supply chain management final exam

supplier relationship management

discipline of strategically planning for and managing all interactions with the third-party organizations that supply goods or services to an organization to maximize the value of those interactions

supplier relationship management goals

- providing high volumes of a product/service

- providing lesser quantities of a crucial product/service

- serve many business units of a company or organization

- intensive engineering, manufacturing, and logistics interaction is essential

importance of strong supplier partnerships

important to achieving win-win competitive performance for the buyer and supplier (require strategic perspective)

keys to successful strategic partnerships

- building trust

- having a shared vision and objectives

- developing personal relationships

- establishing mutual benefits and needs

- gaining commitment from top management

- managing change

- information sharing and lines of communication

- understanding and influencing capabilities

- continuous improvement

- measuring performance

key to successful strategic partnerships: building trust

with trust, partners are more willing to work together, find compromise solutions to problems, work toward achieving long-term benefits for both parties, and go the extra mile

key to successful strategic partnerships: share vision and objectives

both partners must share the same vision and have objectives that are not only clear but mutually agreeable

key to successful strategic partnerships: personal relationships

people who communicate and make things happen

key to successful strategic partnerships: mutual benefits and needs

partnership should result in a win-win situation, which can only be achieved if both companies have compatible needs (alliance is much like a marriage)

key to successful strategic partnerships: commitment from top management to support the strategic partnership

- commitment must start at the highest management level

- partnerships are successful when top executives actively support the partnership

key to successful strategic partnerships: managing change

companies must be prepared to manage the change that comes with forming new partnerships

key to successful strategic partnerships: information sharing and establishing lines of communication

both formal and informal lines of communication should be set up to facilitate the free flow of information

key to successful strategic partnerships: understanding capabilities

key suppliers must have the right technologies and capabilities to meet cost, quality, and delivery requirements on time (currently and in the future)

key to successful strategic partnerships: continuous improvement

making a series of small improvements over time eliminates waste in a system

key to successful strategic partnerships: continuous improvement steps

- plan

- do

- check

- act

key to successful strategic partnerships: measuring performance

measures related to quality- cost, delivery, and flexibility are used to evaluate suppliers

benefits of strategic partnerships with suppliers for buyers

- increased operating efficiencies

- preferred access to the supplier's best people

- influence over supplier investments and technology

- preferred access to supplier ideas

- increased innovation from and with suppliers

- sustainable competitive advantage

benefits of strategic partnerships with suppliers for suppliers

- increased operating efficiencies

- greater visibility into buyer's purchasing plans

- increased scope of business

- opportunities to develop, pilot, and showcase innovative solutions

- longer-term buyer commitments; greater predictability of future business

- sustainable competitive advantage

supplier evaluation

- a process to identify the best and most reliable suppliers

- sourcing decisions are made on facts and not on perception

- frequent feedback can help avoid surprises and maintain good relationships

- suppliers should be allowed to provide constructive feedback to the customer

supplier evaluation: performance

essential to actively monitor a supplier's performance and provide visibility and feedback on supplier performance at each stage of the evaluation process

supplier evaluation: performance (relevant metrics)

- price and cost performance

- product quality

- delivery performance

- contractual compliance

- participation in product development initiatives

- cooperativeness in third-party production management

- support in ethics and sustainable practices

supplier evaluation: weighted-criteria

1. select the critical dimensions of performance that are mutually acceptable to both buyer and supplier

2. monitor and collect performance data

3. assign weights to each of the dimensions

4. evaluate performance measures between 0 and 100

5. multiply dimension rating by weight and sum of the overall score

6. classify suppliers based on the overall score

7. audit and perform ongoing certification review

supplier evaluation: weighted-criteria (preferred)

(90-100) work with these suppliers in maintaining a competitive position and on new product development

supplier evaluation: weighted-criteria (acceptable)

(70-89) require a plan from these supplier outlining how they will achieve the preferred status

supplier evaluation: weighted-criteria (developmental)

(0-69) require corrective actions from these suppliers on how they will achieve acceptable level

supplier certification programs

certified supplier is a source that, through prior experience and qualification, can provide material of such quality that it needs little, if any, receiving inspection or testing before going into approved stock or the production process

benefits of supplier certification programs

1. reducing the time and labor necessary for the buyer to conduct incoming inspections of products and materials from certified suppliers creates cost savings

2. building long-term relationships

3. recognizing excellence

4. decreasing the supplier base

internal certification programs (examples of criteria)

- supplier has no incoming product rejections for a specified period

- supplier has no incoming late deliveries for a specified period

- supplier has no significant negative quality-related incidents for a specified period

- supplier is iso 9000 certified or has successfully passed a recent on-site quality system evaluation

- supplier consistently meets a mutually agreed-upon set of clearly specified quality performance measures

- supplier has a fully documented process and quality system with cost controls and continuous improvement capabilities

- supplier's processes are determined to be stable and in control

external certification

international organization for standardization (iso) is the world's largest developer of voluntary international standards

benefits of iso certification

- greater market potential

- compliance with procurement bids

- improved efficiency and cost savings

- higher level of customer service

- heightened staff morale and motivation

iso 9000

series of management and quality standards in design, development, production, installation, and service

iso 14000

family of standards for environmental management

iso 9000 quality management principles

1. customer focus

2. leadership

3. involvement of people

4. process approach

5. systems approach to management

6. continual improvement

7. factual approach to decision making

8. mutually beneficial supplier relationship

supplier development

technical and financial assistance given to existing and potential suppliers to improve quality and delivery performance (buyer's activities to improve a supplier's capabilities)

goals of supplier development prorgams

- lower supply chain total cost

- increased profitability for all supply chain participants

- increased product quality

- near-perfect on-time delivery at each point in the supply chain

essential functions of a supplier development program

- providing information about products, expected sales growth, etc

- training suppliers to apply lean and six sigma/quality tools

supplier development: process steps

1. identify critical products and services

2. identify the suppliers of those critical products and services

3. form a cross-functional team internally to work with the supplier

4. identify what issues or gaps exist and what specific improvements need to be made

5. meet with the top management at the supplier to get their support and involvement

6. define details of the agreement and the action plan

7. monitor the status of the projects/action plan and modify strategies as necessary

supplier recognition programs

program to recognize suppliers who achieve the high-performance standards necessary to meet customer expectations

supplier recognition programs: three attributes

1. companies should recognize and celebrate the achievements of their best suppliers

2. award winners exemplify true partnerships. continuous improvement, organizational commitment, and excellence

3. award-winning suppliers serve as role models fro other suppliers

benefits of supplier recognition programs

1. motivate suppliers

2. improve supplier loyalty

3. encourage suppliers to adapt to the company's culture

4. helps to create entry barrier for competitors

5. encourages suppliers participation in product innovation

key characteristics of supplier relationship management system

1. automation (handle routine transactions)

2. integration (spans multiple departments, processes, and software applications)

3. visibility (information and clear and concise process flows)

4. collaboration (information sharing)

5. organization (processes and decision-making)

trends in supplier relationship management

1. alignment supplier relationship management with strategic sourcing

2. focus on cross-functional engagement

3. focus on innovation

4. investment in people and "soft skills"

operations management

managing the process of converting resources into goods and services, in alignment with the company's business strategy, as efficiently and effectively as possible while also controlling costs

manufacturing

to make or transform raw materials and components into a finished product, especially using a large-scale industrial operation

manufacturing management

management of all the processes and resources involved in manufacturing

lean

operating philosophy of waste reduction and value enhancement (improves supply chain flow by eliminating waste)

six sigma

disciplined, statistical-based, data-driven methodology for identifying and removing the causes and defects (errors) and minimizing variability in manufacturing and business processes (improves supply chain processes by reducing variation)

manufacturing strategies

companies must develop a manufacturing strategy that suits the type(s) of products they produce, their customers' expectations, and their strengths

make-to-stock

manufacturing products for stock based on demand forecasts

- challenge is to avoid having excess inventory

make-to-order

manufacturing strategy that starts the manufacturing process only after a customer's order is received

- relieves the problems of excessive inventory

assemble-to-order

manufacturing strategy where products ordered by customers are produced quickly and are customizable to a certain extent

- hybrid strategy to combines benefits of make-to-stock and make-to-order

engineer-to-order

manufacturing strategy in which the product is designed, engineered, and built to the customer's specifications after receipt of the order

manufacturing processes

part of any manufacturing strategy involves developing a manufacturing process that can create the exact product that has been designed

manufacturing processes: intermittent processes

used to produce many products with different processing requirements in lower volumes

manufacturing processes: repetitive processes

used to produce one or a few standardized products in high volumes

manufacturing processes: job shop production intermittent)

high product variety, low product volume, very long lead time

- creates a custom product for each customer

- one-off or small number of items produced, generally one unit manufactured at a time

- high-customization (normally made to customs specifications)

- often undertaken by small, speciality businesses

ex. architects, ship builders, road builders

manufacturing processes: batch production (intermittent)

medium product variety, medium product volume, long lead time

- manufacturing a small fixed quantity of an item in a single production run

- each item in the batch goes through one stage of the production process before the whole batch moves on to the next stage

- aims to achieve better use of equipment

- produces good quality products more economically than manufacturing them individually

ex. bakeries, textiles, furniture, pharmaceuticals

manufacturing processes: line flow production (repetitive)

low product variety, high product volume, short lead time

- for standardized products with a limited number of variations

- product moves on an assembly line through various stages of production

- when one task is finished, the next task must start immediately

ex. automobile assembly, cell phones, toilet paper

manufacturing processes: continuous flow production (repetitive)

very low product variety, very high product volume, very short lead time

- high capital investment (frequently dedicated to one specific product)

- involves a series a processes through which raw materials flow (inflexible processes)

- generally, highly automated

- typically, production runs 24 hours a day

ex. oil refining/gasoline, laundry detergent, cement, chemicals

artificial intelligence

broadly defined as the capability of a machine to imitate intelligent human behavior, and it can perform complex tasks similar to how humans solve problems

machine learning

subfield of artificial intelligence involving using computer systems that can learn and adapt without following explicit instructions by using algorithms and statistical models to analyze and draw inferences from patterns in data

automation

using technology and machines to perform specific tasks without requiring humans to intervene

smart manufacturing

using advanced, connected technologies to coordinate physical and digital processes within factories and across the supply chain, aiming to improve performance

internet of things

network of physical objects connected to the internet that can communicate with each other and the cloud; objects are embedded with sensors, software, and other technologies, creating a vast network of interconnected devices that can collect and exchange data and perform various tasks autonomously

risks of internet of things

- security and privacy risks

- interoperability issues

- data overloads

- cost and complexity

- regulatory and legal challenges

3d printing

additive manufacturing process in which a physical object is created from a digital design by printing thin layers of material in liquid or powdered plastic, metal, or cement and then fusing the layers

total cost of manufacturing

aggregate of cost of producing and delivering products to your customers (cost per unit)

activities included in total cost of manufacturing

- manufacturing

- procurement

- inventory

- warehousing

- transportation

trends of activities as total cost of manufacturing volume goes up

- manufacturing and procurement costs go down

- inventory and warehousing costs go up

- transportation costs go down

lean history: henry ford

(1910s) mass production line was first breakthrough in using continuous assembly systems that made parts find their way into finished products

lean history: taichi ohno and shigeo shingo

(1940s) created the toyota production system

lean history: john krafcik

(1988) term "lean" first coined, expanded in 1990 in book "the machine that changed the world"

lean history: quick response

the rapid replenishment of a customer's stock by a supplier with direct access to data from the customer's point of scale

lean history: efficient consumer response (ecr)

strategy to increase the level of services to consumers through close cooperation among retailers, wholesalers, and manufacturs

lean history: just-in-time (jit)

inventory strategy to decrease waste by receiving materials only when and as needed in the production process, thereby reducing inventory costs

lean history: keiretsu relationships

involves companies both upstream and downstream of a manufacturing process, remaining independent but working closely together for mutual benefit

benefits of lean

- large cost reductions

- improved quality

- increased customer service

goal of lean

elimination of waste and minimization of the amount of all resources used in the operation of a company

value

inherent worth of a product as judged by the customer and reflected in its selling price and market demand

value added process

process steps transform or shape a product or service, which is eventually sold to a customer

non-value added process

process steps that take time, resources, or space but do not transform or shape the product or service

value-added activities

- transform or shape material or information

- customer wants it and is willing to pay for it

- done right the first time

non-value added incidental waste

- no value created

- required by current thinking

- required by process limitations

- required by current technology

- required by current regulations

non-value added pure waste

- consumes resources but creates no value for the customer

- could be stopped, and it would be invisible to the customer

lean components

- lean manufacturing

- respect for people

- total quality management

lean manufacturing

natural fit within the discipline of supply chain management as all lean goals and objectives help facilitate an efficient and effective supply chain

- satisfying internal customer demand

- communicating demand forecasts and production schedules up the supply chain

- quickly moving products in the production system

- optimizing inventory levels across the supply chain

- increasing the value, capabilities, and flexibility of the workforce through cross-training

- extending collaboration and alliances beyond first tier of suppliers and customers

elements of lean manufacturing

1. waste reduction

2. lean layouts

3. inventory, setup time, and changeover time reduction

4. small batch scheduling and uniform plant loading

5. lean supply chain relationships

6. workforce empowerment

7. continuous improvement

elements of lean manufacturing: waste reduction

firms reduce costs and add value by eliminating waste from the production system

elements of lean manufacturing: waste categories (down time)

Defects

Overproduction

Waiting

Non-utilized talent

Transportation

Inventory

Motion

Extra-processing

elements of lean manufacturing: lean layout

move people and materials when and where needed and as soon as possible

elements of lean manufacturing: inventory, setup time, and changeover time reduction

- setup time is the time to prepare and format the manufacturing equipment and systems for production

- changeover time is the time taken to adapt and modify the manufacturing equipment and systems to product a different product or a new batch of the same product

elements of lean manufacturing: small batch scheduling and uniform plant loading

ideal schedule is to product every product as quickly as possible and at the same rate as customer demand (large batches can exacerbate the bullwhip effect)

uniform plant loading problem

- demand exceeds capacity at points in the planning horizon

- matching the production plan to follow demand exactly can contribute to inefficiency and waste, including excess inventory and inventory shortages

uniform plant loading

- planning up to capacity earlier to meet demand in later periods

- production schedule is frozen in the up-front period

- helps suppliers better plan production

elements of lean manufacturing: lean supply chain relationships

firms develop lean supply chain relationships with key customers and key suppliers

elements of lean manufacturing: workforce commitment

managers must support lean manufacturing by providing subordinates with the skills, tools, time, and other necessary resources to identify problems and implement solutions

elements of lean manufacturing: continuous improvements

system involving every employee based on making little changes regularly, anywhere changes can be made, to reduce process, delivery, and quality problems

role of workers

perform tasks and actively pursue company goals

- improve production process

- correct quality problems

- monitor quality

- work in teams

role of management

create the cultural change needed for lean to succeed

- provide an atmosphere of cooperation

- empower workers to take action based on their ideas

- develop incentive systems to recognize and reward lean behaviors

role of suppliers

lean involves building long-term supplier relationships

- partnerships with suppliers

- improving process quality

- sharing information

goal is to have fewest high-quality suppliers possible

total quality management

management philosophy based on the principle that employees must maintain high work standards in every aspect of a company's operations