PERT 02 Supply Chain Management

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1 PERT 02 Supply Chain Management Supply chain management Arti Penting Supply Chain Terhadap Strategi. Dampak ekonomis dari SCM Outsourcing Strategi Supply Chain (SC) Pengelolaan SC E-procurement Vendor Selection Logistic Management

2 Supply Chains All facilities, functions, and activities associated with flow and transformation of goods and services from raw materials to customer, as well as the associated information flows An integrated group of processes to source, make, and deliver products

3 The Supply Chain Supplier Inventory Supplier Market research data scheduling information Engineering and design data Order flow and cash flow Ideas and design to satisfy end customer Material flow Credit flow Customer Supplier Manufacturer Inventory Inventory Customer Inventory Distributor Customer

4 Supply-Chain Management Planning, organizing, directing, & controlling flows of materials Begins with raw materials Continues through internal operations Ends with distribution of finished goods Involves everyone in supply-chain Example: Your supplier s supplier Objective: Maximize value & lower waste

5 Supply Chain Management (SCM) Managing flow of information through supply chain in order to attain the level of synchronization that will make it more responsive to customer needs while lowering costs Keys to effective SCM information communication cooperation trust 10-5

6 Supply Chain for Service More difficult than manufacturing Does not focus on the flow of physical goods Focuses on human resources and support services More compact and less extended

7 Supply-Chain Support for Overall Strategy Low Cost Response Differentiation Supplier s goal Supply demand at lowest possible cost Respond quickly to changing requirements and demand to minimize stockouts Share market research; jointly develop products and options Primary Selection Criteria Select primarily for cost Select primarily for capacity, speed, and flexibility Select primarily for product development skills

8 Supply-Chain Support for Overall Strategy - continued Process Characteristics Low Cost Maintain high average utilization Response Invest in excess capacity and flexible processes Differentiation Modular processes to lend themselves to mass customization Inventory Characteristics Minimize inventory throughout the chain to hold down costs Develop responsive system, with buffer stocks positioned to ensure supply Minimize inventory in the chain to avoid obsolescence

9 Supply-Chain Support for Overall Strategy - continued Low Cost Response Differentiation Lead-time Characteristics Shorten leadtime as long as it does not increase costs Invest aggressively to reduce production lead-time Invest aggressively to reduce development lead-time Product-design Characteristics Maximize performance and minimize cost Use product designs that lead to low setup time and rapid production ramp-up Use modular design to postpone product differentiation for as long as possible

10 Purchasing Acquisition of goods & services Activities Help decide whether to make or buy Identify sources of supply Select suppliers & negotiate contracts Control vendor performance Importance Major cost center Affects quality of final product

11 Dampak ekonomis dari SCM Purchasing Costs as a Percent of Sales Industry Percent of Sales All industry Automobile Food Lumber Paper Petroleum Transportation 52% 61% 60% 61% 55% 74% 63%

12 Dollars of Additional Sales Needed to Equal 1$ Saved Through Purchasing Percent of Sales Spent for Purchases Firm's 30% 40% 50% 60% 70% 80% 90% Percent Net Profit 2 $2.78 $3.23 $3.85 $4.76 $6.25 $9.09 $ $2.70 $3.13 $3.70 $4.55 $5.88 $8.33 $ $2.63 $3.03 $3.57 $4.35 $5.56 $7.69 $ $2.56 $2.94 $3.45 $4.17 $5.26 $7.14 $ $2.50 $2.86 $3.33 $4.00 $5.00 $6.67 $10.11

13 Objectives of the Purchasing Function Help identify the products and services that can be best obtained externally; and Develop, evaluate, and determine the best supplier, price, and delivery for those products and services

14 Traditional Purchasing Process Customer Purchase Order Mail Supplier Order Processing Receivable s Report Receiving Dock Packing List Accounts Payable Mail Invoice Reconcile Check Mail Accounts Receivable

15 Purchasing Techniques Drop shipping and special packaging Blanket orders Invoiceless purchasing Electronic ordering and funds transfer Electronic data interchange (EDI) Stockless purchasing Standardization

16 Make/Buy Considerations Reasons for Making Reasons for Buying lower production cost unsuitable suppliers assure adequate supply utilize surplus labor and make a marginal contribution obtain desired quantity remove supplier collusion obtain a unique item that would entail a prohibitive commitment from the supplier lower acquisition cost preserve supplier commitment obtain technical or management ability inadequate capacity reduce inventory costs ensure flexibility and alternate source of supply reciprocity

17 Make/Buy Considerations (Cont) Reasons for Making maintain organizational talent protect proprietary design or quality increase/maintain size of company Reasons for Buying item is protected by patent or trade secret frees management to deal with its primary business

18 Outsourcing Sourcing selection of suppliers Outsourcing purchase of goods and services from an outside supplier Core competencies what a company does best Single sourcing a company purchases goods and services from only a few (or one) suppliers

19 Purchasing Strategies Plans to help achieve company mission Affect long-term competitive position Strategic options Many suppliers Few suppliers Keiretsu network Vertical integration Virtual company Plan 1995 Corel Corp.

20 Supply-Chain Strategies Negotiate with many suppliers; play one supplier against another Develop long-term partnering arrangements with a few suppliers who will work with you to satisfy the end customer Vertically integrate; buy the actual supplier Keiretsu - have your suppliers become part of a company coalition Create a virtual company that uses suppliers on an as-needed basis.

21 Many Suppliers Strategy Many sources per item Adversarial relationship Short-term Little openness Negotiated, sporadic PO s High prices Infrequent, large lots Delivery to receiving dock 1995 Corel Corp.

22 Few Suppliers Strategy 1 or few sources per item Partnership (JIT) Long-term, stable On-site audits & visits Exclusive contracts Low prices (large orders) Frequent, small lots Delivery to point of use 1995 Corel Corp.

23 Vertical Integration Strategy Ability to produce goods previously purchased Setup operations Buy supplier Make-buy issue Major financial commitment Hard to do all things well Raw Material (Suppliers) Backward Integration Current Transformation Forward Integration Finished Goods (Customers)

24 Forms of Vertical Integration Iron Ore Silicon Farming Raw Material (Suppliers) Steel Backward Integration Automobiles Integrated Circuits Flour Milling Current Transformation Distribution System Circuit Boards Forward Integration Dealers Computers Watches Calculators Baked Goods Finished Goods (Customers)

25 Keiretsu Network Strategy Japanese word for affiliated chain System of mutual alliances and cross-ownership Company stock is held by allied firms Lowers need for short-term profits Links manufacturers, suppliers, distributors, & lenders Partnerships extend across entire supply chain

26 Virtual Company Strategy Network of independent companies Linked by technology PC s, faxes, Internet etc. Each contributes core competencies Typically provide services Payroll, editing, designing May be long or short-term Usually, only until opportunity is met

27 Vendor Selection Steps Vendor evaluation Identifying & selecting potential vendors Vendor development Integrating buyer & supplier Example: Electronic data exchange Negotiations Results in contract Specifies period of agreement, price, delivery terms etc.

28 Vendor Selection Rating Form

29 Supplier Selection Criteria Company Financial stability Management Location Product Quality Price Service Delivery on time Condition on arrival Technical support Training

30 Negotiation Strategies Three types: cost-based price model - supplier opens its books to purchaser; price based upon fixed cost plus escalation clause for materials and labor market-based price model - published price or index competitive bidding - potential suppliers bid for contract

31 Managing the Supply-Chain Options: Postponement Channel assembly Drop shipping Blanket orders Invoiceless purchasing Electronic ordering and funds transfer Stockless purchasing Standardization Internet purchasing (e-procurement)

32 Managing the Supply-Chain - Other Options Establishing lines of credit for suppliers Reducing bank float Coordinating production and shipping schedules with suppliers and distributors Sharing market research Making optimal use of warehouse space

33 Materials Management Integrates all materials functions Purchasing Inventory management Production control Inbound traffic Warehousing and stores Incoming quality control Objective: Efficient, low cost operations

34 Goods Movement Options Trucking Railways Airfreight Waterways Pipelines

35 Supply-Chain Performance Compared Number of suppliers per purchasing agent Purchasing costs as percent of purchases Typical Firms Benchmark Firms % 0.8% Lead time (weeks) 15 8 Time spent in placing order 42 minutes 15 minutes Percentage of late deliveries 33% 2% Percentage of rejected material 1.5%.0001% Number of shortages per year 400 4

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