Chapter ~ ==> Leéuseai etter ny etcraee thermeon, nee SUPPLY CHAIN MANAGEMENT + INTRODUCTION 1.2, CONCEPT OF SUPPLY CHAIN MANAGEMENT 1.3. PROCESS VIEW OF A SUPPLY CHAIN 1.4, PUSH-PULL THEORY OF A SUPPLY CHAIN 1.5. PRINCIPLES OF SUPPLY CHAIN 1,6. KEY DECISION AREAS OF SUPPLY CHAIN MANAGEMENT - EXTERNAL DRIVERS 1.7. DIMENSIONS OF LOGISTICS INTRODUCTION The term ‘Supply Chain Management’ was more into usage in the early 1990s, prior to that time, it was referred as ‘Logistics Management’ or ‘Operations Management’. The terminology was changed due to the chain of operations/procedures started expanding with the increase in the business and trade, as a result of New Industrial Policy 1991. It gave scope to free trade and enhanced many investments, including private investments and foreign investments. Today’s business is not only facing the challenges of demand, supply, cost and tastes & preferences, but also the changing dynamics of technology, new production methods, processing procedures, fast delivery, transportation limited human resource. The short life cycles ofz iii PR 2 ‘SUPPLY CHAIN MANAGEMENT ave forced the business organizations to ain”. This phenomenon combined with some ‘ancement, digitalization, mobile communication, *y to continuous evaluation of supply chain and the Prodlucts and heightened expectations of customers h, invest and tocus their atte more ntion on “Supply Ch $tOFS StUch as technological adv and quickest delivery has paved w: to manage them effectively. internet strategies ‘The pressure from competitive market is increasing with more preferences and demand for Speed delivery from the consumers. New information technology has affected the methods of Production, reducing their making time and calling for, 1. Superior Quality High Flexibility of Production Systems Heavy cost reduction wv > Reducing of time to market the goods and w Quick delivery to customer 6. Feedback on delivery pattern The above discussed areas are getting focused by all the producers/manufacturers to make the supply chain more effective and qualitative with the changing competitive businese environment. CONCEPT OF SUPPLY CHAIN MANAGEMENT ae ‘The basic underlying concept of supply chain management was aptly remarked by Napoleon centuries ago as“ An army marches on its stomach”. Napoleon was a master strategist and from the remark made by him, it can be clearly understood that, ‘unless the soldiers are fully fed, the army cannot mov: ‘There is another saying, on the same lines, that goes as ‘Anuateurs talk strategy and professionals talk logistics’. People may discuss many strategies and dashing maneuvers, but none of that will be possible without figuring out the day-today demands providing an army with fuel, food, shelter, medicines, arms and ammunition. It is the seemingly mundane activities of the quartermaster and the supply sergeants that often determine an army’s success. This theory discusses, has many analogies in today’s business. A supply chain encompasses the business activities of companies, that are needed to design, make, deliver and make use of a product or a service. A business completely depends on its supply chain right from production to delivery to the ultimate user.[SUPPLY CHAIN MANAGEMENT. % 13 Definitions: “A supply chain is the alignment of firms that bring products and services to market” According to Ganeshan and Harrison, “A supply chain is 3 network of facititis end distribution operations that perform the functions of procurement of materials, transtormation of these materials into intermediate or finished products and the distribution of thee frashed products to customers”, ‘The following definition was developed and used by Global Supply Chain Forum: “ Supply Chain Management is the integration of key business processes from end user through original suppliers that provides products, services and information that add ¥alue for customers and other stakeholders”. Chopra and Meindl (2001): “A supply chain consists of all stages involved directly or indirectly in fulfilling a customer request. The supply chain not only includes the manufacturer and suppliers, but also transporters, warehouses, retailers and customers themselves” Significance of Supply Chain Management in today’s business =e) === ==) —S==53 An effective supply chain management primarily focuses on the efficient integration of manufacturers, factories, warehouses, stores, transport, suppliers and distributors who distribute in right quantiti in the right locations and a right time, so as to minimize cost burden and ultimately satisfy the customer demands and needs.chain has to overcome the challenges of ycle for processing and quick delivery time to the end user. A supply chain to be effective in today’s scenario, should have a firm hand on all the following aspects. Material Handling Inventory. Management ‘Warehousing Management ‘Transportation Operations[SUPPLY CHAIN MANAGE ae oe zs 15 From the above figure, it is significant that, a supply chain of a firm is expected to be focused on all the areas of its operations, to increase its range of responsibilities that expects the order fulfillment process as one activity is co-ordinating with another, forming, ‘chain’ which we call as “Supply Chain”, ‘The functions that are more often cited to plan and execute are: 1. Supply Chain Management Budget Forecasting 2. Order Processing/ Customer Service and 3. Customer Service Performance Monitoring. Supply Chain of a business organization A supply chain consists of ‘Supplier Objectives of a Supply Chain Management ‘The strategic objectives supply chain management are: 1, Toreduce cost of manufacturing. 2. To reduce the burden of excess working capital. 3. To minimize delay in production process, as well as in supply. 4, To increase inventory turns. 5. To maximize the value creation from customers view point. Ina nutshell Supply Chain Management is- c>-€E>-E>> So that, the product is produced and distributed in ¥ Right Quantity, to the ¥ Right Location and in Vv Right TimeEr 1.6 CHAIN WANAGEMENT. EEE] process view oF a ‘SUPPLY CHAIN aE Process int a supply chain are classitied into a series of cycles, each performed at the interface between two succes on successive ve supply chain stages. Each cycle occurs at the interface between two Pecific roles and responsibilities of each member and the desired outcome ie es explained below, in the figure gi Procurement EGetomer cpttOMer Ory, Stage 1: Procurement Cycle ~ [Manufacturer-Supplier] Stage 2: Manufacturing Cycle — [Distributor-Manufacturer] Stage 3: Replenishment Cycle — [Retailer-Distributor] Stage 4: Customer Order Cycle - [Customer-Retailer] Hence, a cyclical view of a supply chain is essential while considering operational decisions because it clearly specifies each operation, for example, when seiting up information system to support system to support supply chain operations. Depending on the transaction, the sub process can be applied to the appropriate cycle. Let us understand this with a suitable example. 1, When a customer shop online at Flipkart, they are part of customer order cycle- with the customer as the buyer and the Flipkart as supplier. 2. In contrast to this, when Flipkart orders books from a distributor to replenish its inventory, it is a part of replenishment cycle-with Flipkart as a buyer and the distributor as the supplier. Within each cycle, the goal of the buyer is to ensure product availability and to achieve economies of scale in ordering.Procutement, Manufacturing and Replenishment Cycles Push-Pull theory of supply chain process is useful in considering strategic decisions relating to supply chain designing, from a global view point of how a supply chain process relate to customers order. The relative proportion of push-pull process can have an impact on the supply chain performance in a business enterprise. In this, processes in’a supply chain are divided into two categories depending on whether they are executed in response to a customer order (pull) or in expectation of a customer order (push). Pull (Reactive): In a pull-based supply chain, manufacturing is demand driven, co- ordinating with the external customer demand rather than a forecast lead-time reduction occurs as the variabilities are better monitored in pull-based supply chain management. Pull-based system are often difficult to implement, when lead times are so long that it is impractical to react to demand information. Under pull-based strategy, execution is initiated in response to a customer order. Push (Speculative): In a push-based supply chain, it takes longer time to react to the changing market place in a push-based supply chain, production decisions are usually based on long, term forecasts. Under this strategy, a supply chain management experiences increased transportation cost, high inventory levels and high manufacturing costs.SUNTISUPPLV CHAIN MANAGEMENT. Features of Pull-Push Strategles ee Basis PULL PUSH | Objective Maximize service levels Minimize cost Lead Time Short Long Complexity Low High Processes Order fulfillment Supply chain planning Focus Responsiveness Resource allocation KE PRINCIPLES OF SUPPLY CH! provided the needed guidance espousing “Seven Beced on the relevance of supply chain in the business operations, Andersen consulting Principles” of Supply Chain Management. fa firm/company consistently and comprehensively follows these seven principles, it results in a competitive advantage. “The seven principles as articulated by Andersen are as follows. 1. Segmentation of customers based on their service needs: Companies traditionally have grouped customers by industry, product, or trade channel and then provided the same level of service to everyone within a segment. Effective supply-chain management, by contrast, groups customers by distinet service needs~regardless of industry—and then tailors services to those particular segments. 2 Customize the supply chain management network: In designing their Supply Chain ‘Management network, companies need to focus intensely on the service requirements and profitability of the customer segments identified. The conventional approach of creating a “monolithic” Supply Chain Management network runs counter to successful supply-chain management. 3. Listen to signals to market demand and plan accordingly: Sales and operations planning must span the entire chain to detect early warning signals of changing demand in ordering patterns, customer promotions, and so forth. This demand- intensive approach leads to more consistent forecasts and optimal resource allocation. 4, Differentiate product closer to the customer: Companies today no longer can afford to stockpile inventory to compensate for possible forecasting errors. Instead, they need te(SUPPLY CHAIN MANAGED 19 Postpone product differentiation in the manufacturing process doser to actual consumer demand. 5. Strategically manage the sources of supply: By working closely with their key suppliers to reduce the overall costs of owning materials and services, supply-chain management leaders enhance margins both for themselves and their suppliers. Beating multiple suppliers over the head for the lowest price is out, Andersen advises. “Gain sharing” is in. 6. Develop a supply-chain wide technology strategy: As one of the cornerstones of successful supply-chain management, information technology must support multiple levels of decision making. It also should afford a clear view of the flow of products, services, and information. 7. Adopt channel-spanning performance measures: Excellent supply-chain measurement systems do more than just monitor internal functions. They adopt measures that apply to every link in the supply chain. Importantly, these measurement systems embrace both service and financial metrics, such as each account's tue profitability. The above discussed principles are not easy to implement, until and unless they develop a functionally oriented thinking cbout how companies organize, operate and serve customers. The organizations that preserve and build a successful supply chain have proved convincingly that, one can get goodwill from customers and enjoy growth in the business. a agence nce EEG Kev Decision’ (AREAS OF SUPPLY(C CHAIN MANAGEMENT — 5 E (EXTERNAL DRIVERS ~~ EES Effective supply chain management system needs simultaneous improvement in both customer service levels and the internal operating efficiencies of the business enterprises in a supply chain. Customer service at its most basic level means, consistently high-order fill rates, high on-time delivery rates and very low rate of products retumed by the customers, for whatever may be the reason. From the internal efficiency point of view, it is emphasized on the rate of return on the investments in inventory and other assets and they find ways to lower their operating and sales expenses. Supply chain management involves a basic pattern, as each supply chain has its own market demand and operating challenges and yet many issues remain essentially in every case. Hence, abusiness organization in a sty i - supply chain has to take the followi isions i | collectively in the following five areas, —— 1 Pd DIMENSIONS OF L Logistics is a part of supply chain process that plans, flow and storage of goods, services and related information from the point SS supe MANAGER dividually ang Production: This function has to answer the questions such as (i) What prod, the market demands? (ii) How much of products are to be produced and hi oy does questions can be answered only on designing a master production aed takes into account the plant capacities, equipment maintenance, workload bat ae and quality control. = Inventory: The questions such as, (i) what inventory should be stocked at each stage j a supply chain? (ii) How much inventory should he held as raw material, serhi-Raie : goods or finished goods?. The primary purpose of inventory decision is to act = buffer against uncertainty in a supply chain. However, holding inventory ae C expensive, soa decision is to be taken to the extent of optimal inventory levels and re ordering points. - Location: (i) Where should be the facilities for production and inventory storage be located?(ii) Where from we can obtain most cost-efficient locations for production and inventory storage? (iii) should the existing facilities are enough or to build anew one? All these decisions pave way for smooth flow of products for delivery to the final consumer. |. Transportation: Movement of goods from production place to place of consumption is an essential element in the functional area of a supply chain. Questions such as, How an inventory should be move from one location to another location? (ii) Air freight and road ways are faster but very expensive. At the same time, water transport is less expensive, but takes long time to travel, deliver and sea transport is subject to natural calamities. . Information: For a better co-ordination and a quality decision, information should be properly used and managed. (i) Which is the relevant information for the supply of goods? How much information is to be collected and shared?, With accurate information, the businessman can take quality decisions and can improve the strength of their supply chain. implements and control the efficient t of origin to point of consumption in order to meet customer's requirements.[SUPPLY CHAIN MANAGEMENT. The Macro Dimensions of Logistics ‘The macro dimensions of logistics emphasize on the economy as a whole. The following are be some dimensions from macro perspective > Logistics has a significant relationship with overall economy. > Cost of business logistics increasing. ‘Transportation is the largest percentage of logistics casts. Logistics adds value to a product. vy v Place utility - moving goods to points where demand exists. v ‘Time utility - moving goods to points at a specific time. Allows for economic development and specialization. vy Affects land values due to increased accessibility. The Micro Dimensions of Logistics ‘The micro dimensions of logistics establishes the relationship between logistics and other departments in an organization. { Length of the Production Run Balance economies of long production runs against increased costs of high inventories ‘Supply Interfaces = Stocking adequate supplies to ensure uninterrupted production Protective packaging — Principal purpose is to protect the product from damage during transit Interfaces with Sales and Marketing: Sales forecast — Sales forecast will decide quantities estimated to be transported and stored Product — Size, shape, weight, volume of the product impact storage, transportation and handling Price — Larger shipments means cheaper transportation rate, therefore shipment sizes should be customized to the carrier's vehicle capacityLogistics function must be aware of any promotional activities so that it can pl, an, accordingly, Logistic System Anatysis ___ Logistic system analysis is a process of collecting factual data, understanding the proces, involved, identifying problems and recommending feasible suggestions for improving the logistics system functioning. Logistics analysis involves the use of numerous awantitativg ‘techniques on the part of the organization such as network design, forecasting, inventory controy and warehousing. The purpose of the analysis is planning and managing of the effort, to measure the logistics impact of the changes proposed. Logistics system analysis consists of integration of inventory, location, transportation, Packaging activities and information flow for the purpose of managing an effective PhYSical movement of outbound and inbound goods and services in a competitive environment, The complete cost and system approach is developed for planning and managing the variou, logistical functions that prevail within the organization. 1. Supply Chain Management (SCM) 2. Logistics Management 3. Key drivers of SCM 4. Push & Pull Strategy 5. Principles of SCM 6. Dimensions of Logistics 7. Transportation and Information 8. Logistics System Analysis 1. Define Supply Chain Management and its objectivesUPPLY CHAIN MANAGEMENT Im FEROS Multiple Choice Questions 2 Enumerate the key areas of decision making in a supply chain t 3. Distinguish between Push-Pull Strategy. 4. Bring out various micro and macro dimensions of Logistics in SOM. 5. Explain the concept of supply chain management. * Discuss on various external drivers of change in a supply chain, 1. It is primarily concemed with the efficient integration of suppliers, factories, _ warehouses and stores to produce and merchandise the goods at Fight time in a ri location, (@) Purchasing (b) Materials Management (© Supply Chain Management (a) Inventory Management 2. Reducing direct material expenses leads to (@) Operation efficiency () Cost reduction (©) Reducing working capital (4) Improving revenue. 3. Increasing asset utilization will result in (a) Cost reduction (b) Improving profitability (©) Reducing working capital (d) Improving operational efficiency. 4, Place utility and Time Utility are (a) Macro Dimensions () Micro Dimensions (0) Logistics Systems (@) External Drivers For a better co-ordination and quality decision, it should be properly utilized and managed. (a) Location (b) Transportation (¢) Information Answers: 1(c) 2(b) 3(d) 4(a) 5() () Man power Fill in the Blanks WA. ... is the alignment of firms that bring goods and services to the market.2 In tahay’s challenges of technological transformation: 3. When a customer shops at Amazon, they are part of ..e---res oFdder cycles 4. The length of production run is ~ _adimension of logistics. f inventory, location, transportation ang x _ analysis consists of integration of ~ 900=z Oe OO ° &¢eens =a SOURCING STRATEGY . MANUFACTURING/PRODUCTION MANAGEMENT 22, SCOPE OF MANUFACTURING MANAGEMENT 2.3. PRINCIPLES OF MANUFACTURING MANAGEMENT 2.4, MAKE OR BUY - NEXUS 2.5, CAPACITY MANAGEMENT 2.6, MATERIALS MANAGEMENT 2.7, SCOPE OF MATERIALS MANAGEMENT 2.8, CHOICE OF SOURCES 2.9, PROCUREMENT PLANNING PRI MANUFACTURING/PRODUCTION MANAGEMENT Introduction Production Management can also be termed as Manufacturing Management. Planning, organizing and controlling manufacture of goods in manufacturing management. Manufacturing is carried out through processes. A process is any activity or group of activities that takes one or more inputs, transform them and provides one or more outputs. The output could be for an external customer for sale or for an intemal customer to use for further processing. Manufacturing processes convert materials into goods that have a physical form.—_ 22 Meaning of Manutacturing Management Production/Manutacturing Management is a branch of management that is related to Production of goods. Production may be referred as the process of converting the inputs (raw materials, machinery, manpower and information) into output (semi-finished or finished goods of services). In other words, production management is the management by which scientific planning and regulation to make best use of the resources by an enterprise in converting inputs into outputs. Definition of Manufacturing Management, “Manufacturing Management is the process of effectively organizing, planning and regulating the operations that are required by an enterprise, which is responsible in transforming the materials into finished goods”. In the words of $.Buffa, the manufacturing management is termed as: “A decision related to production process, wherein the goods and services are produced as per the amount utilized, schedules demanded and at a minimum cost”. A MANUFACTURING PROCESS SYSTEM INPUTS PROCESS ouput Thus, the manufacturing process system is divided into three parts, as Inputs, Process and Outputs. The factors of production are transformed by the organization into output viz., Goods or Services. EZ score OF MANUFACTURING MANAGEMENT The scope of manufacturing management is associated with factory system and the factory management. Prior to the evolution of factory system, a single person used to carry all the activities. In the post factory system, the aspects such as quality control, layout facilities, meeting the schedules and other organizational activities were addressed well.SOURCING STRATEGY. Ly ; a 23 Various functions that form the part of the scope of manufacturing activities are discussed as under: Production planning, selection and design. Facilities required for production Production system design Method Study weene Layout of factory and materials handling 6. Capacity planning x Production planning 8 Production control 9. Inventory control 10. Quality control 11. Maintenance and Repairs 12. Replacement 13. Cost reduction and control BEE] PRINCIPLES OF MANUFACTURING MANAGEMENT Manufacturing process is existing since, the evolution of mankind. In the early civilization human beings used to manufacture goods on their own to fulfil their basic requirements. With the development of industrialization the role of manufacturing transformed from manual to mechanization. The underlying principle of any manufacturing is to convert the raw material into finished goods. The manufacturing process would include machines, personnel, inventory and warehousing. Manufacturing management includes management of all the activities of manufacturing Process i.e. the conversion of raw materials to finished goods. A firm involves number of decisions with regard to manufacturing of goods. One of such decisions is ‘make or buy’ decisions. Make Vs Buy issue is strategic in nature and involves number of key aspects such as whether the goods are to be produced by the firm? or should they be purchased from outside. Traditionally, firms will be under an opinion that everything should be done internally, unless there is a compelling need in favour of out sourcing. The make Vs buy decision evaluates the involvement and contribution of cach activity in the organization.247 According to value chain model developed by Michael Porter, the supply chain activities are classities as (i) Primary Activities and (ii) Secondary Activities. MAKE OR BUY DECISION The main focus today’s organizations is on outsourcing of non-critical components. These decisions are taken after considering the factors like, capacity, leverage an organization gets and the quality and confidence in working with the vendor. : Make buy decision is a strategic decision and the area that has to be discussed in the development of the total cost model. It has been seen that having a supplier that can work in a simultaneous engineering way with the company is the main aspect in order to avoid costs associated with unnecessary design complexity. This may also mean having a supplier who can provide the same support through IT rather than having an engineer in site, and achieve the same result. The next consideration is the aspect of Jabour charges. The need for simultaneous engineering is required to off-shore the areas such as low labour rates, labour rate inflation and challenges from overseas outsourcing. The following are some of the vital elements that are to be considered for taking decisions wart. make or buy. 1. Identifying the core functions: The focus should be on core activities to match capabilities with the best-in-class performance is not enough. Firms must strive towards being ‘best among the world’ in the specified areas. But, identifying the core areas is a crucial task. The primary step of a company or a firm should be to distinguish between commodity activities and core activities. Focus on improving core areas have significant impact on the performance of the firm 2. Market Vs Hierarchy: When the question of market versus hierarchy is considered, there comes the key aspect of make or buy. In an market mechanism to procure[SOURCING STRATEGY 1 necessary inputs, it may be able to take advantage of economies of scale also can choose suppliers and'services at lower price. On the other hand, in hierarchical form, 2 firm has greater control over co-ordinating with the activities internally, but may not 25 have enough options for internal supplier to work on innovations to reduce cost. 3. Economies of Scale: Always high volume of goods allow a firm to spread its fixed cost over a large volume of operations, thus, a firm with bigger size of operations will have lower cost of operations. Agency Cost: If once, it is decided to manufacture the necessary inputs within the enterprise. the firm has to worry about agency issues. It is quite common that managers and workers of internal supply units may not act best in the interest of the firms. Thus. the top management may incur agency costs. 5. Transaction Cost: Some costs are involved in using market mechanisms, which can be avoided, if those activities are managed properly by the firm. They are the costs involved in locating and evaluating right suppler, bargaining and contracting costs. policing and enforcement costs and the costs that are incurred because of loss of control. { MAKE OR BUY-NEXUS There are two extreme positions to discuss. (i) make an input or buy an input using the market and (ii) vertical integration versus market, where the buyer has a long term relationship with the suppliers. There are several alternative ways in which the decisions can be taken. (i) Tapered Integration — is a phenomenon wherein a firm both makes and buys a given output. Firms like Pizza corner and Madhura Garments fall in this category. These firms own some retail outlets, depend on franchise or other models for the rest of their sales. They keep a part of their manufacturing in-house allows the firm to have a better understanding of the industry cost structures and this helps them to negotiate better deals with the external suppliers. The firm will have a choice to keep pressure on the supplier by demanding to improve, failing which, they will be shifting to in-house manufacture. Another example, Airtel has decided to shift the bulk of its call centres to external firms, but has retained support centres for strategic customers internally, so that, it need not face communication issues with its important patrons. Collaborative Relationship-In a collaborative relationship, the supplier is an extension of the firm. A firm treats its suppliers as strategic partners and usually a supplier is assured of business in the long run. The firms do not take the advantage of competitiveUSOURCING STRATEGY bidding and does not change its suppliers to get small price reduction offers by a competing supplier, One of the major concems in collaborative relationship is ensuring that the supplier keeps working on innovation, Dell Computers benchmarks all its partners on cost and technology leadership. Only if the supplier maintains leadership on both these fronts, Dell continue with the same partner. Another example, Firms like Toyota buy 80% of the required components from the market. Japanese manufacturers work with a network of suppliers with whom they maintain close relationships. Japanese companies have subcontractor networks called “keiretsu”. This network involves vendors, bankers and distributors. Firms within keiretsu are linked by informal personal relationships. BBG] capacity MANAGEMENT ee “Capacity Management refers to the act of ensuring a business maximize its potential activities and production output- under all conditions and in all times”. Importance of Capacity Decisions: » Impacts ability to meet future demands > Affects operating costs y Major determinants of initial costs Vv Involves long-term commitment > Affects competitiveness Process of Capacity Management 1. Measuring current resources to derive your current capacity 2. Understanding what resources could be procured and how that will affect your current capacity 3. Accounting for current and future demands on your capacity 4. Strategically allocating resources to meet your goals 5. Monitoring final capacity usage, analyzing past projects 6. Recalibrating benchmarks for the next project, using data from the past and a fresh assessment of your current capacity and demands Production Capacity Management Capacity management can examine how efficiently your company uses resources to(SOURCING STRATEGY 27 manufacture goods. These resources include owned or rented space, employees, equipment and machinery, raw materials, product components, packaging supplies and modes of transportation. ERGIMATERIALS MANAGEMENT s Meaning of Material Management Materials management is a function, which aims for integrated approach towards the management of materials of an industrial unit. The main objective of materials handling is efficient handling of materials at all stages of production and cost reduction. Its functions include vital aspects of material such as purchasing, storage, inventory control, material handling and standardization. q SCOPE OF MATERIALS MANAGEMENT a Materials management is defined as “the function responsible for the coordination of planning, sourcing, purchasing, moving, storing and controlling materials in an opumem manner soas to provide a pre-decided service to the customer at a minimum cost”. From the definition of material management, it is evident that its scope is wider: functions of material management is illustrated with the following flow ch >~ B ions of Material Management “Sf supplier of © = Mowing will help ‘Materials Planning ‘& Control 1. Materials Planning é& Contro! sales forecast and productio™’ {or material budget, forecasting 1a" performance in relation 1° “arnals. oF 2. Purchasing: The *SOURCING Sry ‘Gy "Sting lationship with suppliers, payments to suppliers, evaltiating 6 owup, rela al ist inh! on the faithick forms part of purchasing, suppliers basal 0 . PR ent: This function includes physical control of materia ss “ee ton of obsolescence and damage through timely disp, Of store, minimization of 0 a hanting maintenanoe of stores records, proper location ang soe etlicent handling ‘al verification of stocks ang "ECONGiing 4 A em, stores ts also responsitle for the phys With book figures / “Inventory Management: Inventory generally refers to the inventory jn stock, interval between neeviving the purchased parts and ‘{ransforming. them inte ' Product varies from industries to industries depending up on the cycle ti Manutacturing. It is therefore necessary to hold inventories of various kinds to 5 butter between supply and demand for efficient operation of the system, I 5. Other Related Activities: 5 inal Me of ct as ©) Simplification: The concept of simplification is closely related to Standardization, Simplification is the process of reducing the variety of products manufactured, Simplification is concerned with the reduction of product range, assemblies, parts, Materials and design, (0 Specifications: It refers to.a Precise statement that formulizes the requirements of the customer, It may relate to a Product, process or 4 service. Example; Specifications of anaxle block are Inside Dia. =2+0.1 om, Outside Dia, = 4 #02cm and Length = 1005 qn, BANECESSATY Specifications and features, It makes its contribution in the last stage of Product cycle, namely, the Lawurily stage. At this stage research and development no longer make positive contributions in terms of improving the efficiency of the functions Of the product or adding new functions to it,as -in-Time (JIT): JIT Manufacturing is a philosophy, rather than, 2 technique. By | eliminating all waste and seeking continuous improvement, it aims at creating | manufacturing system that is responding to the market needs. (TT Aécording to Voss, JIT is defined as, “Production methodology which aims to improve overall productivity through elimination of waste and which leads to improved quality”. Just-in-Time provides an efficient production in an organization and delivery of only the necessary parts in the right quantity, at the right time and in right place, while using the 4 ‘imum facilities. The phase Just-in-Time is used to because this system operates with low WIP (Work-in- Process) inventory and often with very low finished goods inventory. Products are assembled just before they are sold, subassemblies are made just before they are assembled and components are made and fabricated just before subassemblies are made. This leads to lower WIP and reduced lead times. To achieve this organizations have to be excellent in other areas e.g. quality. PI ciicice oF sources” Selection of right suppliers is the prime responsibility of the purchase department. Different strategies can be used for acquiring different types of materials. The selection of suppler from standardized products differ from non-standardized products. The following are some of the factors considered for the choice of sources. 1, Sources of Supplier It is the duty of the purchase department to locate an appropriate sources of supplier of various types of materials. This is known as ‘Survey Stage’. A survey of the following will help in developing the possible sources of supply. 1. Specialised trade directories. Assistance of professional bodies or consultants. ‘The buyer's guide or purchase handbook. The manufacturer's or distributor's catalogue. Advertisements in dailies. : Advertisement in specialised trade journals. NagoPpen Trade fair exhibitions.SOURCING STRATEGY 210 at 2. Development of an approved list of suppliers The survey stage highlights the existence of the source. A busin appropriate supplier. It is Lnovn as ‘Inquiry Stage’. Here a short listing is made out of the given sources of suppliers in terms of production facilities and capacity, financial standing, product quality. possibility of timely supply, technical competence, manufacturing efficiency, general business policies followed, standing in the industry, competitive attitude, and interest in buying onders ete. s inquiry is made with the 3. Evaluation and Selection of the supplier The purchase policy and procedure differ according to the type of items to be purchased, Hence, evolution and selection of the supplier differ accordingly. The following are some of the factors considered while purchasing, as per the ‘purchasing hand book’ edited by Aljian, 1. Cost Factor 2 Delivery Design and Specification Factors . Legal Factors 5. Vendor Rating 3. 4 EG] PROCUREMENT PLANNING : A procurement plan is a process in which an enterprise or a company decides what they need, who is the supplier, when to make an order and when does the order is fulfilled. The following are the steps to be followed under procurement of materials. ‘The need for the materials Purchase requisition . Review of requisition 1 2 3 4. Solicitation process 5. Evaluation of requisition 6. Order management 7. Invoice approvals and dispute settlement 8, Record maintenance The following are the six methods of procurement 1. Single sourcesy eep Quotations Open tendering Restricted tendering Two-stage tendering. Request for proposals Manufacturing Management 2. Principles of Manufacturing Management Make or Buy Decision Materials Management Value Analysis Ergonomics Just-in-Time (IT) |. Procurement Define Manufacturing Management. Explain its process. Enumerate the scope of manufacturing management. What are the principles of manufacturing management? . Discuss the importance of capacity management. Define material management. Explain its scope. Explain various choice of sources. What is procurement planning? Explain. Discuss about Capacity Management. oe