Chapter 13

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


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


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.’


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



Supply chain management concerns flow between a

string of operations

Supply network management concerns flow between

operations






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


Consumer




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


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


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


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


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


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


‘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


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


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


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


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


Supply chain dynamics

Supply chains with different end objectives need to be managed in different ways


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


Products

InformationSupplier Manufacturer

Depot

Outlets

Depot

Efficient fast-throughput supply

Supplier Manufacturer

Depot

Outlets

Depot

Customer-responsive supply

Pro

du

cts

Info

rmat

ion


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


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.


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.


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.


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.


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.

Chapter 13

Documents

services supply

processes slack

services flow

robert johnston

stuart chambers

processes flow

edition nigel slack

processes products