04 Supply Chain Planning and Control Ch13 Colour

13.
MBA Operations Management

Week 4
Supply Chain Planning and Control (Ch.13)
Senior Lecturer: Dr. Louise Hung
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004 Operations Management, 4E: Chapter 13
13.2
Supply chain planning and control
Supply Coordinated delivery Demand

of products and
services from the
The operation supply chain The market
Required time, quantity

and quality of products Customer requirements
Operations resources
and services
13.3
Second tier First tier First tier Second tier End

supplier supplier customer customer customer
Supply side Demand side

Purchasing and Physical distribution
Information supply management management
flow Logistics
Physical
flow Materials
management
Supply chain management
13.4 The purchasing function brings together the
operation and its suppliers
Suppliers Purchasing function The operation
Prepare Requests Request for

quotation for Request for Demand
specification, quotations from
products and customers
price, delivery, services
etc. Liaison
Select between
supplier(s) purchasing
Quotations and the
operation
Produce Prepare Receive Supply to
Order customers
products and purchase products and
services order services
Deliver
13.5 Supply chain relationships
Business Consumer
B2B B2C
Relationship: Relationship:
Most common, all but the Retail operations
last link in the supply chain Catalogue operations, etc.
Business
E-commerce examples: E-commerce examples:
EDI networks Internet retailers
Tesco Information Exchange Amazon.com, etc.
C2B C2C
Relationship: Relationship:
Consumer ‘offer’, Trading ‘swap’ and
Consumer business responds auction transactions
E-commerce examples: E-commerce examples:
Some airline ticket Specialist ‘collector’ sites
operators Ebay.com, etc.
Priceline.com, etc.
13.6 Types of supply relationship
The character of Internal Operations Activity
Everything
Vertically
Integrated
Do
Operation
Traditional
Resource Scope Supply
Everything
Important
Management
Do
“Partnership”
Supply
Management
Virtual Long-term
Nothing
Spot Virtual
Do
Trading Operation
Market Relationship
Transactional - Type of Inter-firm Contact Close -
Many Suppliers Few Suppliers
13.7 Types of exchange
Relationship type Exchange elements Typical examples
Vertical integration
Productive resources
Goods and services Multi-divisional
Supplier Information Customer firms, e.g.
Cash and equity chemicals, food
Control and reporting
Partnership relationships
Design specification
Medium-/long-term plans Co-makership,
Supplier Goods and services Customer joint venture,
Knowledge and e.g. automotive
investment
Long-term market relationships
Capacity commitment
Design specification Single/dual
Supplier Demand forecasts Customer source, preferred
Blanket orders and supplier,
schedules e.g. defence
electronics
Short-term market relationships
Goods and services Spot orders,

Supplier Customer e.g. routine
Orders and documentation
stationery
13.11 The effects of supply chain compression
Supply chain time compression
Schedule Forecasts Defects are New products

changes impact made closer to detected and service
market faster demand time faster faster to market
so can so fewer lost

so easier to so reduced
respond to so improved
improve sales from risk of
market changes forecasts
quality delayed launch obsolescence
better
so less need
for safety
stocks
so revenues so reduced so revenues so fewer

so reduced
are stockholding are discounted
wastage costs
maximized costs maximized sales
Improved profitability
13.12
Managing the supply chain
‘Second-tier’ ‘First-tier’ ‘First-tier’ ‘Second-tier’
suppliers suppliers customers customers
The
operation
Purchasing and Physical distribution

supply management management
Logistics
Materials management
Supply chain management
13.13
Physical distribution management
Operations Mode of transport

performance
dimension Road Rail Air Water Pipeline
Delivery speed 2 3 1 5 4
Reliability 2 3 4 5 1
Quality 2 3 4 5 1
Cost 3 4 5 2 1
Route flexibility 1 2 3 4 5
1 - best performance, 5 - worst performance
13.14
Integrating the organization’s functions
Options for integrating the organization’s functions:
- materials management;
- merchandising;
- logistics;
- supply chain management.
13.15
Increasing degrees of integration
Fully vertically integrated
Semi-hierarchy
Co-contracting
Co-ordinated contracting
Co-ordinated revenue links
Medium- to long-term trading commitments
Short-term trading commitments
13.16 Motor Vehicle Parts Distribution Chains
Dealer Installer
network
Local
distributor
Area
Vehicle distributor
manufacturer
Prime
Distribution distributor Distribution
Chain of Chain of Parts
V.M. Manufacturer
Supplier
Sub-supplier
Manufacturing Stockist
Chain
Raw materials
13.17
ORIGINAL
3rd LEVEL 2nd LEVEL 1st LEVEL EQUIPMENT
SUPPLIER SUPPLIER SUPPLIER MFG.
Prodn. Stock Prodn. Stock Prodn. Stock Prodn. Stock
100 100 100 100

1 100 100
100 100
100 100
100 100
100
100
2 95
3 95
4 95
5 95
6 95
3 2 1 OEM MARKET
ALL OPERATIONS HOLD ONE PERIOD’S STOCK
13.18
ORIGINAL
3rd LEVEL 2nd LEVEL 1st LEVEL EQUIPMENT
SUPPLIER SUPPLIER SUPPLIER MFG.
Prodn. Stock Prodn. Stock Prodn. Stock Prodn. Stock
100 100 100 100

1 100 100
100 100
100 100
100 100
100
100
2 95
3 105
4 95
5 105
6 95
3 2 1 OEM MARKET
ALL OPERATIONS HOLD ONE PERIOD’S STOCK
13.19 The nature of the interaction between
players in supply networks is changing
Price Quality Information Relationship
Planned Kaizen Transparent Integrated

Lean
relationship
Partnership
Negotiated Monitored Shared Cooperative relationship
Traditional
relationship
Bids Historical Secretive Adversarial
Time
This means higher stress levels not lower!
13.20 From cost driving prices up
To prices driving cost down
Price
Cost
Price
Cost
Time Time
From To

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13.

MBA Operations Management

Senior Lecturer: Dr. Louise Hung

Supply chain planning and control

Supply Coordinated delivery Demand

Required time, quantity

Second tier First tier First tier Second tier End

Supply side Demand side

Suppliers Purchasing function The operation

Prepare Requests Request for

The character of Internal Operations Activity

Relationship type Exchange elements Typical examples

Relationship type Exchange elements Typical examples

Relationship type Exchange elements Typical examples

Long-term market relationships

Relationship type Exchange elements Typical examples

Short-term market relationships

Goods and services Spot orders,

Supply chain time compression

Schedule Forecasts Defects are New products

so can so fewer lost

so revenues so reduced so revenues so fewer

Purchasing and Physical distribution

Operations Mode of transport

1 - best performance, 5 - worst performance

Integrating the organization’s functions

Options for integrating the organization’s functions:

- supply chain management.

Increasing degrees of integration

Fully vertically integrated

Co-ordinated revenue links

Medium- to long-term trading commitments

Short-term trading commitments

Prodn. Stock Prodn. Stock Prodn. Stock Prodn. Stock

100 100 100 100

ALL OPERATIONS HOLD ONE PERIOD’S STOCK

Prodn. Stock Prodn. Stock Prodn. Stock Prodn. Stock

100 100 100 100

ALL OPERATIONS HOLD ONE PERIOD’S STOCK

Planned Kaizen Transparent Integrated

Bids Historical Secretive Adversarial

This means higher stress levels not lower!

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