chapter 13
TRANSCRIPT
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Chapter 13
Supply chain planning and controlSource: Tibbett and Britten
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Supply chain planning and control
Operations strategy
Design Improvement
Planning and control
Operations management
Supply chain planningand control
The operation supplies …the coordinated delivery of
products and services from the supply chain
The market requires …specified time, quantity and
quality of products and services
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
What is supply chain management?
‘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.’
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Supply chain management 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
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Supply chain management is concerned with the flow of information as well as the flow of products and services
•Products and services•New products and services•Delivery information•Payment request / Credit
‘Downstream’ flowof products and services
for customer
fulfilment
‘Upstream’ flowof 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
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
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
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
From the operations perspective – 90%
satisfaction
Customer requirements
Product/ service
available?
Product/ service
appropriate?
Meets price and delivery
requirements?
Customer orders?
Produced as promised?
Received as promised?
100
80
20
Y
N
70
10
Y
N
20
50
Y
N
10
40Y
N
10
10
Y
N9
1Y
N
8
1
Y
N
Customer satisfactionFrom the customer’s perspective – 8% satisfaction
Taking a customer perspective of supply performancecan lead to very different conclusions
8
8
1Y
N
9
1
Y
N
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
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 togetherthe operation and its suppliers
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
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
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
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 the hotel chain
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
B2BRelationship:
Most common, all but the last link in the supply chain
E-commerce examples:EDI networksTesco information exchange
B2CRelationship:
Retail operationsCatalogue operations, etc.
E-commerce examples:Internet retailersAmazon.com, etc.
C2BRelationship:
Consumer ‘offers’, business responds
E-commerce examples:Some airline ticket
operatorsPriceline.com, etc.
C2CRelationship:
Trading ‘swap’ and auction transactions
E-commerce examples:Specialist ‘collector’ siteseBay.com, etc.
Business
Consumer
Supply chain relationships
Business Consumer
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
‘Partnership’ supply
management
Cha
ract
er o
f in
tern
al o
pera
tions
act
ivity
Do
noth
ing
Do
ever
ythi
ng
impo
rtan
tD
o ev
eryt
hing
Transactional – many suppliers
Close – few suppliers
Type of inter-firm contact
Virtual spot
trading
Long-term virtual
operation
Vertically integrated operation
Traditional supply management
Types of supply relationship
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Attitudes
Actions
Trust
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
Closeness of relationship
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
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
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
MARKET
6
5
43
21
Third-level supplier
Second-level supplier
First-level supplier
Original equipment
manufacturer Dem
and
Perio
d
Prodn. Stock Prodn. Stock Prodn. Stock Prodn. Stock
100 100 100 100100100
100100
100100
100100 100
3 2 1 OEM
ALL OPERATIONS HOLD ONE PERIOD’S STOCK
20100
60 60100
80 80100
90100
9590100
95
18060
120 12080
100 1009095 9595
9595
60120
90 90100
95 959595
1009095
95959595
95959595
95959595
959595
959595
959595
95959595
9595
The bullwhip effect
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
6
5
43
21
Third-level supplier
Second-level supplier
First-level supplier
Original equipment
manufacturer Dem
and
Perio
d
Prodn. Stock Prodn. Stock Prodn. Stock Prodn. Stock
100 100 100 100100100
100100
100100
100100100
100
95
105
105
95
95
3 2 1 OEM MARKET
ALL OPERATIONS HOLD ONE PERIOD’S STOCK
The bullwhip effect
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007O
rder
s
0Time
Sales from store
Consumers
Ord
ers
0Time
Store’s orders to wholesaler
Time
Wholesaler’s orders to
manufacturer
Ord
ers
0
Manufacturer’s orders to its
suppliers
Ord
ers
0Time
Retail Store
Whole-saler
Manu-facturer
Supplier
Time
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Supply chain dynamics
Supply chains with different end objectives need to be managed in different ways
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Matching the supply chain with market requirements
Lean supply chain
management
Mismatch
Mismatch Agile supply chain
management
Nature of demandFunctional products Innovative products
PredictableFew changes
Low varietyPrice stable
Long lead-timesLow margin
UnpredictableMany changesHigh varietyPrice markdownsShort lead-timesHigh margin
Su
pp
ly c
hai
n o
bje
ctiv
esR
espo
nsiv
eE
ffic
ient
Low
co
st
Hig
h ut
iliza
tion
Min
imum
inve
ntor
y
Low
-cos
t su
pplie
rs
Low
th
roug
hpu
t tim
es
Hig
h ut
iliza
tion
Dep
loye
d in
vent
ory
Fle
xibl
e su
pplie
rs
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Products
InformationSupplier Manufacturer
Depot
Outlets
Depot
Efficient fast-throughput supply
Supplier Manufacturer
Depot
Outlets
Depot
Customer-responsive supply
Pro
du
cts
Info
rmat
ion
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Matching supply chain characteristics to the nature of demand
Nature of demandFunctional products Innovative products
Predictable UnpredictableFew changes Many changes
Low variety High varietyPrice stable Price markdowns
Long lead-time Short lead-timeLow margin High margin
Su
pp
ly c
hai
n o
bje
ctiv
es
Res
po
nsi
ve
E
ffic
ien
t
Fa
st r
esp
on
se
Lo
w c
ost
Lo
w t
hro
ug
hp
ut
time
Hig
h u
tiliz
atio
n
De
plo
yed
inve
nto
ry
M
inim
um
inve
nto
ry
Fle
xib
le s
up
plie
rs
L
ow
-co
st s
up
plie
rs
Match Mismatch
Mismatch Match
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Key Terms Test
Supply networkThe network of supplier and customer operations that have
relationships with an operation; all the operations linked together to provide goods and services.
Supply chainA linkage or strand of operations that provides goods and services
through to end customers; within a supply network several supply chains will cross through an individual operation.
Supply chain riskA study of the vulnerability of supply chains to disruption.
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Key Terms TestPurchasingThe organizational function, often part of the operations function,
that forms contracts with suppliers to buy in materials and services.
Single-sourcingThe practice of obtaining all of one type of input product,
component or service from a single supplier, as opposed to multi-sourcing.
Multi-sourcingThe practice of obtaining the same type of product, component
or service from more than one supplier in order to maintain market bargaining power or continuity of supply.
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Key Terms Test
E-procurementThe use of the Internet to organize purchasing; this may
include identifying potential suppliers and auctions as well as the administrative tasks of issuing orders, etc.
LogisticsA term in supply chain management broadly analogous to
physical distribution management.
Physical distribution managementOrganizing the integrated movement and storage of
materials.
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Key Terms TestOrder fulfilmentAll the activities involved in supplying a customer’s order; often
used in e-retailing but now also used in other types of operation.
MerchandisingA term used to describe a role in retail operations management
that often combines inventory management and purchasing with organizing the layout of the shop floor.
Virtual operationAn operation that performs few, if any, value-adding activities
itself; rather it organizes a network of supplier operations, seen as the ultimate in outsourcing.
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Key Terms TestPartnership relationshipA type of relationship in supply chains that encourages relatively
enduring cooperative agreements for the joint accomplishment of business goals.
Bullwhip effectThe tendency of supply chains to amplify relatively small
changes at the demand side of a supply chain such that the disruption at the supply end of the chain is much greater.