Operations Management Supply-Chain Management 供應鏈管理 Chapter 11 Outline GLOBAL COMPANY PROFILE (全球性公司的槪述): VOLKSWAGEN THE STRATEGIC IMPORTANCE OF THE SUPPLY-CHAIN(供應鏈的策略性重點) Global Supply-Chain Issues SUPPLY-CHAIN CONOMICS(供應鏈的經濟性) Make-or-Buy Decisions(自製與外購決策) Outsourcing (外包) Ref: Outline - Continued SUPPLY-CHAIN STRATEGIES (供應鏈的策略) Many Suppliers Few Suppliers Vertical Integration Keiretsu Networks Virtual Companies Managing the Supply Chain(管理供應鏈) Issues In an Integrated Supply Chain Opportunities in an Integrated Supply Chain Outline - Continued INTERNET PURCHASING(綱路採購) VENDOR SELECTION(供應商的選擇) Ref: Vendor Evaluation Vendor Development Negotiations MATERIALS MANAGEMENT(配送選擇的成本) BENCHMARKING SUPPLY-CHAIN MANAGEMENT (供應鏈管理的標竿) Learning Objectives When you complete this chapter, you should be able to : Identify or Define: Supply-chain management Purchasing Outsourcing E-procurement Materials management Keiretsu Virtual companies Learning Objectives When you complete this chapter, you should be able to : Describe or Explain: Supply-Chain Strategies Purchasing strategies Approaches to negotiations Volkswagen Brazilian plant employs 1000 workers 200 work for VW 800 work for other contractors: Rockwell International, Cummins Engines, Deluge Automotiva, MWM, Remon and VDO, etc. VW responsible for overall quality, marketing, research and design VW looks to innovative supply-chain to improve quality and drive down costs Volkswagen Unusual elements: VW is buying not only materials, but also the labor and related services Suppliers are integrated tightly into VW’s own network, right down to assembly work in the plant 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 The Supply-Chain VISA Material Flow Supplier ® Credit Flow Manufacturing Supplier Schedules Order Flow Retailer Consumer Wholesaler Retailer Cash Flow The Supply Chain Market research data Scheduling information Engineering and design data Order flow and cash flow Supplier Inventory Supplier Customer Ideas and design to satisfy end customer Material flow Credit flow Customer Manufacturer Inventory Inventory Supplier Distributor Inventory Customer Material Costs in Supply-Chain Wholesale 8% 9% Manufacturing 31% 11% COGS Payroll Material 83% Other Dir Wages 58% Other Retail 13% 16% 71% COGS Payroll Other Supply-Chain Support for Overall Strategy Supplier’s goal Primary Selection Criteria Low Cost Response Supply demand at lowest possible cost Respond quickly to changing requirements and demand to minimize stockouts Share market research; jointly develop products and options Select primarily for capacity, speed, and flexibility Select primarily for product development skills Select primarily for cost Differentiation Supply-Chain Support for Overall Strategy - continued Low Cost Response Differentiation Process Characteristics Maintain high average utilization Invest in excess capacity and flexible processes Modular processes that 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 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 Global Supply-Chain Issues Supply chains in a global environment must be: Flexible enough to react to sudden changes in parts availability, distribution, or shipping channels, import duties, and currency rates Able to use the latest computer and transmission technologies to schedule and manage the shipment of parts in and finished products out Staffed with local specialists to handle duties, trade, freight, customs and political issues Importance of Purchasing Major cost center Affects quality of final product Aids strategy of low cost, response, and differentiation Supply-Chain Costs as a Percent of Sales Industry All industry Automobile Food Lumber Paper Petroleum Transportation Percent of Sales 52% 67% 60% 61% 55% 79% 62% Dollars of Additional Sales Needed to Equal 1$ Saved Through Purchasing Percent of Sales Spent in the Supply-Chain Percent Net Profit of Firm 30% 40% 50% 60% 70% 80% 90% 2 $2.78 $3.23 $3.85 $4.76 $6.25 $9.09 $16.67 4 $2.70 $3.13 $3.70 $4.55 $5.88 $8.33 $14.29 6 $2.63 $3.03 $3.57 $4.35 $5.56 $7.69 $12.50 8 $2.56 $2.94 $3.45 $4.17 $5.26 $7.14 $11.11 10 $2.50 $2.86 $3.33 $4.00 $5.00 $6.67 $10.00 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 The Purchasing Focus Materials Management -High transportation cost -High inventory costs Supply Management -High costs -Scarcity: national or international Purchasing Management -Commodity items -Standard products Source Management -Unique items -Custom-made items -High technology items Traditional Purchasing Process Customer Supplier Purchase Order Receivables Report Accounts Payable Reconcile Order Processing Mail Receiving Dock Packing List Mail Invoice Check Mail Accounts Receivable Purchasing Techniques Drop shipping and special packaging Blanket orders Invoiceless purchasing Electronic ordering and funds transfer Electronic data interchange (EDI) Stockless purchasing Standardization Outsourcing Make/Buy Considerations Reasons for Making 1. Maintain core competencies and protect personnel from layoff 2. Lower production cost 3. Unsuitable suppliers 4. Assure adequate supply 5. Utilize surplus labor and make a marginal contribution Reasons for Buying 1. Frees management to deal with its primary business 2. Lower acquisition cost 3. Preserve supplier commitment 4. Obtain technical or management ability 5. Inadequate capacity Make/Buy Considerations Continued Reasons for Making 6. Obtain desired quantity 7. Remove supplier collusion 8. Obtain a unique item that would entail a prohibitive commitment from the supplier 9. Protect proprietary design or quality 10. Increase or maintain size of company Reasons for Buying 6. Reduce inventory costs 7. Ensure flexibility and alternate source of supply 8. Inadequate managerial or technical resources 9. Reciprocity 10. Item is protected by patent or trade secret Supply-Chain 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. 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. 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. 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. Daimler Chrysler’s Supplier Cost Reduction Effort Supplier Suggestion Model Savings Rockwell Use passenger car door locks on trucks Simplify design/substitute materials on manual window system Dodge trucks Various 3M Change tooling for woodgrain panels to allow three from one die instead of two Caravan, Voyager Trico Change wiper-blade formulation Various $140,000 Leslie Metal Arts Exterior lighting suggestions Various $1,500,000 Rockwell $280,000 $300,000 $1,500,000 Tactics for Close Supplier Relationships Tactic Results Reduce total number of suppliers Average 20% reduction in 5 years Certify suppliers Almost 40% of all companies surveyed were themselves currently certified About 60% ask for this Ask for JIT delivery from key suppliers Involve key suppliers in new product design Develop software linkages to suppliers About 54% do this Almost 80% claim to do this About 50% claim this 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) Forms of Vertical Integration Iron Ore Silicon Steel Automobiles Farming Raw Material (Suppliers) Flour Milling Backward Integration Current Transformation Integrated Circuits Forward Integration Distribution Circuit Boards System Dealers Computers Watches Calculators Baked Goods Finished Goods (Customers) Vertical Integration Can be Forward or Backward Vertical Integration Raw material (suppliers) Backward Integration Examples of Vertical Integration Iron ore Silicon Farming Flour Milling Steel Current Transformation Automobiles Integrated Circuits Forward Integration Distribution System Circuit boards Dealers Computers, watches, calculators Finished goods (customers) Baked Goods 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 Virtual Companies Companies that rely on a variety of supplier relationships to provide services on demand. Also known as hollow corporations, or network corporations 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 © 1995 Corel Corp. 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) 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 Successful Supply-Chain Management Requires: A mutual agreement on goals Trust Compatible organizational cultures Issues in an Integrated SupplyChain Local optimization Incentives Large lots Opportunities in an Integrated Supply-Chain Generation of accurate “pull” data Reduction of lot size Single stage control of replenishment Vendor Managed Inventory (VMI) Postponement – keeps product generic as long as possible Channel Assembly – sends to distributor individual components and modules rather than finished goods Drop Shipping and Special Packaging – supplier will ship to end consumer rather than to seller Blanket Orders – a long-term purchase commitment to a supplier for items that are to be delivered against short-term releases to ship Standardization – reducing the number of variations in materials and components Electronic Ordering and Funds Transfer – “paperless” ordering and 100% material acceptance, payment by “wire” 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. Supplier Selection Criteria Company Financial stability Management Location Product Quality Price Service Delivery on time Condition on arrival Technical support Training Vendor Selection Rating Form 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 Logistics Management Integrates all materials functions Purchasing Inventory management Production control Inbound traffic Warehousing and stores Incoming quality control Objective: Efficient, low cost operations Goods Movement Options Trucking Railways Airfreight Waterways Pipelines Supply-Chain Performance Compared Administrative costs as percent of purchases Lead time (weeks) Benchmark Typical Firms Firms 3.3% 0.8% 15 8 Time spent in placing order 42 minutes 15 minutes Percentage of late deliveries 33% 2% Percentage of rejected material 1.5% .0001% 400 4 Number of shortages per year