Chapter 06
Every operation has two core components:
1. suppliers
2. customers
For example the Tous Les Jour(TU LISUIRE) bakery doesn’t
produce wheat , sugar, milk or coca for their operation
function instead they depend on their suppliers for the
same.
Again, the suppliers of flour(the ingredient for baking bread)
to the bakery depend on mills.
The mills depend on the farmers who cultivate the wheat,
therefore we can call Tous Les Jour as a customer for flour
producers and flour producers as supplier for the bakery.
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A network of supplier and customer
operation can be called supply network.
core activity of suppliers include the
following:
Deliver materials
Deliver information
Deliver Ideas
Deliver Parts for the production
The chain of suppliers and suppliers’ suppliers
that provide the parts, information or
services.
 Demand side
The chain of customers and customers’
customers.
First – tier supplier
Who directly supply to the operation or
production of goods and services.
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who supply indirectly or supply to the first –tier
supplier.
Total supply network
All the suppliers and customers who are
involved in the supply chains.
The reasons for considering the whole supply
network.
1. To understand competitiveness
2. to understand the links in network.
3. to focus on the long – run uses.
Three decisions or aspects for designing network.
1. Network configuration and outsourcing
2. location
3. capacity
Vertical integration
Form of operation where all the stages of
production of a good or service from the
acquisition of raw materials to the retailing of
the goods and services are controlled by the
company. For example oil industry. In Vietnam
petro Vietnam can be considered as an example.
reshaping the responsibilities
 reduce the number of direct suppliers.
Disintermediation
Technique of an operation in supply network
that separates two operations.
Or cutting the middle men.
For example many travel services are becoming
online and reducing the role of travel
agencies.
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This stands for co-operative competition.
Any business is surrounded by 4 types of
players:
Customers
Suppliers
Competitors
Complimentors – vinaphone selling Apple
phones.
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No business produces everything that is
required by itself.
for example the bakery depend on flour
supply for baking the bread.
Outsourcing means obtain goods and services
from outside party.
The purpose of outsourcing is to reduce the
cost.
Do or buy situation is standing for out-sourcing
or in -sourcing .No single business does
everything that is required to produce its
products and services. Bakers do not grow
wheat, and banks do not check their credit by
themselves. Most companies always
outsource some of their activities. Outsourcing is done to reduce the cost. Again
out-sourcing will increase the flexibility and
quality.
the scope of business
what the organization do itself?
what the organization should buy?
If a company produces everything by itslef for
the production of goods and services, we can
call the vertical integration and if it depend
on outside sources we call horizontal
integration.
Long term strategic importance also important
while taking decision on do or buy.
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reasons for location decision
changes in demand
Changes in supply
For examples a mining unit will relocate if the
amount of minerals for mining decreased.
What are the objectives of location decisions?
The cost of the operation with the location.
The service that operation able to provide
customers.
Revenue
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supply side
demand side
Different techniques for location based
decision making.
Weighted –score method – method comparing
the attractiveness of different options.
The centre of gravity method – method used to
find a location which minimizes the
transportation cost.
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capacity means the facilities used for the
production of goods and services.
For example machines, factories, machines
Capacity leads demand – timing the
introduction of capacity according to the
demand.
Capacity lags demand – timing the introduction
of capacity when demand is equal or greater
than the present capacity.
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using the excess capacity of period to
produce inventory for the under capacity of
another period.