Chapman_IMM8_IB_Ch01-4

Introduction to Materials Management

• Text copyright © 2017 by Pearson Education, Inc.

• Author: Stephen N. Chapman

Chapter Overview

• Wealth Creation: Key considerations for decision-making in materials management.

• Manufacturing Strategy: Selecting the right strategy for production.

• Supplier Interaction: Effective means of communication and relations with suppliers/customers.

• Decision Making Guidance: Strategies to assist in logistics and operational challenges.

• Conflict Resolution: Methods to manage and reduce internal conflicts.

Key Concepts

Wealth Creation

• Considerations: Identifying what products to manufacture.

Operating Environment

• External Environment: Includes PESTEL analysis.

• Internal Environment: Highlights SWOT analysis focusing on Strengths and Weaknesses.

• Competitive Environments: Analyzes using Porter’s Five Forces.

Analysis Tools

SWOT Analysis

• Strengths: Internal advantages of the company.

• Weaknesses: Internal limitations or risks.

PESTEL Analysis

• Political, Economic, Social, Technological, Environmental, and Legal factors influencing organizations.

Porter’s Five Forces

• Framework to assess industry competitiveness and profitability:

  • Threat of New Entrants: Barriers to entry into the market.

  • Bargaining Power of Buyers: Influence of customers on pricing and quality.

  • Bargaining Power of Suppliers: Influence of suppliers over the supply chain.

  • Threat of Substitute Products: Alternate products that can serve the same function.

  • Industry Rivalry: Intensity of competition among existing firms.

Manufacturing Strategies

Engineer-to-Order (ETO)

• Waits for customer orders; involves custom designs and longer lead times.

Make-to-Order (MTO)

• Production starts upon receipt of order; often uses standard materials with reduced lead times.

Configure-to-Order (CTO)

• Customers can configure features for products without extensive design time; implies quicker delivery.

Assemble-to-Order (ATO)

• Standard components are assembled post-order receipt; leads to shorter lead times.

Make-to-Stock (MTS)

• Goods produced anticipating demand; involves finished goods inventory.

Postponement Strategy

• Strategy to defer differentiation to as close to the customer as possible, helping minimize stock diversity and enable quick response.

Supply Chain Concept

• Encompasses activities for delivering products/services:

  • Involves suppliers, intermediaries (wholesalers, retailers), and customer relationships.

  • Addressing flows of products, services, and information.

Challenges in Supply Chain Management

1. Customer expectations are often unmet.

2. Managing large supply chains efficiently.

3. Shortening product life cycles.

4. Handling vast amounts of data.

5. Navigating narrow profit margins.

6. Increasing alternatives in the marketplace.

7. Responding to disruptive events (pandemics, wars).

Guiding an Organization

Key Elements

• Mission: Purpose of the organization.

• Vision: Future goals and aspirations.

• Values: Core principles governing behavior.

• Metrics: Development and tracking of key performance indicators.

Supply Chain Metrics

• Definitions:

  • Metric: Measure of performance.

  • Performance Standards: Goals that guide operations.

  • SMART Metrics: Specific, Measurable, Achievable, Relevant, Time-bound objectives.

Balanced Scorecard

• Framework used to measure organizational performance from multiple perspectives.

Conflicts in Traditional Systems

• Traditional challenges include:

  • Balancing customer service with cost, production efficiency, and distribution expenses.

  • Addressing discrepancies between Marketing, Production, and Finance.

Conflict Resolution Strategies

• Effective Materials Management includes maximizing resource usage, providing customer service, and improving communications.

Materials Management Definition

• Focuses on planning and controlling the flow of:

  • Raw materials, Work In Process (WIP), Finished Goods, and Maintenance Repair and Operating supplies (MRO).

Manufacturing Planning and Control

• Involves activities like:

  • Production planning, Implementation and control, and Inventory management.

Summary of Materials Management Principles

• Focus on wealth creation through:

  • Efficient manufacturing practices and customer demand.

• Balancing service costs and resolving conflicts among departments.

• Understanding the process through metrics and frameworks like JIT and the Bullwhip Effect.