Pgbm03 MBA OPERATION MANAGEMENT session 08 supply chain management

1. PGBM03 Operations Management
Session 08
Supply Chain Management
Module Leader: Peter Coleman

2. Design
Planning and
control
Operations
strategy
Improvement
Supply chain planning and control
The operation supplies…
the coordinated delivery of
products and services
The market requires…
specified time, quantity and
quality of products and
services
Supply chain
planning and control

3. Key operations questions
• What is supply chain management?
• What are the activities of supply chain management?
• What are the types of relationship between operations in
supply chains?
• How do supply chains behave in practice?
• How can supply chains be improved?

4. ‘Supply chain management is the management of
the interconnection of organizations that relate to
each other through upstream and downstream
linkages between the processes that produce
value to the ultimate consumer in the form of
products and services’.
What is supply chain management?

5. …is concerned with managing the flow of materials and information between a
string of operations, that form the strands or ‘chains’ of a supply network
Flow between processes
Flow between processes
Flow between processes
Supply chain
management concerns
flow between a string of
operations
Supply network
management concerns
flow between operations
Flow between processes
Flow between processes
Flow between processes
Flow between processes
Supply chain planning and control

6. Supply chains management is concerned with the flow of
information and the flow of products and services
• Products and services
• New products and services
• Delivery information
• Payment request/Credit.
‘Downstream’ flow of
products and services for
customer
Fulfilment
‘Upstream’ flow of
customer
Requirements
• Long-term plans and requirements
• Market research information
• Individual orders
• Payment
• Potential new products and services.
Flow between
processes
Consumer
Flow between
processes
Flow between
processes
Operation 1 Operation 2 Operation 3

7. First tier
supplier
Second tier
supplier
First tier
customer
Second tier
customer
End
customer
Demand
side
Supply side
Purchasing and
supply
management
Physical distribution
management
Logistics
Materials management
Supply chain management
Information
flow
Physical
flow
Supply chain planning and control

8. The operationPurchasing functionSuppliers
Request for
products
and services
Demand
from
customers
Supply to
customers
Request
for
quotations
Prepare
purchase
order
Prepare
quotation for
specification,
price, delivery,
etc.
Requests
Select
supplier(s)
Quotations
Produce
products
and services
Order Receive
products
and services
Deliver
Liaison
between
purchasing
and the
operation
The purchasing function brings together the operation
and its suppliers

9. Short-term ability to supply Longer-term ability to supply
•Range of products or services
provided
•Potential for innovation
•Quality of products or services •Ease of doing business
•Responsiveness •Willingness to share risk
•Dependability of supply •Long-term commitment to supply
•Delivery and volume flexibility •Ability to transfer knowledge as
well as products and services
•Total cost of being supplied •Technical capability
•Ability to supply in the required
quantity
•Operations capability
•Financial capability
•Managerial capability
Factors for rating alternative suppliers

10. Factor Weight Supplier A score Supplier B score
Cost performance 10 8 (8 x 10 = 80) 5 (5 x 10 = 50)
Quality record 10 7 (7 x 10 = 70) 9 (9 x 10 = 90)
Delivery speed
promised
7 5 (5 x 7 = 35) 5 (5 x 7 = 35)
Delivery speed
achieved
7 4 (4 x 7 = 28) 8 (8 x 7 = 56)
Dependability record 8 6 (6 x 8 = 48) 8 (8 x 8 = 64)
Range provided 5 8 (8 x 5 = 40) 5 (5 x 5 = 25)
Innovation capability 4 6 (6 x 4 = 24) 9 (9 x 4 = 36)
Total weighted score 325 356
Weighted supplier selection criteria for a hotel chain

11. Business to business (B2B)
• Most common, all but the last
link in the supply chain
• E-commerce examples:
– EDI networks
– Business information
exchanges.
Business to consumer (B2C)
• Retail operations
• Catalogue operations, etc.
• E-commerce examples:
– Internet retailers
– Amazon.com, etc.
Consumer to consumer (C2B)
or ‘peer to peer (P2P)
• Consumers ‘offer’,
business responds
• E-commerce examples:
– Some airline ticket operators
– Priceline.com, etc.
Supply chain relationships
• Trading ‘swap’ and auction
transactions
• E-commerce examples:
– Specialist ‘collector’ sites
– Ebay.com, etc.
Consumer to business (C2B)
Business ConsumerTo…
Business
Consumer
From…

12. Attitudes
Actions
Closeness of
relationship
Elements of process partnership relationships
Joint problem
solving
Joint co-
ordination of
activities
Joint
learning
Long-term
expectations
Sharing
success
Multiple
points of
contact
Few
relationships
Information
transparency
Dedicated
assets
Trust

13. Improved profitability
Supply chain time compression
Schedule
changes impact
market faster
so can
respond to
market changes
better
so revenues
are maximized
so improved
forecasts
so reduced
stockholding
costs
Forecasts
made closer to
demand time
so less need for
safety stocks
Defects are
detected faster
so easier to
improve quality
so reduced
wastage costs
New products
and service
faster to market
so fewer lost
sales from
delayed launch
so reduced
risk of
obsolescence
so revenues
are maximized
so less
discounted
sales
The effects of supply chain compression

14. MARKET
6
5
4
3
2
1
3rd LEVEL
SUPPLIER
2nd LEVEL
SUPPLIER
1st LEVEL
SUPPLIER
ORIGINAL
EQUIPMENT
MFG.
Prodn. Stock Prodn. Stock Prodn. Stock Prodn. Stock
100 100 100 100
100
100
100
100
100
100
100
100
100
3 2 1
ALL OPERATIONS HOLD ONE PERIODS STOCK
20
100
60 60
100
80 80
100
90
100
9590
100
95
180
60
120 120
80
100 100
90
95 9595
95
95
60
120
90 90
100
95 95
95
95
100
90
95
9595
95
95
9595
95
95
9595
95
95
95
95
95
95
95
95
95
95
95
95
95
9595
95
95
The bullwhip effect
OEM

15. MARKET
6
5
4
3
2
1
3rd LEVEL
SUPPLIER
2nd LEVEL
SUPPLIER
1st LEVEL
SUPPLIER
ORIGINAL
EQUIPMENT
MFG.
Prodn. Stock Prodn. Stock Prodn. Stock Prodn. Stock
100 100 100 100
100
100
100
100
100
100
100
100
100
3 2 1
ALL OPERATIONS HOLD ONE PERIODS STOCK
The bullwhip effect (Continued)
OEM
95
105
105
95
95

16. 0
Time
Sales from
store
Consumers
0
Time
Store’s orders to
wholesaler
Time
Wholesaler’s
orders to
manufacturer
0
Manufacturer’s
orders to its
suppliers
0
Time
Retail
store
Whole
saler
Manuf
acturer
Supplier
The bullwhip effect (Continued)

17. Supply chains with different end
objectives need to be managed in
different ways
Supply chain dynamics

18. Matching the supply chain with market requirements
Nature of demand
Functional products Innovative products
Predictable – Unpredictable
Few changes – Many changes
Low variety – High variety
Price stable – Price markdowns
Long lead-times – Short lead-times
Low margin – High margins
Supplychainobjectives
ResponsiveEfficient
Lowcost–Lowthroughputtimes
Highutilization–Lowutilization
Minimuminventory–Deployedinventory
Lowcostsuppliers–Flexiblesuppliers
Mismatch
Mismatch
Agile supply
chain
management
Lean supply
chain
management