materials mgt n supply chain

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Materials Management and Supply Chain 9 Chapter Excel Books Copyright © 2007, Upendra Kachru 9-1

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Page 1: Materials Mgt n Supply Chain

Materials Management and Supply Chain

9Chapter

Excel Books

Copyright © 2007, Upendra Kachru

9-1

Page 2: Materials Mgt n Supply Chain

Excel BooksProduction And Operations Management Text and cases, Upendra Kachru

Copyright © 2007, Upendra Kachru

9-2

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.

Page 3: Materials Mgt n Supply Chain

Excel BooksProduction And Operations Management Text and cases, Upendra Kachru

Copyright © 2007, Upendra Kachru

9-3

EXAMPLE OF SUPPLY CHAINKALYANI BREWERIES

NALCOSupertechindustry

KalyaniBrewries

UBSNLtd

DSIDC

TRANSPORT CO.

FINAL

CUSTOMER

Page 4: Materials Mgt n Supply Chain

Excel BooksProduction And Operations Management Text and cases, Upendra Kachru

Copyright © 2007, Upendra Kachru

9-4

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

Page 5: Materials Mgt n Supply Chain

Excel BooksProduction And Operations Management Text and cases, Upendra Kachru

Copyright © 2007, Upendra Kachru

9-5

Supply Chain is part of the value chain

SUPPORT ACTIVITIES

Firm Infrastructure, HRM,Technology development, Purchase

Value chain Primary Activity/ Supply Chain

Material/ Supply management Physical distribution/Channel mgmt

Extended Value Chain/ Total supply chain/ Total Logistic Management

Inbound logistic operation

Outbound logistic

Marketing sales

Customer service

S3S3S3S3S3S3

>

>

>

S2

S2

S2

SUP

PL

I

ER

Customers

Page 6: Materials Mgt n Supply Chain

Excel BooksProduction And Operations Management Text and cases, Upendra Kachru

Copyright © 2007, Upendra Kachru

9-6

Decisions of Supply Chain

Supply Chain Design

Supply Chain Planning

Supply Chain Operating

External Supply Chain

Internal Supply Chains

Page 7: Materials Mgt n Supply Chain

Excel BooksProduction And Operations Management Text and cases, Upendra Kachru

Copyright © 2007, Upendra Kachru

9-7

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.

Page 8: Materials Mgt n Supply Chain

Excel BooksProduction And Operations Management Text and cases, Upendra Kachru

Copyright © 2007, Upendra Kachru

9-8

PULL/PUSH PROCESS

Customer order cycle

Replenishment cycle

Manufacturing cycle

Procurement cycle

Customer

Retailer

Distributor

Manufacturer

Supplier

Customer order cycle

Procurement

Manufacturing cycle PUSH

PULL

Page 9: Materials Mgt n Supply Chain

Excel BooksProduction And Operations Management Text and cases, Upendra Kachru

Copyright © 2007, Upendra Kachru

9-9

Supply Chain Models

SCOR Model1. Plan

2. Source

3. Make

4. Deliver

5. Return

Page 10: Materials Mgt n Supply Chain

Excel BooksProduction And Operations Management Text and cases, Upendra Kachru

Copyright © 2007, Upendra Kachru

9-10

Cycle View Model of Supply Chain

Customer order cycle

Replenishment cycle

Manufacturing cycle

Procurement cycle

Customer

Retailer

Distributor

Manufacturer

Supplier

Page 11: Materials Mgt n Supply Chain

Excel BooksProduction And Operations Management Text and cases, Upendra Kachru

Copyright © 2007, Upendra Kachru

9-11

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.

Page 12: Materials Mgt n Supply Chain

Excel BooksProduction And Operations Management Text and cases, Upendra Kachru

Copyright © 2007, Upendra Kachru

9-12

Stores

Overhead Cranes and Hoists

Conveyors

Industrial Trucks

Forklifts

Automated Guided Vehicles (AGVs)

Elevators and Lifts

Page 13: Materials Mgt n Supply Chain

Excel BooksProduction And Operations Management Text and cases, Upendra Kachru

Copyright © 2007, Upendra Kachru

9-13

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

Page 14: Materials Mgt n Supply Chain

Excel BooksProduction And Operations Management Text and cases, Upendra Kachru

Copyright © 2007, Upendra Kachru

9-14

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.

Page 15: Materials Mgt n Supply Chain

Excel BooksProduction And Operations Management Text and cases, Upendra Kachru

Copyright © 2007, Upendra Kachru

9-15

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.

Page 16: Materials Mgt n Supply Chain

Excel BooksProduction And Operations Management Text and cases, Upendra Kachru

Copyright © 2007, Upendra Kachru

9-16

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

Page 17: Materials Mgt n Supply Chain

Excel BooksProduction And Operations Management Text and cases, Upendra Kachru

Copyright © 2007, Upendra Kachru

9-17

Summary of Key Operations and Supply Chain Activities

Operations & Supply Chain Activities

Purpose Key: Inter-Functional Participants

Key: Inter-Organizational Participants

Process Selection Design and Implement the transformation processes that best meet the needs of the customer and firm.

Engineering Marketing Fiance Human Resource IT

Customers

Forecasting Develop the planning numbers needed for effective decision making.

Marketing Finance Accounting

Suppliers Customers

Capacity Planning Establish strategic capacity levels (“bricks and mortar”) and tactical capacity levels (workforce, Inventory levels).

Finance Accounting Marketing Human Resources

Suppliers Customers

Page 18: Materials Mgt n Supply Chain

Excel BooksProduction And Operations Management Text and cases, Upendra Kachru

Copyright © 2007, Upendra Kachru

9-18

Summary of Key Operations and Supply Chain Activities

Inventory management

Manage the amount and placement of inventory within the company and the supply chain.

IT

Finance

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

Marketing

IT

Suppliers

Suppliers

Customers

Purchasing Identify & Quality suppliers of goods & Services; manage the ongoing buyer-supplier relationships.

Engineering

Finance

Marketing

Suppliers

Logistics Manage the movement of physical goods throught the supply chain

Marketing

Engineering

Suppliers

Customers

Page 19: Materials Mgt n Supply Chain

Excel BooksProduction And Operations Management Text and cases, Upendra Kachru

Copyright © 2007, Upendra Kachru

9-19

Summary of Key Operations and Supply Chain Activities

Operations & Supply Chain Activities

Purpose Key: Inter-Functional Participants

Key: Inter-Organizational Participants

Recovery & Recycling

“Close the loop’ by recovering and recycling used products and materials

Marketing

Engineering

Engineering

Suppliers

Customers

Page 20: Materials Mgt n Supply Chain

Excel BooksProduction And Operations Management Text and cases, Upendra Kachru

Copyright © 2007, Upendra Kachru

9-20

Effect of Interdependence in Supply Chain Relationships

Partner Relatively Powerful

High Level ofInterdependence

OrganizationRelatively Powerful

Low Level of Interdependence

Page 21: Materials Mgt n Supply Chain

Excel BooksProduction And Operations Management Text and cases, Upendra Kachru

Copyright © 2007, Upendra Kachru

9-21

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

Page 22: Materials Mgt n Supply Chain

Excel BooksProduction And Operations Management Text and cases, Upendra Kachru

Copyright © 2007, Upendra Kachru

9-22

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