Supply Chain Final

Chap 7,8,9

What is Supplier Relationship Management SRM?

strategically planning for and managing all interactions with the third party organizations to maximize the value of the interactions

SRM is often a part of the rollot of strategic sourcing, what does it do with suppliers?

• provides high volumes of a product/service

• serves many business units of a company

Successful strategic partnerships

• achieving a win win competitive performance for the buyer and supplier

• involves a mutual commitment over an extended time to work together for a mutual benefit of both parties

What are the 10 keys to developing a successful strategic partnership?

1. Building Trust

2. Having a Shared vision and objectives

3. developing personal relationships

4. establishing mutual benefits and needs

5. gaining commitment from top management

6. managing change

7. information sharing and lines of communication

8. understanding and influencing capabilities

9. continuos improvement

10. measuring performance

How do you build trust

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

how do strategic partnerships begin

they begin with developing personal relationships between key people at each company

how do companies manage change in these relationships?

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

what is the process commonly utilized in continuous improvement?

Plan, Do, Check & Act

benefits of strategic partnerships with suppliers are..

buyers:

• lower costs

• enhanced service

• incremental revenue

• improved quality

suppliers:

• lower cost of sales

• increased margins

• incremental revenue

what is a supplier evaluation?

a process to identify the best and most reliable suppliers

supplier evaluation: performance metrics

• price and cost performance

• product quality

• delivery performance

• contractual compliance

• participation in product development initiatives

how to select key suppliers

key supplier selection is typically conducted by a cross functional team using evaluation forms and scorecards

supplier evaluation: weighted criteria

1. select the critical dimensions of performance

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 their overall score

7. audit and perform ongoing certification review

what is a supplier certification program

a source that through prior experience and qualification, can provide material of receiving inspection or testing before going into approved stock or the production process

benefits of supplier certification programs

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

• building long term relationships

• recognizing excellence

• decreasing the supplier base

criteria used for internal certification programs

• supplier has no incoming product rejections

• supplier has no incoming later deliveries

• supplier has no significant negative quality related incidents

• supplier is ISO 9000 certified

what are ISO certification benefits

• greater market potential

• compliance with procurement bids

• improved efficiency and cost savings

• higher level of customer service

• heightened staff moral and motivation

what is ISO 9000

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

what is an ISO 14000

a family of standards for environmental management

what are the 8 quality management principles for ISO 9000

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

why are ISO certified suppliers preferred by procurement departments

• they have to conform to an externally defined set of standards

• easier for procurement to qualify initially and periodically audit

• they are usually more open to sharing supply chain info

• they welcome building relationships with customers

• firms have to be re certified every 3 years

what is supplier development

the technical and financial assistance given to existing and potential suppliers to improve quality and delivery performance

what do supplier development programs achieve

• 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

what are the 2 most essential functions of a supplier development program

1. providing information about products, expected sales growth, suppliers need to become extensions of their customers

2. 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

what is a supplier recognition program

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

what are the 3 attributes for supplier recognition programs

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 for other suppliers

what are the benefits for 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 barriers for competitors

5. encourages supplier participation in product innovation

what are the 5 key characteristics to consider in the development and implementation of an SRM system

1. automation

2. integration

3. visibility

4. collaboration

5. optimization

what is operations management

refers to managing the process of converting resources into goods and services, in alignment with the company’s business strategy

manufacturing def

to make or transform raw materials and components into a finished product

manufacturing management def

the management of all the processes and resources involved in manufacturing

what is LEAN

an operating philosophy of waste reduction and value enhancement

what is six sigma

a disciplined, statistical bases methodology for identifying and removing the causes of defects and minimizing variability in manufacturing and business processes

what is a manufacturing strategy

companies must develop a manufacturing strategy that suits the types of products they produce, their customers expectations, and their strengths

what is Make to Stock (MTS)

means manufacturing products for stock based on demand forecasts - push system

what is Make to Order (MTO)

manufacturing strategy that starts the manufacturing process only after a customer’s order is recieved

what is Assemble to Order (ATO)

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

what is Engineer to Order (ETO)

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

what are the 2 manufacturing process categories

1. Intermittent Processes - used to produce many products with different processing requirements in lower volumes

2. Repetitive processes - used to produce one or a few standardizes products in high volumes

what is job shop production

• creates a custom product for each customer

• one off or small number of items produced

• high customization

• often undertaken by small specialist businesses

what are examples of job shop production

• architects

• ship builders

• road builders

what is batch production

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

• aims to achieve better use of equipment

what are example of batch production

• bakeries

• textiles

• furniture

• pharmaceuticals

what is line flow production

• for standardized products with a limited number of variations

• products move on an assembly line through various stage of production

what are example of line flow production

• automobile assembly

• cell phones

• toilet paper

what is continuous flow productions=

• high capital investment - frequently dedicated to one specific product

• involves a series of processes through which raw materials flow

• generally highly automated

what are examples of continuous flow production

• oil refining/ gasoline

• cement

• laundry detergent

• chemicals

what is automation in manufacturing

refers to using technology and machines to perform specific taskes without requiring humans to intervene

what is smart manufacturing

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

what is Internet of Things (IoT)

a network of physical objects connected to the internet that communicate with each other and the cloud. they collect and exchange data and perform various tasks autonomously

what are the risks associated with IoT

• security and privacy risks

• interoperability issues

• data overload

• cost and complexity

• regulatory and legal challenges

what is the Total Cost of Manufacturing (TCM)

is the aggregate cost of producing and delivering products to your customers

what does TCM include

1. manufacturing and procurement activities

2. inventory and warehousing activities

3. transportation activities

what happens when volume in a company goes up

1. manufacturing and procurement costs go down

2. inventory and warehousing costs go up

3. transportation costs go down

Lean History 1990’s supply chain management combined:

• Quick response

• efficient consumer response (ECR)

• just in time (JIT)

• Keiretsu Relationships

what is LEAN not

Lean is not a tool box of method, ideas, or methodologies, it is philosophy/culture

what does lean regularly result in

• large cost reductions

• improved quality

• increased customer service

what is “value”

value is defined as the inherent worth of a product as judged by the consumer and reflected in its selling price and market demand

what is a value added process

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

what is a non value added process

process steps that take time, resources, or space but do no transform or shape the product or service

what are value added activities

• transform or shape material or information

• customer wants it and is willing to pay for it

• done right the first time

what are non value added incidental waste activities

• no value created but

• required by current thinking

• required by process limitations

• required by current technology

what are non value added pure waste activities

• consumes resources but creates no value for the customer

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

what are the components of lean

1. lean manufacturing

2. respect for people

3. total quality management

what is lean manufacturing

• satisfying 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

• cross training

• collaboration

what are the elements of lean manufacturing

1. waste reduction

2. lean layouts

3. inventory, set up time, & change over time reduction

4. small batch scheduling and uniform plant loading

5. lean supply chain relationships

6. workforce empowerment

7. continuous improvement

what is waste reduction

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

what are examples of waste

• wait times

• inventories

• material and people movement

• processing steps

• variability

• and other non value adding activities

waste categories acronym (downtime)

D = Defects

O= Overproduction

W= Waiting

N = Non Utilized Talent

T = Transportation

I = Inventory

M = Motion

E = Extra Processing

what are the benefits of lean waste reduction

• reduced cycle times

• greater throughput

• better productivity

• improved quality

• reduced costs

what is the lean layout

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

Why is inventory, setup time, and changeover time reduction considered waste

excess inventory takes up space and costs money to hold, maintain, protect, secure, and insure

setup time and changeover time reduction

these are both considered wastes as they are times when the equipment is not performing its intended function or producing a product

small batch scheduling and uniform plant loading

the ideal schedule is to produce every product as quickly as possible and at the same rate as customer demand

Large Batches/ Bullwhip effect

large batches can exacerbate the Bullwhip effect as production in large batches creates an uneven workload

what is small batch scheduling

production in small batches creates a smooth workload as production can by synchronized with the customer demand, facilitating a pull system

what is the problem with uniform plant loading

demand exceeds capacity at points in the planning horizon

what is uniform plant loading

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

• also called front loading

• helps suppliers better plan production

what are lean supply chain relationships

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

what is a 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

what are “continous improvements”

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

what does the “respect for people” component mean with LEAN

respect for all people must exist for an organization to be at its best

• ordinary workers are given greater responsibility

• supply chain members work together in cross functional teams

what is the role of workers?

perform tasks and actively pursue company goals

what is the role of management

create cultural change needed for LEAN to succeed

what is the role of suppliers

LEAN involves building long term supplier relationships

what is total quality management

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

what experts contributed to the basic framework of total quality management (TQM)

• W. Edwards Deming

• Philip Crosby

• Kaoru Ishikawa

what are W. Edwards Deming 4 highlighted points of 14 points to guide companies quality improvement

1. cease dependence on inspection to improve quality

2. constantly improve the production and service system

3. break down barriers between departments

4. put everyone to work to accomplish the transformation

What are the 4 attrubutes of quality that Philip Crosby introduced

1. quality is conformance to requirements

2. the system of quality is prevention

3. performance standard is zero defects

4. the measure of quality is the price of non conformance

what did Karou Ishikawa develop

one of the first tools in the quality management process, the Cause and Effect Diagram

what is the voice of the customer (VOC)

a term used in business to describe the process of capturing internal and external customer’s expectations, preferences, likes, dislikes

how can the voice of the customer (VOC) be captured

• customer interviews

• market surveys

• focus groups

• customer specifications

• observation

what is the cost of quality

an approach that supports a company’s efforts to determine the level of resources necessary to prevent poor quality and to evaluate the quality of the company’s products and services

what are cost of good quality - appraisal costs

appraisal costs are associated with evaluating purchased materials, processes, products, and services to ensure they conform to specifications

what are cost of good quality - prevention costs

prevention costs are related to the quality management system’s design, implementation, and maintenance. they are planed and experienced before products or materials are acquired or produced

what are cost of poor quality - internal failure costs

internal failure costs occur when the product or service does not meet the designed quality standards are are identified before the product or service is delivered to customer

cost of poor quality - external failure costs

these costs occur when the product or service does not meet the designed quality standards, but they are only detected after the product or service is delivered to the customer

examples of external failure costs

• handling and responding to customer complaints

• failed products that must be replaced repair of returned product

• repair of returned products

what is six sigma

a quality management process