CHAPTER SUPPLY CHAIN MANAGEMENT Materials any commodities used directly or indirectly in producing a product or service, such as raw

aw material, component parts, assemblies, and supplies. Managing materials is crucial as the cost may be more than half of the product cost. Better management of material could lead to higher productivity, which may reduce cost. Supply Chain Management The flow of materials from suppliers all the way to consumers need to be managed. Supply chain may be referred to the way that materials flow through different organisations, starting with basic raw materials and ending with finished product. E.g. Figure 11.1 Supply chain management involves all management functions related to the flow of material from suppliers to customers. Materials management = logistic management Material manager = supply chain manager = vicepresident of materials 4 key activities: o 1 >> PURCHASING o 2 >> LOGISTICS o 3 >> WAREHOUSING o 4 >> EXPEDITING

Purchasing Function buy raw materials, purchased parts, machinery, supplies and all other goods and services used in production system It is very important. Can affect: o >> duration/on-time delivery o >> cost and >> quality For high volume production: purchase from suppliers that can produce the material at lowest cost, and larger quantities. For low volume, fast delivery, high quality production: fast response times, very high quality and dependable shippling schedules are important. Function of purchasing manager: o 1 >> Maintain a database of available suppliers o 2 >> Select suppliers to supply each material o 3 >> Negotiate supply contracts with suppliers o 4 >> Act as interface - company & suppliers Centralisation and decentralisation of purchasing. Purchasing process o Material specification: the detailed description of the material such as dwg, chemical & physical properties o Purchase requisition: to request on buying goods or services. Include what to be purchase, amount, when required, where to be delivered, approval, etc. o Request for quotations: prepared by purchasing dept. & sent to suppliers that are believed to be capable of meeting the cost, quality, schdule delivery, etc. o Purchase order: a legal commitment by the buyer when it is issed in reponse to a quotation from a supplier o Buyers & their duties o Make-or-buy analysis o Ethics in buying

Logistics Usually refers to the management of the movement of materials o within the factory o shipment of incoming materials from suppliers o shipment of outgoing products to customers Production control o Include assign delivery dates, MPS, shop-floor planning & control, detailed production planning o Includes the movement of materials with factories, including following activities Remove matl from vehicle & place on receiving dock Move matl from dock to inspection Etc.. etc.. etc.. Distribution requirement planning o Example 11.2 (pg.438) Warehousing The management of materials while they are in storage : o Storing o Dispersing o Ordering, etc. Material handling equipment, e.g. forklift trucks, conveyors, pipelines, etc. Raw material inventories In-process inventories partially completed product between processes Inventory management

Expediting Expediting is the focusing of one or more persons attention on a particular order or batch of mateials for th epurpose of speeding up the order through all or part of the entire supply chain De-expediting slowing donw an order These are necessary because of unforeseen events have caused an order for materials or products to be late or early. E.g events: o Customer increase the order quantity, exceed finished-good inventories o A supplier fails to ship an order for material as promised, emergency shipment must be done o Production has started but customer calls to delay the shipment for 3 weeks, work is to be slowed & reschedule to meet customer time Material management must be flecible enough to accommodate these uncertainties by reacting quickly when the unexpected happens However, if too much expediting is carried out, the related management, planning, procedure need to be reevaluated