OPERATIONS MANAGEMENT

AND TQM
Supply Chain Management
LEARNING OBJECTIVES:

 Define Supply chain

 Define Supply Chain Management
 Identify the 6 important aspects of supply chain
 Explain the importance of strategic supply chain
 Define the 5 supply chain strategies
 Evaluate supply chain performance
 Discuss issues and supply chain opportunities
WHAT IS A SUPPLY CHAIN ?

 A supply chain pertains to a system that connects a manufacturer to a supplier in

order to produce goods and sell it to consumers. This is a complex network that
involves various activities that is interconnected to the following: individuals,
organizations and resources. Supply chain is concerned with the development of
products, marketing, operations, distribution, finance and customer
service(Hezier, Barry and Munson, 2019).
WHAT IS A SUPPLY CHAIN MANAGEMENT?

 Supply Chain Management refers to the management of movement of goods and

services that includes turning raw materials into finished goods. Example of this is
a grocery store and its supplier, the grocery provides information to the supplier
on what products are needed and how many should be delivered.
6 KEY SUPPLY CHAIN LINKS

 • Enhancing customer service- One important aspect of supply chain

management is to improve the quality of service the customer is experiencing.
Example of this assuring that consumers are getting their items on time, making
sure that the items are in good condition and in right quantity
 • Decreasing Inventory- Companies should decrease supply chain lead time to
ensure that raw materials or finished goods are not held for a long time in doing
this inventory levels will be reduced.
 • Optimizing Production- Production should run smoothly to maintain the
consistency and accuracy of products. With a well-coordinated supply chain a
company must be able to optimize batch production, reduce set up time and
avoid delays.
6 KEY SUPPLY CHAIN LINKS

 • Agile- This refers to the company’s ability to respond and handle unexpected
supply chain problems such as: raw material availability, stock out, manpower
shortage, unexpected rising demand and equipment failure. Companies should
analyse and choose the best response to these issues.
 • Reducing cost- In order to offer the lowest possible price to their customers,
companies are lowering their cost by managing the following aspects: labor,
procurement, inventory and transportation cost
 • Managing materials- this is a critical part in managing the supply chain,
materials should traced, should have quality, should meet specifications and
should be low cost in order for companies to reduce production cost.
IMPORTANCE OF SUPPLY CHAIN

 As stated by Hezier,Barry and Chuck (2019), a good supply chain decreases the
cost of doing business, it also contributes to the establishment of the firm’s
competitive adavantage. It improves customer servcie by delivering their goods
on time and in the right quantity. Another, it decreases the firm’s production and
purchasing cost and it also improves the financial condition of the company.

“It’s not the organizations that are competing.

It’s the supply chains that are competing”- Walter
Safwat. SCMAO
IMPORTANT ACTIVITIES IN SUPPLY CHAIN
MANAGEMENT
 Transportation vendors
 Credit and cash transfer
 Suppliers
 Distributors
 Accounts payable and receivable
 Warehousing and inventory
 Order fulfillment
 Sharing customer, forecasting and production information
SUPPLY CHAIN FOR PAPER

Source: https://fbnotify.top/rbessay/
GLOBAL SUPPLY CHAIN ISSUES

As stated by Hezier, Barry and Munson (2019) companies doing global supply
chain must:

 Respond to sudden shifts in the supply of materials, the distribution or

delivery networks, import duties and the exchange rate.
 Using state-of-the-art machine and transmission technology to plan and
control parts distribution and finished goods.
 Employ local experts who will be in charge of managing employment, freight,
customs and political matters
 IMPACT OF SUPPLY CHAIN DECISION
Low Cost Strategy Response Strategy Differentiation Strategy

Goal of the Supplier It should be at its lowest possible cost Give an immediate response to the dynamic Collaborate with market research to develop
requirements and demand to reduce stock out products and options

Selection Criteria Select for cost Choose based on capacity, flexibility and speed Choose based on product development skills

Characteristics of the process Sustain high average usage Start investing on extra plant capacity and flexible Make modualr processes to make it easy for mass
processes customization

Characteristics of the Inventory Reduce inventory to minimize cost Create a susceptible system with buffer stocks to Reduce inventory and prevent having outdated or
support supply obsolete products

Characteristics of the Lead Time Decrease lead time as long as it does not make the Invest to minimize production lead time Invest to minimize development lead time
cost higher

Characteristics of Product Design Boost performance and reduce cost Design products that has low set up time and easy to Use modular design to delay proudct differentiation
produce
SUPPLY CHAIN IN ECONOMICS

 Supply chain has a great impact on economics. Due to the rising cost of
production managers locate their companies to countries where they can utilize
and maximize their resources. This will have an effect on the economic standing
of the country where they chose to locate or relocate their business. This leads to
job outsourcing and creation of job opportunities for the locals. Another, is natural
disaster which can disrupt and can be a threat to the supply chain operations.
MAKE OR BUY DECISIONS

Reasons to make it in house:

 Sustain the organization by maintaining its core competence
 Reduce production cost
 Unsuited suppliers
 Ensure enough supply(quantity/delivery)
 Maximizing the use of surplus labor and facilities
 Achieve desired quality
 Alleviate supplier collusion
 Prevent worker lay off
 Secure proprietary design and quality
 Boost or maintain company size
MAKE OR BUY DECISIONS

Reasons to buy
 It gives management the freedom to deal with their core competence
 Decreasing their acquisition cost
 Uphold commitment with suppliers
 Acquire technical and management ability
 Lack of capacity
 Minimize inventory cost
 Ensure and provide alternative sources
 Reciprocity
 The item is subjected to patent or trade secret
OUTSOURCING

 Outsourcing is the business strategy of recruiting a group outside of a

organization to provide services and produce products that the company's own
employees and staff have historically done in-house.
 Outsourcing will dramatically help companies slash labor costs. If a corporation
performs outsourcing, it gathers support from non-business related external
organizations to complete those tasks. Corporations outsource information,
technology, legal services,logistics, production and accounting services.
ETHICS IN SUPPLY CHAIN

 There are many opportunities and temptations to express unethical behavior

in supply chain areas.
 Companies are setting strict rules and regulations and code of conduct to set
acceptable behavior
 Supply Management formulated a set of principles and standards to define
ethical behavior
PRINCIPLES AND STANDARDS FOR ETHICAL
SUPPLY MANAGEMENT CONDUCT
 Prevent the intention and appearance in partnerships that engages in acts of
correspondence of immoral or damaging activities.
 Exemplify loyalty to the employer by respecting authority and faithfully
following the lawful instructions of the employer
 Avoid any personal or professional practice which would generate a conflict
with personal interests and employer interests.
 Refrain from soliciting or receiving money, loans, incentives or favorable
discounts and the acceptance of present or potential suppliers' gifts,
entertainment, advantages or services that could affect or tend to influence
supply chain management decisions.
 Handle classified or sensitive information with respect for ethical and legal
issues and government regulations.
 Encourage positive relationships with suppliers through courtesy and
impartiality
PRINCIPLES AND STANDARDS FOR ETHICAL
SUPPLY MANAGEMENT CONDUCT
 Avoid improper mutual arrangements
 Know and follow the letter and purpose of legislation relating to supply
management
 Facilitate support for small, disadvantaged and minority-owned enterprises
 Obtain and sustain professional competence
 Conduct supply chain management operations in compliance with national
and international rules, customs and procedures, the regulations of your
company and other ethical principles and standards.
 Improve the reputation of the supply chain management career
SUPPLY CHAIN STRATEGIES

 Negotiating with many suppliers

 This is normally used for commodity products
 Purcahse is based on price alone
 Suppliers are competing with each other
 Suppliers should be responsible for factors like: cost of quality, delivery,
expertise,forecasting and technology
 Few Suppliers
 The manufacturer build long term relationships with few suppliers.
 Enhance value through economies of scale and learning curve improvements.
 Suppliers are willing to take part in JIT programs and to contribute their expertise in
design and technology
 Changing suppliers is costly
SUPPLY CHAIN STRATEGIES

 Vertical Integration
 This is a technique used by a company to gain leverage of its suppliers or distributors to
maximize the company’s purchasing influence of the product, minimize transaction
costs and secure supplies or channels of distribution.
 Keiretsu Networks
 As defined by investopedia.com Keiretsu is a Japanese term that refers to a group of
firms, including producers, supply chain partners, distributors and sometimes financers
who support and work together to achieve success.
 Virtual Companies
 They depend on various suppliers to provide services and meet the demand. Virtual
companies are entities that use telecommunications and computers to expand their
capacities by continually hiring contractors or remote staff, without relying on a physical
location to operate as a company
MANAGING THE SUPPLY CHAIN

According to Hezier, Barry and Munson (2019) this factor affects how we
manage the supply chain aspect of our company.
 Mutual arrangement of goals and objectives
 Trust
 Suitable organizational culture
INTEGRATED SUPPLY CHAIN ISSUES

 Local optimization- This concentrates on local profit and cost reduction based
on limited knowledge
 Incentives( sales incentives,quantity discounts, quotas and promotions)
 Large lots
 Bullwhip effect- This can be defined as an occurrence identified in the supply chain
where orders sent to the producer and supplier generate a greater variance than sales
to the final consumer . This happens when changing customer demand force the supply
chain companies to order more products to satisfy the new demand. Generally the
bullwhip effect spreads up the supply chain, beginning with the seller, wholesaler,
dealer, producer and then the source of the raw materials.
OPPORTUNITIES IN AN INTEGRATED
SUPPLY CHAIN
 Accurate pull data- Pull Data refers to an information model that allows
companies to use business intelligence and reporting tools to arrange information
and make reports.
 Lot size reduction- Lot size refers to the number of goods produced at a specific
period. Lowering lot size and set-up costs enables the production of small lots and
the 'pulling' of goods through the supply chain.
 Vendor managed inventory-This refers to a business model in which the
purchaser offers information to the vendor of that product and the vendor
assumes full accountability for maintaining an agreed inventory of the material ,
usually at the purchaser's place of consumption.
OPPORTUNITIES IN AN INTEGRATED
SUPPLY CHAIN
 Blanket orders-A blanket order is an order issued for a particular range or classification from
which individual specifications may be drawn over a period of time.A blanket order prevents
consumers from keeping excessive stock amounts and eliminates the administrative burden of
handling regular purchase orders, while encouraging discount pricing by volume or price breaks
commitments.
 Standardization-Standards ensure uniform quality of products or services provided in a
specific industry and are equal to other comparable goods or services in the same industry.
 Drop shipping and special packaging-This is a form of supply chain management in which the
retailer does not hold the products in stock but then transfers the orders and information of its
customer to either the supplier, another retailer or a wholesaler who delivers the products
directly to the customer.
 Postponement
 Pass through facility
 Channel assembly
E-PROCUREMENT

 Refers to a process wherein companies can look for suppliers, buy materials,
products and services in the internet.This are business to business transactions
done using a digital paltform, a wireless network or a website. This uses Electronic
data interchange and advance shipping notice, also online vendors are providing
catalogs to give them a description of what they are offering.
VENDOR SELECTION

 Vendor Evaluation
 Vendor Development
 Negotiations
 Cost based price model
 Market based price model

 Competitive bidding
LOGISTICS MANAGEMENT

 This is a supply chain management function used to meet consumer demands by

preparing, monitoring and enforcing the efficient transportation and storage of
relevant information , goods and services from producer to consumer.
DISTRIBUTION SYSTEMS

 Trucking
 Railroads
 Airfreignt
 Waterways
 Pipelines
THIRD PARTY LOGISTICS

 3PL (third-party logistics provider) provides outsourced logistics services covering

anything that includes handling one or more aspects of procurement and
production activities. This includes activities like: shipping, storage, pick-and-
pack, product forecasting, order fulfillment, packing and freight forwarding
 REFERENCES:
 Heizer J., Barry R., Chuck M. (2019). Operations Management: Sustainability and Supply Chain Management 13th Edition. Pearson.
 https://www.investopedia.com/terms/s/supplychain.asp
 https://www.supplychaindigital.com/scm/six-key-supply-chain-links
 https://smallbusiness.chron.com/explain-term-supply-chain-its-importance-cost-management-69721.html
 https://www.slideshare.net/RIZWANKHURRAM/heizer-11
 https://www.investopedia.com/terms/o/outsourcing.asp#:~:text=Outsourcing%20is%20the%20business%20practice,as%20a%20cost%2Dcuttin
g%20measure.
 https://strategicmanagementinsight.com/topics/vertical-integration.html
 https://www.investopedia.com/terms/k/keiretsu.asp
 http://www.cbpp.uaa.alaska.edu/afef/bullwhip_effect_in_supply_ch.htm
 www.techleens.com
 https://www.scm-portal.net/glossary/lot_size.shtml
 https://www.thebalancesmb.com/vendor-managed-inventory-vmi-
2221270#:~:text=Vendor%20Managed%20Inventory%20(VMI)%20is,at%20the%20buyer%27s%20consumption%20location.
 https://www.scm-portal.net/glossary/blanket_order.shtml
 https://corporatefinanceinstitute.com/resources/knowledge/economics/standardization/
VIDEO REFERENCES:

 Please watch the video: https://www.youtube.com/watch?v=AwemFfdD6VI

 https://www.youtube.com/watch?v=ZXjx3D066p0
 https://www.youtube.com/watch?v=Sz6cYxBtFfs
 : https://www.youtube.com/watch?v=R8tpknJN3eI