Supply Chain planning & control, Supply chain management, Procurement, Supplier management, Bullwhip effect, Logistics, Creating an effective supply chain

Supply Chain

The sequence of organizations (facilities, functions, & activities) that are involved in producing & delivering a product or service.

• Begins with basic suppliers of raw materials & extends to the final customer

Supply chain management

The strategic coordination of business functions within an organization & throughout its supply chain for the purpose of integrating supply & demand management

• The lifeblood of any business organization

• Involved with planning & coordinating activities that include sourcing & procurement of materials & services, transformation activities, & logistics

• Effective flow management (product & service, information, & financial flow

• The goal is to match supply to demand as effectively & efficiently as possible

Key issues relate to:

• Determining the appropriate level of outsourcing

• Managing procurement

• Managing suppliers

• Managing customer relationships

• Being able to quickly identify problems & respond to them

Procurement

The purchasing department of an organization is responsible for obtaining the materials, parts, supplies, & services needed to produce a product or provide a service

- In manufacturing, upwards of 60% of the cost of finished goods comes from purchased parts & materials

• Cost of goods purchased

• Quality of goods & services

• The timing of deliveries of goods or services

The Purchasing Cycle

Series of steps that begin with a request for purchase & end with notification of shipment received in satisfactory condition

• Purchasing receives the requisition

- Description of item, quantity & quality necessary, delivery dates etc.

• Purchasing selects a supplier

- Identify suppliers who have the capability of supplying the desired goods.

• Purchasing places the order with a vendor

- Negotiations with a vendor

• Monitoring orders

- Routine follow-up on orders

• Receiving orders

- Check incoming shipments for quality & quantity

Centralized purchasing: Purchasing is handled by one special department

Decentralized purchasing: Individual departments or separate locations handle their own purchasing requirements

Supplier management

Reliable & trustworthy suppliers are a vital link in an effective supply chain

• Select a supplier according to Vendor analysis & considers price, quality, supplier’s reputation, past experience with the supplier, & service after the sale

Vendor analysis: Evaluating supplier in terms of price, quality, reputation, & service

Single- & multi-sourcing

Inventory management

Inventory velocity: The speed at which goods move through a supply chain

• The greater the velocity, the lower the inventory holding costs & the faster orders are filled & goods are turned into cash

Bullwhip effect: Inventory oscillations become progressively larger looking backward through the supply chain

• Demand variation begin at the customer end of the chain & become increasingly large as they radiate backward through the chain

Supply chain management can overcome the bullwhip effect by strategic buffering & inventory replenishment based on needs, & by vendor-managed inventory (VMI)

Vendor-managed inventory (VMI): Vendors monitor goods & replenish retail inventories when supplies are low.

Relationships in supply chains

Logistics

The part of a supply chain involved with the forward & reverse flow of good, service, cash, & information

• Includes management of inbound & outbound transportation, material handling, warehousing, inventory, order fulfillment & distribution, third-party logistics, & reverse logistics (the return of goods from customers)

Movement within a Facility

• From incoming vehicles to receiving

• From receiving to storage & storage to the point of use (a work center)

• From one work center to the next or to temporary storage

• From the last operation to final storage & storage to packaging/shipping

• From shipping to outgoing vehicles

Third-party logistics (3-PL)

The outsourcing of logistics management

- Turn over warehousing & distribution to companies that specialize in these areas

Creating an effective supply chain

Strategic sourcing is a systematic process for analyzing purchase of product & service to reduce cost by reducing waste & non-value-added activities, increase profits, reduce risks, & improve supplier performance

Creating a supply chain typically involves the following steps:

1. Plan 
2. Source 
3. Make 
4. Delivery 
5. Manage returns

Achieving an effective supply chain there must be

• Trust

• Effective communication

• Information velocity (Speed at which information is communicated in a supply chain)

• Supply chain visibility (Trading partner can connect supply chain to access data)

• Event management capability (Ability to detect and respond to unplanned  events)

• Performance metrics (Needed to check that supply chain is functioning as expected)