing cost
5.
Resource utilization
Copyright © 2007, Upendra Kachru
9-21
Production And Operations Management Text and cases, Upendra Kachru Excel Books
Logistics Metrics
Overhead as % of Total Costs
Overhead to Cost of Goods Sold Ratio
Order Fulfillment Costs
Order Fulfillment Cost as a % of Order Management Costs
Process Costs
Total Supply Chain Costs as a % of Revenue
Total Supply Chain Costs as a % of Total Costs
Copyright © 2007, Upendra Kachru
9-22
Production And Operations Management Text and cases, Upendra Kachru Excel Books
9 Materials Management and Supply Chain
Copyright © 2007, Upendra Kachru
9-1
Excel Books
Supply Chain The Concept of Supply Chain Management is based on two core ideas. 1. The first is that practically every product that reaches an end user represents the cumulative effort of multiple organization. These organizations are referred to collectively as the supply chain. 2. The second idea is that organizations have to pay attention to what is happening outside their “four walls” and manage the entire chain of activities that ultimately delivers products to the final customer in order to maximize profits.
Copyright © 2007, Upendra Kachru
9-2
Production And Operations Management Text and cases, Upendra Kachru Excel Books
EXAMPLE OF SUPPLY CHAIN KALYANI BREWERIES
NALCO
Supertech industry
Kalyani Brewries
UBSN Ltd
DSIDC
FINAL CUSTOMER TRANSPORT CO.
Copyright © 2007, Upendra Kachru
9-3
Production And Operations Management Text and cases, Upendra Kachru Excel Books
What is ‘Supply Chain Management’?
‘Supply Chain management’ is defined as the integration-oriented skills required for providing competitive advantage to the organization that are basis for successful supply chains. A typical supply chain may involve a variety of stages. These supply chain stages include: 1. Customers 2. Retailers 3. Wholesalers/Distributors 4. Manufactures 5. Component/Raw material suppliers
Copyright © 2007, Upendra Kachru
9-4
Production And Operations Management Text and cases, Upendra Kachru Excel Books
Supply Chain is part of the value chain SUPPORT ACTIVITIES S3 > S2 S3 S3 > S2 S3 S3 S3 > S2
S U P P L
Inbound logistic
operation
Firm Infrastructure, HRM, Technology development, Purchase Outbound logistic
Marketing sales
Customer service
I E R
Customers
Value chain Primary Activity/ Supply Chain
Material/ Supply management
Physical distribution/Channel mgmt
Extended Value Chain/ Total supply chain/ Total Logistic Management Copyright © 2007, Upendra Kachru
9-5
Production And Operations Management Text and cases, Upendra Kachru Excel Books
Decisions of Supply Chain
Supply Chain Design
Supply Chain Planning
Supply Chain Operating
External Supply Chain
Internal Supply Chains
Copyright © 2007, Upendra Kachru
9-6
Production And Operations Management Text and cases, Upendra Kachru Excel Books
Supply Chain Process Pull and Push Processes: Pull processes are processes in a supply chain initiated by a customer order. Push processes are processes in a supply chain initiated and performed in anticipation of customer orders.
Copyright © 2007, Upendra Kachru
9-7
Production And Operations Management Text and cases, Upendra Kachru Excel Books
PULL/PUSH PROCESS Customer order cycle
PULL
Customer order cycle
Replenishment cycle
Customer
Retailer
Distributor Manufacturing cycle Procurement Manufacturing cycle
Manufacturer PUSH
Procurement cycle Supplier Copyright © 2007, Upendra Kachru
9-8
Production And Operations Management Text and cases, Upendra Kachru Excel Books
Supply Chain Models SCOR Model 1. 2. 3. 4. 5.
Plan Source Make Deliver Return
Copyright © 2007, Upendra Kachru
9-9
Production And Operations Management Text and cases, Upendra Kachru Excel Books
Cycle View Model of Supply Chain Customer order cycle
Replenishment cycle
Manufacturing cycle
Procurement cycle
Customer
Retailer
Distributor
Manufacturer Supplier Copyright © 2007, Upendra Kachru
9-10
Production And Operations Management Text and cases, Upendra Kachru Excel Books
Logistics Logistics is involved in facilitating all the required parts and raw materials in the right sequence, the right quantity, the right quality and the right time to manufacturing and service. Category items.
Copyright © 2007, Upendra Kachru
9-11
Production And Operations Management Text and cases, Upendra Kachru Excel Books
Stores
Overhead Cranes and Hoists
Conveyors
Industrial Trucks
Forklifts
Automated Guided Vehicles (AGVs)
Elevators and Lifts
Copyright © 2007, Upendra Kachru
9-12
Production And Operations Management Text and cases, Upendra Kachru Excel Books
Out-bound Logistics: Distribution and Shipping The Distribution System 1. The supplier’s facility 2. In transit 3. A regional warehouse 4. A distribution Center 5. The customer’s facility
Copyright © 2007, Upendra Kachru
9-13
Production And Operations Management Text and cases, Upendra Kachru Excel Books
Shipping
Warehouse stock is reduced by the delivery quantity
Value changes are posted to the balance sheet account in inventory accounting
Requirements are reduced by the delivery quantity.
The serial number status is updated.
The goods issue posting is automatically recorded in the document flow.
Stock determination is executed for the vendor’s consignment stock.
A work list for the proof of delivery is generated.
Copyright © 2007, Upendra Kachru
9-14
Production And Operations Management Text and cases, Upendra Kachru Excel Books
Supply Chain Relationship Focus 1.
Customer Relationship Management (CRM): All processes that focus on the interface between the firm and its customers.
2.
Internal Supply Chain Management (ISCM): All process those are internal to the firm.
3.
Supplier Relationship Management (SRM): All processes that focus on the interface between the firm and its suppliers.
Copyright © 2007, Upendra Kachru
9-15
Production And Operations Management Text and cases, Upendra Kachru Excel Books
Supply Chain Macro Processes SRM (Supplier Focus)
ISCM (Firm Focus) CRM (Customer Focus)
Source
Strategic Planning
Market Trends
Negotiate
Demand Planning
Sales and Marketing
Buy
Supply Planning
Information on Customers
Design Collaboration
Fulfillment
Order Management
Supply Collaboration
Field Service
Call Center Management
Copyright © 2007, Upendra Kachru
9-16
Production And Operations Management Text and cases, Upendra Kachru Excel Books
Summary of Key Operations and Supply Chain Activities Operations & Supply Chain Activities
Purpose
Key: InterFunctional Participants
Key: InterOrganizational Participants
Process Selection
Design and Implement the Engineering Customers transformation processes that best Marketing Fiance meet the needs of the customer Human Resource IT and firm.
Forecasting
Develop the planning numbers needed for effective decision making.
Marketing Finance Suppliers Accounting Customers
Capacity Planning
Establish strategic capacity levels (“bricks and mortar”) and tactical capacity levels (workforce, Inventory levels).
Finance Accounting Marketing Human Resources
Suppliers Customers
Copyright © 2007, Upendra Kachru
9-17
Production And Operations Management Text and cases, Upendra Kachru Excel Books
Summary of Key Operations and Supply Chain Activities Inventory management
Manage the amount and placement IT of inventory within the company and Finance the supply chain.
Suppliers Customers
Planning and Control
Schedule and manage the flow of work through an organization and the supply chain; match up customer demand to supply chain activities
Suppliers Customers
Purchasing
Identify & Quality suppliers of goods Engineering & Services; manage the ongoing Finance buyer-supplier relationships. Marketing
Suppliers
Logistics
Manage the movement of physical goods throught the supply chain
Suppliers Customers
Marketing IT Suppliers
Marketing Engineering
Copyright © 2007, Upendra Kachru
9-18
Production And Operations Management Text and cases, Upendra Kachru Excel Books
Summary of Key Operations and Supply Chain Activities Operations & Supply Chain Activities
Purpose
Key: Inter-Functional Participants
Recovery & Recycling
“Close the loop’ by Marketing recovering and recycling Engineering used products and Engineering materials
Key: InterOrganizational Participants Suppliers Customers
Copyright © 2007, Upendra Kachru
9-19
Production And Operations Management Text and cases, Upendra Kachru Excel Books
Effect of Interdependence in Supply Chain Relationships
Partner Relatively Powerful
High Level of Interdependence
Organization Relatively Powerful
Low Level of Interdependence
Copyright © 2007, Upendra Kachru
9-20
Production And Operations Management Text and cases, Upendra Kachru Excel Books
Purchasing Metrics 1.
Purchase cost savings/avoidance
2.
Managing supplier base. This includes time to market, supplier satisfaction, partnerships, supplier health (financial and/or management stability)
3.
Internal customer satisfaction
4.
Purchasing cost
5.
Resource utilization
Copyright © 2007, Upendra Kachru
9-21
Production And Operations Management Text and cases, Upendra Kachru Excel Books
Logistics Metrics
Overhead as % of Total Costs
Overhead to Cost of Goods Sold Ratio
Order Fulfillment Costs
Order Fulfillment Cost as a % of Order Management Costs
Process Costs
Total Supply Chain Costs as a % of Revenue
Total Supply Chain Costs as a % of Total Costs
Copyright © 2007, Upendra Kachru
9-22
Production And Operations Management Text and cases, Upendra Kachru Excel Books
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