Materials Management
BUS 3 – 141
Mr. Jess MarinoSpring, 2011
Page 2 2
Agenda
– Introduction
– Additional comments on the course
– Initial Lecture
Page 3 3
Student Information Sheet
NAME
MAJOR (and Emphasis)
BUS 3 – 140, 141, 142, 143, 144, 145, 146, 147
CURRENT JOB (Company Optional)
PREVIOUS SUPPLY CHAIN JOBS / EXPEIRIENCE
OTHER
Page 4 4
Course Overview and Objectives
– Understanding how an organization determines its materials requirements, including what needs to be purchased, in what quantities, and at what delivery schedule … What do you need? …. What do you have? …. What do you have to get?
– Understanding the significance of cost management and price negotiation, including design, quality, and transportation and logistics considerations
– Understanding the critical relationship between an organization and its suppliers
Page 5 5
Student Learning Objectives for the Course
– Understand how to calculate requirements
– Understand the materials management process and how it fits within the overall Supply Chain process
– Understand the interaction and leverage between the organization and its suppliers
– Develop an interest in pursuing a career in Materials Management; enhance capabilities of those already in the field
Page 6 6
Key Assignments
Three (3) Exams
One (1) Homework assignment
Two (2) Case Studies
Group Project
Page 7 7
Additional Notes on the Course
– Buying at work vs. Buying at home Pay the least for the most Sometimes it’s Safeway, sometimes Costco, sometimes 7-11 Focus more time and attention on expensive or critical items
– 5% of Grade based on Participation
– Issues and observations from students work experience
– The positions of Buyer and Material Planner
– Careers in Supply Chain Management
– Classroom expectations
Course Introduction
Page 9 9
Highest Level Supply Chain Objective
Revenue
Utilization of Assets
(People, Plant, Equip)
Cash
Inventory
BALANCING keeping Customers completely satisfied and Resourcesoptimally utilized ……. against spending the least amount of Cash
and carrying the least amount of Inventory
Page 10 10
Highest Level Materials Management Process
Identify WHATItems areRequired
CalculateHOW MUCHis Required
ScheduleWHEN they
are Received& FROM WHOM
At the LOWEST Total COST of Ownership
With the Highest QUALITY and Reliability
Page 11 11
How this Course supports Supply Chain Objective & Process
The RightQUALITY
The RightQUANTITY
The Right TIME
The Right PLACE
The Right SUPPLIER
The Right SERVICE
The Right PRICE
at the
with the
at the
with the
and
paying
– Ensure CONTINUOUS SUPPLY
– Manage critical FINANCIAL levers Balance Sheet by optimizing Cash and Inventory Income Statement by minimizing Cost of ownership
Page 12 12
Supply Strategy Interpreted in Organizational Strategy *
SupplyObjectives
SupplyStrategy
OrganizationalObjectives
OrganizationalStrategy
* Adapted from Leenders, Johnson, Flynn, and Fearon, Purchasing and Supply Management, Thirteenth Edition, McGraw Hill Irwin
Tactical Elements of theSupply Management Process
Page 14 14
The 9 Elements of the Supply Management Process
SupplyMgmt
ProductionCustomerService
Shipping
IdentifyRequirements
EstablishSpecifications
AssessSuppliers
SelectSupplier(s)
IssuePurchase
Order
Follow-Up& Expedite
Receive &Verify
ProcessPayment
MaintainRecords
CustomerDemand
ProductionSchedule
Page 15 15
1. Identify Requirements
IdentifyRequirements
EstablishSpecifications
IdentifySuppliers
SelectSupplier(s)
IssuePurchase
Order
Follow-Up& Expedite
Receive &Verify
ProcessPayment
MaintainRecords
– Direct and Indirect
– Material Requisitions
– MRP Output
– Impact of Lead Time
– Other items to consider As availability becomes scarce, Purchasing alerts users Recommending subassemblies instead of components Proposing substitute items, where appropriate
Page 16 16
2. Establish Specifications
EstablishSpecifications
IdentifyRequirements
IdentifySuppliers
SelectSupplier(s)
IssuePurchase
Order
Follow-Up& Expedite
Receive &Verify
ProcessPayment
MaintainRecords
– Engineering Drawings and Specifications
– Samples
– Requisition Details (electronic or paper) Date originated, Document Number, Dept, Account Number,
Signature(s) Complete description of material or service required Quantity and date required Shipping / delivery instructions
– Authorization to Buy
– Impact of Lead Time
– Other items to consider Understanding ultimate purpose (Are they asking for a Mercedes
or just a car?) Catalogues and standard items Supplier Input
Page 17 17
3. Identify Suppliers
IdentifySuppliers
IdentifyRequirements
EstablishSpecifications
SelectSupplier(s)
IssuePurchase
Order
Follow-Up& Expedite
Receive &Verify
ProcessPayment
MaintainRecords
– History and Geography
– Request for Quotation
– Request for Proposal
– Request for Bid
– Other items to consider Input from Technical Staff Other
Page 18 18
4. Select Suppliers
SelectSupplier(s)
IdentifyRequirements
EstablishSpecifications
IdentifySuppliers
IssuePurchase
Order
Follow-Up& Expedite
Receive &Verify
ProcessPayment
MaintainRecords
– Supply Capability Quality Capacity Reliability
– Many other factors to be covered later in semester
Page 19 19
5. Issue Purchase Order
IssuePurchase
Order
IdentifyRequirements
EstablishSpecifications
IdentifySuppliers
SelectSupplier(s)
Follow-Up& Expedite
Receive &Verify
ProcessPayment
MaintainRecords
– Relationship to Material Requisition The Requisition provides the information that populates several
Purchase Order data fields (see Requisition Details)
– Ensure Risk Management
– Acknowledgement
– Internal Controls Budgets Approvals
– Recurring Purchase Order Releases Pre-negotiated contracts
– Other items to consider ALWAYS ensure that the terms and conditions are in WRITING. A
Purchase Order is a CONTRACT
Continued on next Slide
Page 20 20
5. Issue Purchase Order, continued
IssuePurchase
Order
IdentifyRequirements
EstablishSpecifications
IdentifySuppliers
SelectSupplier(s)
Follow-Up& Expedite
Receive &Verify
ProcessPayment
MaintainRecords
– Discrete Orders
– Pre-negotiated Blanket
– Pre-negotiated Vendor-Managed
– Maintenance, Repair, and Operating Supplies (MRO)
– Bid and Auction
– Corporate Purchase Card (pCard)
Page 21 21
6. Follow-Up and Expedite
Follow-Up& Expedite
IdentifyRequirements
EstablishSpecifications
IdentifySuppliers
SelectSupplier(s)
IssuePurchase
Order
Receive &Verify
ProcessPayment
MaintainRecords
– ERP Applications assume that scheduled dates will be received on time
– A Scheduled delivery date needs to be monitored and managed
– Possible missed dates must be identified in advance and avoided If delays are inevitable, recovery plans must be developed and
managed
– Other items to consider An understanding of the Supplier’s production process, capacity,
and constraints is critical to collaborative problem solving Expediting should be on an exception basis. If it is determined that
a particular supplier is consistently being expedited, corrective action should be initiated
Page 22 22
7. Receive and Verify
Receiveand Verify
IdentifyRequirements
EstablishSpecifications
IdentifySuppliers
SelectSupplier(s)
IssuePurchase
Order
Follow-Up& Expedite
ProcessPayment
MaintainRecords
– Relationship to Material Requisition and Purchase Order Key data elements travel throughout
– Key objectives Confirm receipt of goods Ensure proper physical condition, quantity, documentation Quality parameters met
– Cross functional activity among Purchasing, Receiving, Materials, and Finance
– Other items to consider Receiving is technically a “non-value-added” activity. It is designed
to ensure that something that should have been done properly actually was. The goal is to ensure quality throughout, and eliminate the need for inspection
Page 23 23
8. Process Payment
ProcessPayment
IdentifyRequirements
EstablishSpecifications
IdentifySuppliers
SelectSupplier(s)
IssuePurchase
Order
Follow-Up& Expedite
Receive& Verify
MaintainRecords
Key Document Flow
RequisitionPurchase
OrderPacking Slip(Receiving)
Invoice Payment
– Match the data in the Purchase Order, Packing Slip, and Invoice Discrepancies must be reconciled before payment is issued Some level of discrepancies can be ignored (e.g. if +/- 5% or +/-
$25) Audits of all
– Discounts for early payment are often available and should be taken whenever possible
– Other items to consider Chronic discrepancies from a single Supplier could lead to a
change
Page 24 24
9. Maintain Records
MaintainRecords
IdentifyRequirements
EstablishSpecifications
IdentifySuppliers
SelectSupplier(s)
IssuePurchase
Order
Follow-Up& Expedite
Receive& Verify
ProcessPayments
– Purchase Orders should be archived for up to 7 years
– Key Records to be Maintained Purchase Order Log of all PO’s Copies of Purchase Orders Commodity file Supplier history file Outstanding Contracts against which PO’s are placed
– Other items to consider Can be electronic or paper Paper can be managed by a third party