Supply Chain Management & Operations Management

1. SupplyChain Management & Operations Management Management Development Programme

2. Programme 08:30 – 10:30 Introduction Origins of SCM Components of SCM 10:30 – 11:00 Tea 11:00 - 13:00 Operations Management 13:00 - 14:00 Lunch 14:00 - 15:00 Government and SCM 15:00 - 15:15 Tea 15:15 - 16:30 Public Sector SCM

3. What is a Supply Chain? • A supply chain consists of the flow of products and services from: • Raw materials manufacturers • Intermediate products manufacturers • End product manufacturers • Wholesalers and distributors and • Retailers • Connected by transportation and storage activities, and • Integrated through information, planning, and integration activities

4. What is Supply Chain Management? Here are two definitions: The design and management of seamless, value-added process across organizational boundaries to meet the real needs of the end customer Institute for Supply Management Managing supply and demand, sourcing raw materials and parts, manufacturing and assembly, warehousing and inventory tracking, order entry and order management, distribution across all channels, and delivery to the customer The Supply Chain Council

5. Business logistics Physical supply Physical distribution (Materials management) Sources of Plants/ Customers supply operations • Transportation • Transportation • Inventory maintenance • Inventory maintenance • Order processing • Order processing • Acquisition • Product scheduling • Protective packaging • Protective packaging • Warehousing • Warehousing • Materials handling • Materials handling • Information maintenance • Information maintenance Traditional Scope of the Supply Chain Internal supply chain

6. Logistics vs Supply Chain Management Council of Logistics Management • “Logistics is the process of planning, implementingand controllingthe efficient, cost-effective flow and storage of raw materials, in-process inventory, finished goods and related information from the point of origin to point of consumption for the purpose of conforming to customer requirements.” Handfieldand Nichols • SCM is the integrationof all activities associated with the flow and transformation of goods from raw materials through to end user, as well as information flows, through improved supply chain relationships, to achieve a sustainable competitive advantage.

8. Supply Chain is Multi-Enterprise Conventional Scope Focus Company Suppliers Customers Customers/ Supplier’s End users suppliers Acquire Convert Distribute Product and information flow

9. Important Elements of Supply Chain Management Purchasing- Supplier alliances, supplier management, strategic sourcing Operations- Demand management, MRP, ERP, JIT, TQM Logistics- Transportation management, customer relationship management, network design, service response logistics Integration- Coordination/Integration activities, global integration problems, performance measurement

10. Elements / Components of SCM Purchasing- Trends: • Long term relationships • Supplier management- improve performance through- • Supplier evaluation (determining supplier capabilities) • Supplier certification (third party or internal certification to assure product quality and service requirements) • Strategic partnerships- successful and trusting relationships with top-performing suppliers

11. Elements / Components of SCM Operations- Trends: • Demand management- match demand to available capacity • Linking buyers & suppliers via MRP and ERP systems • Use JITto improve the “pull” of materials to reduce inventory levels • Employ TQMto improve quality compliance among suppliers

12. Elements / Components of SCM Distribution- Trends: • Transportation management- tradeoff decisions between cost & timing of delivery/customer service via trucks, rail, water & air • Customer relationship management- strategies to ensure deliveries, resolve complaints, improve communications, & determine service requirements • Network design- creating distribution networks based on tradeoff decisions between cost & sophistication of distribution system

13. Elements / Components of SCM Integration Trends: • Supply Chain Integration- when supply chain participants work for common goals. Requires intrafirm functional integration. Based on efforts to change attitudes & adversarial relationships • Global Supply Chains- advantages that accrue from sourcing from larger global market e.g., lower cost & higher quality suppliers. May involve operating exposure, which is risk found in foreign settings • Supply Chain Performance Measurement- Crucial for firms to know if procedures are working

14. Importance of Supply Chain Management Cost savings and better coordination of resources are reasons to employ Supply Chain Management • Reduced Bullwhip Effect- the magnified reduction of safety stock costs based on coordinated planning and sharing of information • Process Integration- Interdependent activities can lead to improved quality, reduced cycle time, better production methods, etc.

15. Origins of Logistics Mngt

16. Key Activities/Processes • Primary • Setting customer service goals • Transportation • Inventory management • Location • Secondary, or supporting • Warehousing • Materials handling • Acquisition (purchasing) • Protective packaging • Product scheduling • Order processing

17. Logistics Strategy and Planning • The objectives of logistics strategy • Minimize cost • Minimize investment • Maximize customer service • Levels of logistical planning • Strategic • Tactical • Operational

18. Customer • service goals • The product • Logistics service • Information sys. The Logistics Strategy Triangle (4 problem areas)

19. LEAN PRODUCTION • "A team-based approach to continuous improvement focused on eliminating non-value added activities or “waste” from the viewpoint of the customer.” • “...a system for organising and managing product development, operations, suppliers, and customer relations.”

20. LEAN PRODUCTION – KAIZEN • Kaizen ... rapid improvement processes - the "building block" of all lean production methods. • Kai – Change........ Zen - Good "CHANGE FOR THE BETTER" • Big results come through routinely applying small, incremental changes....continuous improvement....

21. 2 GOVERNMENT AND PROCUREMENT

22. Procurement by the state serves two broad purposes: Primary – Efficient acquisition of goods & services Secondary – Socio-economic transformation Constitutional imperative (Section 217) South African public sector spent R500 billion on goods and services in 2013/14 Government and Procurement

23. Procurement – a key developmental tool S217(3) of the Constitution prescribes the framework within which preference and socio-economic objectives are to be achieved. Local Economic Development “Set asides” Procurement should talk to broader macro-economic strategy: National Growth Plan and the NDP The need to create jobs thus eliminating poverty. In essence, need to strengthen basic service delivery whilst promoting labour intensive programmes EVERYONE’s RESPONSIBILITY Government and Procurement

24. Legislative Environment CONSTITUTION PFMA PPPFA BBBEE Act PAJA & PAIA Preferential Procurement Regulations 2011 Revised BBBEE Scorecard & Codes of Good Practice • Instructions • Circulars • Guidelines The Organisation’s SCM Policy

25. The Public Sector SCM System

26. Roles and Responsibilities of Bid Committees • Appointment of Bid Committees • ‘The cornerstone of the successful implementation of Supply Chain Management is the establishment of well functioning Bid Structures’ • According section 44 & 56 of PFMA: • The Accounting Officer must appoint the following: • Bid Specification Committee • Bid Evaluation Committee • Bid Adjudication (Award) Committee

27. Four (4) broad steps to the evaluation process: STEP 1: Compulsory Statutory Requirements STEP 2: Minimum Mandatory Bid Requirements STEP 3: Functionality against pre-set criteria STEP 4: Price and Preference Points NB: SCM Policy can indicate who will evaluate steps 2 & 3 (Both for quotations and bids)......SCM to first issue an evaluation guideline... Specific Evaluation Matters

28. The End