Supply Chain Management

1
Supply Chain Management
2
Supply Chain Management

• Supply Chain Management
• Outsourcing
• Purchasing
• Partnership Relationships
• The Firm as Supplier
• JIT Purchasing
• Global Purchasing

2
3
Supply Chain Management

• Apply a total systems approach to managing the
  entire flow of
• information
• materials
• and services

Raw material suppliers
3
4
Outsourcing

• Purchased items account for 50 to 70 of the cost
  of goods sold.
• Outsourcing allows firms to focus on their core
  competencies.
• Organizations outsource when they decide to
  purchase something they had been making in-house.
• Typically mis-handled by materials management
  function.

4
5
Make or Buy

• Current trend favors outsourcing all activities
  that do not directly represent or support core
  competencies.
• Are there any dangers associated with aggressive
  outsourcing? What are the implications for JIT
  production?

5
6
Purchasing

• No longer just order takers.
• Purchasing need to know
• material
• performance
• availability
• suppliers

7
7
The Firm as a Supplier

• In this chapter, we discuss the role of the firm
  as a buyer of goods and services.
• How does the perspective change when the shoe is
  on the other foot?

8
8
Partnership Relationship

• Continuing relationship involving
• a commitment over an extended time period,
• an exchange of information, and
• an acknowledgement of the risks rewards of the
  relationship.

9
9
Characteristics of Good Relationships

• Commitment
• Communication
• Working through change / improvement
• Principles centered relationship
• Spending time together
• Appreciation / recognition / feedback

10
Supplier Characterization Matrix
High
Special Attention Low spend - high risk
Long-Term Relationship High spend - high risk
Risk
Contractual High spend - low risk (Easily
substituted)
Transactional Low spend - low risk
Low
High
Annual Spend
11
Supplier Improvement

• Supplier Evaluation - Involves finding potential
  suppliers and determining the likelihood of their
  becoming good partners.
• Supplier Development - May include everything
  from training, to engineering and production
  help, to formats for electronic transfer.
• Negotiations - Are of three classic types
  cost-based model, market-based price model, and
  competitive bidding.

12
JIT Purchasing--Requirements

• Reduced lot sizes
• Frequent and reliable delivery schedules
• Reduced and highly reliable lead times
• Consistently high quality levels for purchased
  materials

11
13
JIT Purchasing--Suppliers

• Fewer, nearby suppliers
• Repeat business
• Support suppliers competitiveness
• Clusters of remote suppliers
• Limit competitive bidding to new parts
• Resist vertical integration
• Encourage suppliers to implement JIT purchasing

12
14
JIT Purchasing--Quantities

• Steady output rate (a desirable prerequisite)
• Frequent deliveries in small lot quantities
• Long-term contract agreements with minimal
  release paperwork
• Deliver quantities variable from release to
  release but fixed for whole contract term

13
15
JIT Purchasing--Quantities (Ctd)

• Little or no permissible overage or underage of
  receipts
• Suppliers encouraged to package in exact
  quantities
• Suppliers encouraged to reduce their production
  lot sizes (or store unreleased material)

14
16
JIT Purchasing--Quality

• Minimal product specifications imposed on
  supplier
• Help suppliers to meet quality requirements
• Close relationships between buyers' and
  suppliers' quality assurance people
• Suppliers encouraged to use process control
  charts instead of lot sampling inspection

15
17
JIT Purchasing--Shipping

• Scheduling of inbound freight
• Gain control by use of
• company-owned or contract shipping
• contract warehousing
• trailers for freight consolidation/storage

16
18
JIT Purchasing--Benefits

• Consistent quality
• Savings on resources
• Lower costs
• Special attention
• Saving on tooling
• Loyalty associated with long-term relationships
  with suppliers

17
19
Global Sourcing

• Original strategy was to reduce production
  costs.
• Changing focus of global purchasing includes
• local content / market access
• product availability
• technology
• delivery
• lead times
• labor availability and quality.

18
20
Why Long-Term Relationships?

• Increasing trend toward global supply
• Higher baseline performance
• Increasing focus on time to market
• Dependence upon suppliers for technology

21
Why Long-Term Relationships?

• A long-term relationship between purchaser and
  supplier is necessary for best economy. How can
  a supplier be innovative and develop economy in
  his production processes when he can only look
  forward to short-term business with a purchaser?
• W. Edwards Deming, Out of the Crisis

22
Why Long-Term Relationships?

• Trend toward LT contracts since 1990
• Pressure to reduce price
• Pressure to reduce transaction costs
• Consolidation pressures

23
Challenges for a Useful SCR Model

• Relationships are critical
• Trust may be low
• Literature focuses on causes of failure

24
Challenges for a Useful SCR Model

• Limited number of published SCR successes
• Successes could be culture-dependent
• Model should be simple proven

25
Family Strengths Research

• Strong families
• 20 years of research
• Over 6,000 surveyed

26
Family Strengths Research

• Culturally diverse population
• Compares favorably with other taxonomies of
  family success
• Summarized in six characteristics

27
Family Strengths Research6 Characteristics of
Strong Families

• Commitment (trust)
• Good communication patterns
• Ability to deal with crises
• Spiritual wellness
• Spending time together
• Appreciation

28
Six Characteristics of Successful SCRs

• Commitment
• Good communication patterns
• Ability to deal with crises (change)
• Spiritual wellness (principles-centered)
• Spending time together
• Appreciation / feedback

29
Commitment Concerns

• Is this the right supplier?
• What about commitment?
• Is management committed?
• What are the implementation
• issues related to maintaining
• commitment?

30
Commitment Implementation

• Selection prior to initiation
• Two-way criteria for success
• Regular performance reviews
• Management committed to proceed
• Participation requirements identified early
• Implementation of complete SCR model

31
Matrix for SCR Selection
Increasing Risk / Complexity
Increasing Spend / Value Potential
32
Communication Concerns

• Replace face-to-face communication with
  technology?
• Good communication
• Communication between technical groups
• Role of agent

33
Communication Implementation

• Face-to-face communication increased
  facilitated by multiple technologies
• Support for communication forums
• Triad as core team
• Agent investments in communication

34
Dealing with Change

• New product dev. process
• Common improvement process
• Performance measures
• Conflict resolution by team leaders

35
Shared Principles

• Principles Centered Leadership
• Two-Way Performance Measures
• Follow-through on Commitments

36
Spending Time Together

• Quarterly performance reviews
• Team building dinners
• Commitment to keep the schedule

37
Appreciation

• Celebration of critical improvement
• Recognition distribution
• Other forms of recognition

38
(No Transcript)