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8/19/2019 Lecture Eight n (1)
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Slack, Chambers and Johnston, Operations Management , 6th Edition,© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
12.1
12.1
Chapter 12
Inventory planning and control
Photodisc. Kim Steele
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Slack, Chambers and Johnston, Operations Management , 6th Edition,© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
12.2
12.2
esign
!lanning and
control
"#erations
strateg$
%m#ro&ement
Inventory planning and control
%n&entor$ #lanningand control
The operation supplies… the deli&er$ o' a(uantit$ o' #roducts andser&ices )hen re(uired
The market requires…a (uantit$ o' #roducts
and ser&ices at a#articular time
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Slack, Chambers and Johnston, Operations Management , 6th Edition,© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
12.*
12.*
Key operations questions
%n Cha#ter 12 + %n&entor$ #lanning and control + Slack
et al . identi'$ the 'ollo)ing ke$ (uestions
-hat is in&entor$/
-h$ is in&entor$ necessar$/
-hat are the disad&antages o' holding in&entor$/
-o) much in&entor$ should an o#eration hold/
-hen should an o#eration re#lenish its in&entor$/
-o) can in&entor$ be controlled/
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Slack, Chambers and Johnston, Operations Management , 6th Edition,© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
12.
12.
What is Inventory?• Inventory (stock) is stored accumulation of
material resources in a transformation system.• A manufacturing company will hold stocks of
materials.
•Inventory exists because of the difference in thetiming or rate of supply and demand.
• When the rate of supply exceeds the rate of
demand inventory increases.• When the rate of demand exceeds the rate of
supply inventory decreases
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Slack, Chambers and Johnston, Operations Management , 6th Edition,© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
12.
12. Inventory is created to compensate or the dierences intiming !et"een supply and demand
%n#ut#rocess
%n&entor$
"ut#ut
#rocess
Rate o' su##l$ 'rom
in#ut #rocess
Rate o' demand 'romout#ut #rocess%n&entor$
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12.6
12.6
!ypes of Inventory• !he various reasons for imbalance between
the rates of supply and demand at different points in any operation lead to the different
types of inventory.
•
!here are five (") types# – $uffer inventory
– %ycle inventory
–
&e'coupling inventory – Anticipation inventory
– ipeline inventory
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12.3
12.3
!ypes of Inventory (contd)• $uffer inventory (safety)
–
Its purpose is to compensate for the unexpectedfluctuations in supply and demand.
– A retail store will order goods from its suppliers such
that there is always a certain amount of most items in
stock because demand might be greater than expected.
• %ycle inventory
– *ccurs when one or more stages in the process cannot
supply all the items it produces simultaneously. – +esults from producing in batches to satisfy demand
between the times when each batch is ready for sale.
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Slack, Chambers and Johnston, Operations Management , 6th Edition,© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
12.4
12.4
!ypes of Inventory (contd)• &e'coupling inventory
–
When transformed resources move intermittently b,ndepartments that comprise similar operations.
• Anticipation inventory
– -sed to cope with seasonal demand.
– It is used when demand fluctuations are large but
relatively predictable.
• ipeline inventory
– It exists because materials (allocated to a customer)
cannot be transported instantaneously between the
point of supply and the point of demand.
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Slack, Chambers and Johnston, Operations Management , 6th Edition,© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
12.5
12.5
&isadvantages of holding inventories
• Although inventory plays an important role
it also has disadvantages such as# – It ties up money
– It incurs storage costs
– aterials may become obsolete
– aterials may be damaged or deteriorate
– aterials may be lost
– It might be ha/ardous to store
– It uses up valuable space
– It involves administrative and insurance costs
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Slack, Chambers and Johnston, Operations Management , 6th Edition,© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
12.10
12.10
!he position of inventory• 0upply demand imbalances also exists between
different stages in the operation.• !he simplest level is the single stage inventory system
such as a retail store which will only have one stock of
goods to manage.
• An auto motive parts distribution operation will have acentral depot and various local distribution points
which contain inventories' two'stage inventory system.
•
A television manufacturer will have a multi stageinventory system.
• A more complicated system is the multi 1echelon
inventory system
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Slack, Chambers and Johnston, Operations Management , 6th Edition,© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
12.11
12.11
e.g. utomoti&e #arts
distributor
e.g. 7ocal retail store
Single8stagein&entor$ s$stem
Su##liers Su##liers
Stock Saleso#eration
Centralde#ot
istribution 7ocaldistribution
#oint
Saleso#eration
9)o8stage in&entor$s$stem
Single#stage and t"o#stage inventory systems
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Slack, Chambers and Johnston, Operations Management , 6th Edition,© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
12.12
12.12
e.g. 9ele&ision manu'acturer
Su##liers
%n#ut
stockStage
1
$ multi#stage inventory system
%! Stage2
%! Stage*
:inishedgoodsstock
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Slack, Chambers and Johnston, Operations Management , 6th Edition,© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
12.1*
12.1*
$ multi#echelon inventory system
;arn#roducers
Clothmanu'acturers
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Slack, Chambers and Johnston, Operations Management , 6th Edition,© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
12.1
12.1
&ay to day inventory decisions• In managing day to day tasks of running the
inventory system operations managers areinvolved in three ma2or types of decision#
– 3ow much to order? (volume decision)
• 4very time a replenishment is placed how big should it be?
– When to order? (time dimension)
• At what point in time or at what level of stock should the
replenishment order be placed?
–
3ow to control the system?• What procedures and routines should be installed to help
make those decisions? 0hould priorities be allocated to
different stock items? 3ow should stock info be stored?
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• 0everal types of costs are directly associated with
order si/e.
– Inventory costs
• %ost of placing the order (transaction costs)
• rice discount costs (discounts on price for large 5uantities)
•
0tock'out costs (incurred for failing to supply customers)• Working capital costs
• 0torage costs
• *bsolescence costs
• *perating inefficiently costs
– Inventory profiles
• A visual representation of the inventory level over time.
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12.13
12.13
!he economic order 5uantity (4*6)
formula• !he most common approach to deciding how much of
any particular item to order when stock needsreplenishing.
• !his approach attempts to find the best balance between
the advantages and disadvantages of holding stock.
• !o find out the best plan (order 5uantity policies) that
minimi/es the total cost of stocking the item'
– !otal cost of holding one unit in stock for a period of time
• Working capital storage and obsolescence risk costs
– and the total cost of placing an order.• %ost of placing the order and price discount costs
T"o alternative inventory plans "ith dierent
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Slack, Chambers and Johnston, Operations Management , 6th Edition,© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
12.14
12.14 T"o alternative inventory plans "ith dierentorder quantities %Q &
9ime
% n & e n t o r
$
l e & e l !lan
Q = 00
emand >D? = 1000 items #er $ear
&erage in&entor$
'or #lan = 200
&erage in&entor$
'or #lan @ = 0
0.1 $r 0. $r
100
00
!lan @Q = 100
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Slack, Chambers and Johnston, Operations Management , 6th Edition,© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
12.15
12.15
!he timing decision' when to place the order
• When we assume that orders arrive instantaneously and
demand is steady and predictable the decision on whento place a replenishment order is self evident.
• If replenishment orders do not arrive instantaneously but
have a lag between the order being placed and it arriving
in the inventory we can calculate the timing of the
replacement order i.e. when the demand and order lead
time are perfectly predictable' not so in most cases.
• !herefore the earlier the replacement order is placed thehigher will be the expected level of buffer or safety stock
when the replenishment order arrives.
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Slack, Chambers and Johnston, Operations Management , 6th Edition,© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
12.20
12.20
The re#order point
00
*00
200
100 % n & e n t o r $
l e & e l
0
0 1 2 * 6 3 4
Re8order le&el
Re8order #oint
9ime
emand >D? = 100 items #er )eek
"rder lead time
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12.21
12.21
!he timing decision' when to place the order (contd)
• We can calculate how much safety stock to allow by
using the lead'time usage.
– !he lead time usage distribution is a combination of the
distributions which describe lead'time variations and the
demand rate during the lead time
• Continuous review approach – +eview stock level of each item continuously and place order
when stock level reaches its re'order level.
•Periodic review approach – 0acrifices the use of a fixed order 5uantity
– Instead of ordering at a predetermined re'order level the
periodic approach orders at a fixed and regular time interval.
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12.22
Inventory analysis and control systems• Inventory priorities'
–
In an inventory which contains more than one stockeditem some items will be more important to the
organisation than others.
• *ne common way of discriminating between different stock
items is to rank them by the usage value (usage rate xindividual value)
• areto 7aw' 89,:9 rule
– ;enerally a relatively small proportion of the total
range of items contained in an inventory will account
for a large proportion of the total usage value i.e.• 89< of an operations sales are accounted for by only :9< of all stocked
types.
12 2*
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12.2*
12.2*
A$% inventory control system• !his allows inventory managers to concentrate
their efforts on controlling the more significantitems of stock using monetary value.
– %lass A items are those :9< or so of the high'usage'
value items which account for 89< of the total usage
value. – %lass $ items are those of medium usage usually next
=9< of items which account for around >9< of total
usage value
– %lass % are those low'usage'value items which
although comprises around "9< of the total types of
items stocked account for around >9< of the total.
12 2
I t l ii ti d
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12.2
12.2
Inventory classiications and measures
Class items + the
20A or so o' high8
&alue items )hich
account 'or around
40A o' the total
stock &alue.
Class @ items + theneBt *0A or so o'
medium8&alue items
)hich account 'or
around 10A o' the
total stock &alue.
Class C items + the
remaining 0A or so
o' lo)8&alue items
)hich account 'oraround the last 10A
o' the total stock
&alue.
12 26
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12.26
12.26
• *ther criteria used in classification of an item
–
%onse5uences of stock out• 3igh priority might be given to items that will seriously
delay or disrupt other operations or the customers when
not in stock.
– -ncertainty of supply
• 0ome items although of low value might warrant more
attention if their supply is erratic or uncertain.
– 3igh obsolescence or deterioration risk • Items which could lose value through obsolescence or
deterioration might need extra attention and monitoring.
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12.23
12.23
easuring Inventory
• onetary value can also be used to measure
the absolute level of inventory at any point intime.
• !aking the number of each item in stock
multiplying it by its value and summing thevalue of all the individual items stored.
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12.24
Inventory Information system
• ost inventories of any significant si/e are
managed by computeri/ed systems. – &ata capture has been made more convenient
through the use of bar'code readers and the point of
sale recording of sales transactions. – %ommon functions of commercial systems
• -pdating stock records
• ;enerating orders
• ;enerating inventory reports• forecasting
12 25
% bl i h i
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12.25
%ommon problems with inventory systems
• a2ority of inventory records might not be
accurate because of the following# – @eying errors
– 6uantity errors
–
&amaged inventory not recorded as such – !he wrong item being taken out of stock but
records not being corrected
– &elays between transactions being made and
records being updated.
– Items stolen from inventory.
12 *0
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12.*0
12.*0
Chapter 1'
Supply chain planning and control
Pearson (ducation )td. $rnos *esign
12.*1
S l h i l i d t l
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12.*1
esign
!lanning and
control
"#erations
strateg$
%m#ro&ement
Supply chain planning and control
The operation supplies
the coordinated deli&er$ o'#roducts and ser&ices
The market requiress#eci'ied time, (uantit$ and
(ualit$ o' #roducts andser&ices
Su##l$ chain
#lanning and control
12.*2
K ti ti
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12.*2
Key operations questions
%n Cha#ter 1* + Su##l$ chain #lanning and control + Slack
et al . identi'$ the 'ollo)ing ke$ (uestions
-hat is su##l$ chain management/
-hat are the acti&ities o' su##l$ chain management/
-hat are the t$#es o' relationshi# bet)een o#erations
in su##l$ chains/
-o) do su##l$ chains beha&e in #ractice/
-o) can su##l$ chains be im#ro&ed/
12.**
+h t i l h i t,
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12.**
‘Supply chain management is the management of
the interconnection of organizations that relate to
each other through upstream and downstreamlinkages between the processes that produce
value to the ultimate consumer in the form of
products and services’
+hat is supply chain management,
12.*
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12.*
• *n going flow of goods and services
through the supply network along theindividual channels or strands of that
network.
•0upply chain refers to the strand of linkedoperations.
• 0upply chain management coordinates all
the operations on the supply side and thedemand side.
12.*
0 l h i t b2 ti
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12.*
0upply chain management ob2ective
• All supply chain management shares one
common and central ob2ective 1 to satisfy theend customer.
• 4ach operation in the chain should be satisfying
its own customers but also making sure thateventually the end'customer is also satisfied.
• eeting the re5uirements of the end customer
re5uires the supply chain to achieve appropriatelevels the five operations performance
ob2ectives.
12.*6
Supply chain planning and control
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12.*6
is concerned )ith managing the 'lo) o' materials and in'ormation bet)een a
string o' o#erations, that 'orm the strands or Dchains o' a su##l$ net)ork
:lo) bet)een #rocesses
:lo) bet)een #rocesses:lo) bet)een #rocesses
Su##l$ chain
management concerns
'lo) bet)een a string o'
o#erations
Su##l$ net)ork
management concerns
'lo) bet)een o#erations
:lo) bet)een #rocesses :lo) bet)een #rocesses
:lo) bet)een #rocesses
:lo) bet)een #rocesses
Supply chain planning and control
12.*3 Supply chains management is concerned "ith the lo" o
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12.*3
pp y ginormation and the lo" o products and services
•!roducts and ser&ices•Ne) #roducts and
ser&ices•eli&er$ in'ormation•!a$ment re(uestFCredit.
-*o"nstream lo" oproducts and services or
customer
Fulfilment
-/pstream lo" o
customer
Requirements
•7ong8term #lans and re(uirements•
Garket research in'ormation•%ndi&idual orders•!a$ment•!otential ne) #roducts and ser&ices.
:lo) bet)een
#rocesses
Consumer
:lo) bet)een
#rocesses
:lo) bet)een
#rocesses
"#eration 1 "#eration 2 "#eration *
12.*4
0 t d
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12.*4
0ome terms used• hysical distribution management may mean
supplying immediate customers
• 7ogistics is an extension that often refers to
materials and information flow down through a
distribution channel to the retail store or
consumers.
• !hird party logistics (!7) indicates outsourcing to
a specialist logistics company.
• aterials management refers to the flow of
materials and information only through the
immediate supply chain.
12.*5
Supply chain planning and control
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12.*5
:irst tier
su##lier
Second tier
su##lier
:irst tier
customer
Second tier
customer
End
customer
emand
side
Su##l$ side
!urchasing andsu##l$
management
!h$sical distributionmanagement
7ogistics
Gaterials management
Su##l$ chain management
%n'ormation
'lo)
!h$sical
'lo)
Supply chain planning and control
12.0
!he activities of supply chain management
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12.0
!he activities of supply chain management
• urchasing (procurement) and supply
management
– At the supply end of the business purchasing
(procurement) buys in materials and services from
suppliers. urchasing managers provide a vital link
b,n the operation itself and its suppliers. – !hey must understand the re5uirements of all the
processes within the operation and the capabilities of
their potential suppliers.
– urchasing can have a significant impact on an
operations cost and therefore profits.
– urchase costs are a large proportion of total costs.
12.1 The purchasing unction !rings together the operation
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12.1
9he o#eration!urchasing 'unctionSu##liers
Re(uest 'or
#roducts and
ser&ices
emand'rom
customers
Su##l$ tocustomers
Re(uest
'or
(uotations
!re#are
#urchase
order
!re#are(uotation 'ors#eci'ication,
#rice, deli&er$,
etc.
Re(uests
Select
su##lier>s?Huotations
!roduce
#roducts and
ser&ices
"rder Recei&e
#roducts and
ser&ices
eli&er
!iaisonbetween
purchasingand the
operation
p g g g pand its suppliers
12.2
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12.2
• 0upplier selection
– %hoosing appropriate suppliers should involve trading
off attributes.
– ost businesses find it best to adopt some kind of
supplier scoring or assessment procedure capable of
rating alternative suppliers against certaincriteria,factors.
• 0ingle and multi'sourcing
–
An important decision facing most purchasingmanagers is whether to source each individual product
or service from one supplier (single sourcing) or more
than one supplier (multi'sourcing)
12.*
0actors or rating alternative suppliers
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12.*
Short#term a!ility to supply )onger#term a!ility to supply
•
Range o' #roducts or ser&ices#ro&ided•
!otential 'or inno&ation
•Hualit$ o' #roducts or ser&ices •Ease o' doing business
•Res#onsi&eness •illingness to share risk
•e#endabilit$ o' su##l$ •7ong8term commitment to su##l$
•eli&er$ and &olume 'leBibilit$ • bilit$ to trans'er kno)ledge as)ell as #roducts and ser&ices
•9otal cost o' being su##lied •9echnical ca#abilit$
• bilit$ to su##l$ in the re(uired
(uantit$
•"#erations ca#abilit$
•:inancial ca#abilit$
•Ganagerial ca#abilit$
0actors or rating alternative suppliers
12.
+eighted supplier selection criteria or a hotel chain
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12.
0actor +eight Supplier $ score Supplier score
Cost #er'ormance 10 4 >4 B 10 = 40? > B 10 = 0?
Hualit$ record 10 3 >3 B 10 = 30? 5 >5 B 10 = 50?
eli&er$ s#eed#romised
3 > B 3 = *? > B 3 = *?
eli&er$ s#eedachie&ed
3 > B 3 = 24? 4 >4 B 3 = 6?
e#endabilit$ record 4 6 >6 B 4 = 4? 4 >4 B 4 = 6?
Range #ro&ided 4 >4 B = 0? > B = 2?
%nno&ation ca#abilit$ 6 >6 B = 2? 5 >5 B = *6?
9otal )eighted score *2 *6
+eighted supplier selection criteria or a hotel chain
12.
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12.
• urchasing the internet and e'procurement
– Bor some years electronic means have been used by
businesses to confirm purchased orders and ensure
payment to suppliers.
– !he internet has opened up the potential for far more
fundamental changes in purchasing behaviour' supplierinformation made available through the internet.
– E- procurement is the generic term used to describe the
use of electronic methods in every stage of the
purchasing process from identification of re5uirement
through to payment and potentially to contract
management.
12.6
$ fit f t
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12.6
$enefits of e'procurement• It promotes efficiency improvements in purchasing
processes.
• It improves commercial relationships with
suppliers.
• It reduces the transaction costs of doing business
for suppliers.
• It opens up the marketplace to increased
competition and therefore keeps prices
competitive
• It improves a businesss ability to manage their
chain more efficiently
12.3
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12.3
• ;lobal sourcing
– !he expansion in the proportion of products and
(occasionally) services which businesses are willing
to source from outside their home country.
– It is the process of identifying evaluating
negotiating and configuring supply across multiplegeographies.
– Bactors promoting global sourcing
• !ransportation infrastructure are more sophisticated and
cheaper than they once were.
• %ompanies now source from wherever is cheapest because
competition is forcing companies to reduce total cost.
12.4
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12.4
;lobal sourcing
•
0ome factors that must be understood andincluded in evaluating global sourcing are
– urchase price
– !ransportation costs
– Inventory carrying costs
– %ross'border taxes tariffs and duty costs
– Amongst others
12.5
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12.5
• hysical distribution management (&) and the
internet – !ransporting tangible products to customers.
– *ne of the ma2or effects of internet communication
on & is#
• !o make information available more readily along the
distribution chain' share knowledge of where goods are in
the chain (transport companies warehouses suppliers etc.)
12.0
!ypes of relationships in supply chain
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!ypes of relationships in supply chain
• $usiness or consumer relationships
–$usiness to business ($:$)• ost common in supply chain context
– $usiness to customer ($:%)
• +elationship includes retailers and online retailers.
– %ustomer to business (%:$
• +elationships involve consumers posting their needs on the
web and companies then deciding whether to offer.
–
%ustomer to customer (%:$) or peer to peer (:)• +elationships include the online exchange and auction
services and file sharing services.
12.1
Supply chain relationships
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usiness to !usiness %2&
-Gost common, all but thelast link in the su##l$ chain
- "#commerce e$amples% + E% net)orks
+ @usiness in'ormation
eBchanges.
usiness to consumer %2C&
- Retail o#erations- Catalogue o#erations, etc.
-"#commerce e$amples% +%nternet retailers + maIon.com, etc.
Consumer to consumer %C2&
or -peer to peer %P2P&
-Consumers Do''er,
business res#onds
- "#commerce e$amples% + Some airline ticket o#erators + !riceline.com, etc.
Supply chain relationships
-9rading Ds)a# and
auction transactions-"#commerce e$amples%
+S#ecialist Dcollector sites +Eba$.com, etc.
Consumer to !usiness %C2&
@usiness Consumer 9o
@usiness
Consumer
:rom
12.2
!raditional market supply relationship
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!raditional market supply relationship
• urchasing goods and services often seeking the best
supplier every time it is necessary to purchase instead of performing the operation in'house.
• 4ach transaction effectively becomes a separate decision.
(short term transactional relationship)
12.*
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• 0ome advantages
–
!hey maintain competition b,n alternative competitors – %ustomers can simply change the number and type of
suppliers if demand changes.
– !hey help operations to concentrate on their core
activities.
• &isadvantages in buying free market manner
– !here may be supply uncertainties
– %hoosing who to buy from takes time and effort
– !here are risks in subcontracting activities to other
businesses.
12.
Cirtual operations
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Cirtual operations• It is an extreme form of outsourcing operational
activities
• Cirtual operations do relatively very little themselves
but rely on a network of suppliers that can provide
products and services on demand.
• A network may be formed for only one pro2ect anddisbanded once that pro2ect ends.
• !he advantage of virtual operations is their flexibility
and the fact that the risks of investing in production
facilities are far lower than in a conventional operation.
12.
artnership supply relationships
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artnership supply relationships• !hey are relatively enduring inter'firm cooperative
agreements involving flows and linkages that use
resources and,or governance structures from
autonomous organisations for the 2oint accomplishment
of individual goals linked to the corporate mission of
each sponsoring firm.
• 0uppliers and consumers are expected to cooperate even
to the extent of sharing skills and resources to achieve
2oint benefits beyond those they could have achieved by
acting alone.• 0ometimes seen as a compromise b,n vertical integration
and pure market relationships.
12.6
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• artnerships are close relationships the
degree of which is influenced by a numberof factors such as#
– 0haring success
– 7ong term expectations, commitments
– Doint learning
– Doint coordination of activities
– Information transparency
– Doint problem solving
– !rust
12.3
(lements o process partnership relationships
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ttitudes
ctions
Closeness o'
relationshi#
p p p p
Joint #roblem
sol&ing
Joint co8
ordination o'
acti&ities
Joint
learning
7ong8term
eB#ectations
Sharing
success
Gulti#le
#oints o'
contact
:e)
relationshi#s
%n'ormation
trans#arenc$
edicated
assets
9rust
12.4
%ustomer relationship management
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%ustomer relationship management
• It is a method of learning more about customers needs
and behaviour in order to develop stronger relationshipswith them.
• It helps to understand and meet customers needs while
maximi/ing profitability.
• It helps to increase revenue by
– roviding products,services exactly what customers want
– +etaining existing customers and discovering new ones
–
*ffering better customer service – %ross'selling products more effectively
12.5
!he $ullwhip effect
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!he $ullwhip effect• !his describes how a small disturbance at the
downstream end of a supply chain causesincreasingly large disturbances errors
inaccuracies and volatility as it works its way
upstream.
12.60
The !ull"hip eect
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MARKET
6
5
4
3
2
1
3rd LEVEL
SUL!ER
2nd LEVEL
SUL!ER
1st LEVEL
SUL!ER
"R!#!$AL
EQU!ME$T
MF#% & E M A $ &
E R ! " &
r'dn% St'() r'dn% St'() r'dn% St'() r'dn% St'()
1** 1** 1** 1** 1**
1**
1**
1**
1**
1**
1**
1** 1**
' 2 1
ALL "ERAT!"$S +"L& "$E ER!"&S ST",K
2* 1**
6* 6* 1**
-* -* 1**
.* 1**
.5 .* 1**
.5
1-* 6* 12* 12* -*
1** 1** .* .5 .5 .5
.5
.5
6* 12*
.* .* 1**
.5 .5 .5
.5
1** .*
.5
.5 .5 .5
.5
.5 .5 .5
.5
.5 .5 .5 .5
.5 .5
.5
.5 .5 .5
.5 .5
.5
.5 .5 .5 .5 .5 .5
p
(3
12.61
The !ull"hip eect %Continued&
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MARKET
6
5
4
3
2
1
3rd LEVEL
SUL!ER
2nd LEVEL
SUL!ER
1st LEVEL
SUL!ER
"R!#!$AL
EQU!ME$T
MF#% & E M A $ &
E R ! " &
r'dn% St'() r'dn% St'() r'dn% St'() r'dn% St'()
1** 1** 1** 1** 1**
1**
1**
1**
1**
1**
1**
1** 1**
' 2 1
ALL "ERAT!"$S +"L& "$E ER!"&S ST",K
p % &
(3
.5
1*5
1*5
.5
.5
12.62
The !ull"hip eect %Continued&
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" r d e r s
09ime
Sales 'rom
store
Consumers
" r d e r s
09ime
Stores orders to
)holesaler
9ime
holesalers
orders to
manu'acturer
" r d e r s
0
Ganu'acturers
orders to its
su##liers
" r d e r s
09ime
4etail
store
+hole
saler
3anu
acturer Supplier
p % &
12.6*
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iscommunication in the supply chain
•!here is the potential for misunderstandingand miscommunication in the supply chain.
!his may be caused by
–
Eot being sufficiently clear about what a customerexpects or what a supplier is capable of delivering
– &ifferences in perception of seemingly clear
agreements.
Recommended