materials management bus 3 – 141 mr. jess marino spring, 2011

Materials Management

BUS 3 – 141

Mr. Jess MarinoSpring, 2011

2

Agenda

– Introduction

– Additional comments on the course

– Initial Lecture

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

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

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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

6

Key Assignments

Three (3) Exams

One (1) Homework assignment

Two (2) Case Studies

Group Project

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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

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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

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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

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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

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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

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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

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1. Identify Requirements



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

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2. Establish Specifications



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

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3. Identify Suppliers

IdentifySuppliers



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

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4. Select Suppliers

SelectSupplier(s)



IdentifySuppliers

IssuePurchase

Order

Follow-Up& Expedite

Receive &Verify

ProcessPayment

MaintainRecords

– Supply Capability Quality Capacity Reliability

– Many other factors to be covered later in semester

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5. Issue Purchase Order

IssuePurchase

Order



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

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5. Issue Purchase Order, continued

IssuePurchase

Order



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)

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6. Follow-Up and Expedite

Follow-Up& Expedite



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

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7. Receive and Verify

Receiveand Verify



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

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8. Process Payment

ProcessPayment



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

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9. Maintain Records

MaintainRecords



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

materials management bus 3 – 141 mr. jess marino spring, 2011

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