Professionals Purchasing’sGrowing Importance Supply Chain Management The Internet and Business-to-Business Sell
Supply Chain ManagementJust- in- time Inventory System Advantage and Disadvantage Material Requirements Planning (MRP) system Automatic Replenishment (AR)Supplier Relationship Management
Supply Chain ManagementSet of programs undertaken to increase the efficiency of the distribution channel that moves products form producer’s facilities to the end user.
Just-in-time Systems used by a producer to minimize its inventory by having frequent deliveries, sometimes daily, just in time for assembly into the final product.The ultimate goal is to eliminate all inventory except products in production and transit. Inventory is waste.Rely on one supplier.
Advantages of JIT SystemFunds that were tied up in inventories can be used elsewhere.Areas previously used, to store inventories can be used for other more productive uses.Throughput time is reduced, resulting in greater potential output and quicker response to customers.Defect rates are reduced, resulting in less waste and greater customer satisfaction.
PCs Just In Time Management:Del Computer Corporation has finally tuned its Just-in-Time system, Dells low cost production system allows it to under price its rivals by 10% to 15%. How does the companys just in time system deliver lower costs? "While machines from Compaq and IBM can languish on dealer shelves for two months Dell does not start ordering components and assembling computers until an order is booked.
That may sound like no biggie, but the price of PC parts can fall rapidly in just a few months. By ordering right before assembly, Dell figures itsparts, on average,are 60 days newer thanthose in an IBM or Compaqmachine sold at the same time.That can translate into a 6% profit advantage in components alone."
Disadvantage of JIT System JIT manufacturing also opens businesses to a number of risks, notably those associated with your supply chain. With no stocks to fall back on, a minor disruption in supplies to your business from just one supplier could force production to cease at very short notice.
Toyota the Developer of JIT SystemJust-in-time manufacturing system has many advantages, but they are vulnerable to unexpected disruptions in supply. A production line can quickly come to a halt if essential parts are unavailable. Toyota, the developer of JIT, found this out the hard way. One Saturday, a fire at Aisin seiki Companys plant in Aichi Prefecture stopped the delivery of all break parts to Toyota. By Tuesday,
Toyota had to close down all of its Japanese assembly line. By the time the supply of break parts had been restored, Toyota had lost an estimated $15 billion in sales.
Material Requirement PlanningSystem these systems are used to forecast sales, develop a production schedule, and then order parts and raw materials with delivery dates that minimize the amount of inventory needed, thereby reducing costs.
Week 1 2 3 4 5 6 7 8Gross RequirementsScheduled ReceiptsProjected on hand IPlanned ReceiptsPlanned order releases
Automatic Replenishment A form of Just-in-time where the supplier manages inventory levels of the customer. The materials are provided on consignment, meaning the buyer doesn’t pay for them until they are actually used. (industrial settings)
Electronic Data Interchange Computer-to-computer linkages between suppliers and buyers sharing information about sales, production and shipment and receipts of products.
Sales Forecasts Promotion Schedule Request For Quote Change Order BUYER Material Release SUPPLIER Sh Quote Order A ip no dva me Acknowledge s tu B tic nc nt i ll e e S r ta de of d ta Shipping Notice ts sh tu orPi La en ip s ck up nd pi Invoice m up in ng ck ip g Promotion Schedule or Sh Pi de r CARRIER
Supplier RelationshipManagement is a strategy by which organizational buyers evaluate the relative importance of suppliers and use that information to determine with whom they want to develop partnerships.
Annual Spend Is the amount that is spent with each vendor (supplier) and for what products.
Vendor Analysis The buyer rates the supplier and its product on a number of criteria such as; Price Quality Performance On- time Delivery
Note: The ratings of suppliers can be affected by perceptions and personal needs of the buyers.
Overall score is developed The ratings are weighted by importance of the characteristics.
The Internet and Business-to-Business Selling Electronic ordering through EDI (Electronic Data Interchange) has been common practice in business for more than 10 years.
The Internet and Business-to-Business Selling EDI activity, nowadays, was transacted over private networks that required buyers and sellers to use specialized software to communicate with each other. Special secure Internet-based networks connecting buyers and suppliers are called extranets.
Benefit of Extranet Reduced costs by making manuals and technical documentation available online to trading partners and customers more effective collaboration between business partners - perhaps members of a project team - by enabling them to work online on common documentation improved business relationships with key trading partners because of the close collaborative working that extranets support
improving the security of communications between you and your business partners, since exchanges can take place under a controlled and secure environment