GLOBAL PURCHASING & MATERIALS HANDLING

CHAPTER I-II

INTRODUCTİON TO

PURCHASING&MATERİALS HANDLİNG

INSTRUCTOR : VOLKAN ÇETİNKAYA

OBJECTİVES

To Explain the aim of production.

To Explain the dynamics of Operating

Environment.

To identify manufacturing types and lead-time

concept.

To identify supply chain.

OBJECTİVES

To Explain why we need materials management.

To identify supply chain and explain the

members of supply chain.

To learn the need of production planning.

To identify, BOM, Order winners concepts.

İNTRODUCTİON

İNTRODUCTİON

A production function is needed to

transform our resources into useful goods.

Production is a transformation form like

extracting minerals from the earth,

lumbering, forming metals and etc., and

using these resources into useful goods.

İNTRODUCTİON

To get the most value out of our

resources, we must design and manage

the manufacturing process most

efficiently .

HOW?

İNTRODUCTİON We must manage and control the inputs of

process as, labor, capital, and the flow of

material.(Why material? )

If the right materials in the right quantities are

not avaible at right time , the process cannot

produce what it should.

OPERATİNG ENVİRONMENT

GovernmentEconomyCompetitionCustomersQualityOrder qualifiersOrder winners

OPERATİNG DYNAMİCS Government: Environmental, safety, taxation regulations,product

liability. Economy: Economic recessions, labor and material shortages, low

population growth, freer trade between countries. Competition: Globalization,Internet,transportation costs

Customers: A fair price, high quality, delivery time, product and volume flexibility.

Quality: Not only meeting expectations but also exceeding them.

Order qualifiers: Price, quality, delivery..( Customer Requirements)

Order winners: A combination of competitive charecteristics, that pursuade a company’s customers to choose its products or services.(May be different for different markets)

LEAD TİME

From the side of Supplier: The time from receipt order to the delivery of product. They want it to be as long as possible.

From the side of Customer: The time from order preparation to the delivery of product. They want it to be as short as possible. ( The part to be achieved)

MANUFACTURİNG STRATEGİES

Engineer to Order:

Make to Order:

Assemble to Order:

Make to Stock:

MANUFACTURİNG STRATEGYEngineer to Order:

PURCHASE PRODUCTION SHIPASSEMBLEDESIGN

Delivery Lead Time

MANUFACTURİNG STRATEGYMake to Order:

INVENTORY PRODUCTION SHIPASSEMBLE

Delivery Lead Time

MANUFACTURİNG STRATEGYAssemble to Order:

PRODUCTION INVENTORY SHIPASSEMBLE

Delivery Lead Time

MANUFACTURİNG STRATEGYMake to Stock:

PRODUCTION ASSEMBLE SHIPINVENTORY

Delivery Lead Time

MANUFACTURİNG STRATEGY(COMPARİSON OF STRATEGİES)

Production Type

Lead Time Inventory Example Explanation

Engineer to Order Long

Material purchased and consumed

Ship or Plane manufacturing

Customer involves in designing and R&D

Make to Order Reduced Ready

The product consists standart items but may include custom designed component.(automative industry)

Starts after taking order

Assemble to Order

Reduced further

Held ready for assembly.

Automative Industry in Turkey

Standart components are assembled according to the customer order.

Make to stock Shortest Finished goods inventory White Good Sector

The customer has a little involvement in design process.

SUPPLY CHAİN CONCEPT(SUPPLY PRODUCTİON AND DİSTRUBİTİON SYSTEM

INBOUND SUPPLY CHAIN

SUPPLIERPURCHASING

(Physical Supply)

MANUFACTURING(Planning and Control)

PHYSICAL DISTRUBITION CUSTOMERS

OUTBOUND SUPPLY CHAIN

Information Flow

Value-added Material Flow

SUPPLY CHAİN CONCEPT The supply chain includes all activities and processes

to supply a product or service to a final customer.

Any number of companies can be linked in the supply

chain.

A customer can be a supplier to another customer.

Product or services usually flow from supplier to

customer and information just the opposite.

SUPPLY CHAİN CONCEPT Although the distribution system can be direct from

supplier to customer, depending on the products an

markets, it can contain a number of distribuyors such

as, wholesalers, warehouses and retailers.

Although these systems vary from industry to

industry or company to company, the basic elements

are the same: Supply-Produce-Distribute

SUPPLY CHAİN CONCEPT To manage a supply chain, we must not only

understand the network of suppliers and customer

along the chain, but must also try to efficiently plan

material and information flows to maximize cost

efficiency, effectiveness, delivery and flexibility.

This can be supplied by integrated information

systems.

SUPPLY CHAİN CONCEPT Traditional System:

Production provides lowest cost

Purchasing supplies with a minimum cost and lowest delivery time.

Warehouse provides lowest inventory and lowest distribution

costs.

Finance reduces inventory investment..

Materials Management Concept

Every department is responsible.

MATERİALS MANAGEMENT

A coordinating function responsible for planning and

controlling materials flow.

‘WHY DO WE NEED MATERIALS MANAGEMENT?’

MATERİALS MANAGEMENT(OBJECTİVES)

Maximizes the efficiency of using firm’s resources.

Provides the required level of customer service.

Reduces the material cost.(Scrap)

A part that can improve profit.

MATERİALS MANAGEMENT(OBJECTİVES) XYZ Manufacturing Company P&L

Sales Revenue: $1,000,000

Direct Material Cost: $500,000

Direct Labor Cost: $200,000

Overhead: $200,000

Total Cost : $900,000

Gross Profit: $100,000

MATERİALS MANAGEMENT(OBJECTİVES)

Sales Revenue: $1,000,000

Direct Material Cost: $450,000 (%10 Discount)

Direct Labor Cost: $190,000 (%10 Discount)

Overhead: $200,000 (Fixed Cost)

Total Cost : $840,000

Gross Profit: $160,000 (%60 increase)

MATERİALS MANAGEMENT(OBJECTİVES)

Sales Revenue: $1,200,000

Direct Material Cost: $600,000

Direct Labor Cost: $240,000

Overhead: $200,000 (Fixed Cost)

Total Cost : $1,040,000

Gross Profit: $160,000