Supply Chain Management Introduction

Supply Chain Management Introduction

Supply Chain Management Session Agenda 1) Introduction to module 2) Assessments 3) Source of information • Text Books • On-line sources • Digital Library

Supply Chain Management • Text Books • Lysons, K. Farrington, B. Purchasing and Supply Chain Management. FT Prentice Hall. 7th Edition 2006 • Slack, N et al. Operations Management. FT Prentice Hall. 4th Edition 2004 • Donald J. Bowersox, David J. Closs, M. Bixby Cooper, Supply Chain Logistics Management, McGraw-Hill, First Edition. • Simchi-Levi, D and E and Kaminsky, P. (2003), Designing and Managing the Supply Chain, McGraw-Hill, Second Edition

Supply Chain Management Definition: Supply Chain Management “The management of the flow of goods or services between entities in the chain to realize the delivery of end products or services, satisfying customers at minimum cost” Definition 2: Supply Chain Management is a set of approaches utilized to efficiently integrate suppliers, manufacturers, warehouses and stores, so that merchandise is produced and distributed in the right quantities, to the right locations at the right time in order to minimize system wide costs while satisfying service level requirements.

Supply Chain ManagementMore Realistic Supply Chain

Supply Chain Management Purchasing: • The acquisition of goods and services needed to support the various activities of an organization, at the best possible cost and from reliable suppliers.

Supply Chain Management Purchasing professional's goal to a company should be to provide: • The best pricing • Communication • Research in finding sources • Supplier performance Evaluation • Service level agreements (SLA’s)

GOODS/SERVICES GOODS/SERVICES A BUSINESS EXTERNAL CUSTOMER EXTERNAL SUPPLIER INFORMATION INFORMATION PAYMENT £££ PAYMENT £££ Supply Chain Management

Supply Chain Management Purchasing Topics to Cover: • Importance of Purchasing Today • Purchasing Processes • Letter of Credit • Import Documentation • Negotiation Skills • Make – or – Buy Analysis • Ethics in Buying

Supply Chain Management Importance of purchasing: • Competition • Material cost • Lead time • Customer Demand • Quality

Supply Chain Management Cost of manufacturing company, 1979 Cost of same manufacturing company, 1999 The bigger the percentage of total spend is allocated to purchasing, the bigger the potential saving to the organisation by cutting the purchasing costs. (Lysons (2000), pp3-4)

Supply Chain Management Single Sourcing Advantages • Potentially better quality because more SQA possibilities. • Strong relationships • Greater dependency encourages more commitment and effort. • Better communication. • Easier to cooperate on new product/service development. • More scale economies. • Higher confidentiality. Disadvantages • More vulnerable to disruption if a failure to supply occurs. • Individual supplier more affected by volume fluctuations. • Supplier might exert upward pressure on prices if no alternative supplier is available. Multi-sourcing Advantages • Purchaser can drive price down by competitive tendering. • Can switch sources in case of supply failure. • Wide sources of knowledge and expertise to tap. Disadvantages • Difficult to encourage commitment by supplier. • Less easy to develop effective SQA. • More effort needed to communicate. • Suppliers less likely to invest in new processes. • More difficult to obtain scale economies.

Supply Chain Management Purchasing Process • Recognize, describe and define the need • Transmit the need (requisitions) • Determine sources, investigate, and select supplier/analyze • bids • Prepare and issue the PO • Follow-up the order (including expediting and de- • expediting) • Receive and inspect the material • Clearance of the invoice and payment to supplier

(Slack, 2001, p417) (Slack. 2001. p417) Supply Chain Management The purchasing function brings together the operation and its suppliers

Supply Chain Management Letter of Credit (L/C) • Written commitment to pay from buyer bank to seller bank. Types of L/C: • Revocable • Irrevocable

Supply Chain Management Import Documents: • Bill of Lading • Commercial Invoice • Packing List • Weight Memo • Certificate of Inspection • Certificate of Origin • Insurance Policy • Sales Contract

Supply Chain Management Negotiation

Supply Chain Management Negotiation Definition and Comments: “The process whereby two or more parties decide what each will give and take in an Exchange between them.” (Lysons & Farrinton) “Negotiation is the process by which we search for terms to obtain what we want from somebody who wants something from us.” (Total Success Training) “Negotiating is a trading game. There is only one way to play the game; that is to trade what we want from somebody else for what they want from us. The best way of being able to do this is to know what we want and what we are prepared to give to get it.” (Total success Training) “Negotiation is discussing or bargaining in order to reach agreement.” (Owen)

Supply Chain Management Negotiation (What it isn’t): • Negotiation is not selling. • Negotiation is not ‘giving in’ or conceding. (Owen)

Supply Chain Management Types of negotiation: Adversarial and Collaborative Adversarial Negotiation (distributive or win-lose negotiation) • Is an approach in which the focus is on ‘positions’ staked out by the participants and the assumption is that every time one party wins, the other loses, so, as a result the other party is regarded as an adversary (opponent). (Lysons & Farrington)

Supply Chain Management Collaborative Negotiation (integrative or win -win negotiation) • Is an approach in which the assumption is that, by means of creative problem solving, one or both parties can gain without the other having to lose and, as the other party is regarded as a collaborator rather than an adversary, the participants may be more willing to share concerns, ideas and expectations than would otherwise be the case. (Lysons & Farrington)

Supply Chain Management Make or Buy?

Supply Chain Management Why would we buy something (items, components, services) when we could provide it ourselves?

Supply Chain Management Reasons to buy: • -The unit cost is cheaper, • -We don't use it enough, • -We don't have space, • -We don't understand the technology, • -We don't have the skill, • -It's not our core business/expertise, • -It's expensive to set up the process,

Supply Chain Management Reasons to provide in-house: • - The unit cost is cheaper, • - It's critical to the business, • - Retain specialist knowledge/skills, • -We have control over the supply, • - Quality issues are critical, • - No suitable supplier, • - It's part of our core business/expertise,

HBL - March '06 Case Study HBL Sacks over 2,000 employees An announcement of HBL said on Friday that the bank had abolished the entire cadres of manual workers with immediate effect under a retrenchment order of March 10. The order further said that it had been decided to concentrate on core banking activities and retrench all non-clerical cadres including guards, messengers, godown guards, drivers, maintenance staff and other categories of manual workers. The bank has also decided to outsource services with service providers for providing quality and efficient services at competitive market rate. Currently, there are over 2,300 employees working in the HBL dedicated to non-core activities including security, transport and other manual work. The announcement said the administration and management of these activities like business development and customer services.

All Manual (I.e. Non-Clerical) Workmen in Habib Bank Ltd. Retrenchment (cutback) In order to focus on core banking activities and rationalize our staff strength, HBL had introduced Voluntary Separation Schemes in the past. Currently there are over 2300 employees working in HBL dedicated to non -core activities including Security, Driver and other manual work. The administration and management of these activities is causing a severe lack of focus on core activities like business development and customer service etc. the market practices amongst progressive Bank dictates an urgent need for outsourcing such services.

Supply Chain Management Ethics in Buying: • Child Labor • Environment • Green Supply Chain • Fair Trade

Supply Chain Management End of Topic

Supply Chain Management Introduction