OM 300 1nd Edition Lecture 15 Outline of Last Lecture I Supply Chain Management II Sourcing Issues III Six Sourcing Strategies a Many Suppliers b Few Suppliers c Vertical Integration d Joint Ventures e Keiretsu networks f Virtual companies Outline of Current Lecture I Supply Risks II Managing the Integrate Supply Chain III Building the Supply Base IV Shipping Systems V Ethics Current Lecture Supply Chain Risk More reliance on supply chains means more risk Fewer suppliers increase dependence Compounded by globalization and logistical complexity Vendor reliability and quality risks Political and currency risks Risk and Mitigation Tactics Research and assess possible risks Innovative planning Reduce potential disruptions Prepare responses for negative events Flexible secure supply chains Diversified supplier base Security and JIT Shipments get misrouted stolen damaged or excessively delayed Technological innovations are improving security and inventory management o Location motion sensors broken seals temperature These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute can help expedite shipments Managing the Integrated Supply Chain Issues o Local optimization can magnify fluctuations o Incentives push merchandise into the supply chain for sales that have not occurred o Large lots reduce shipping costs but increase inventory holding and do not reflect actual sales Opportunities o Accurate pull data shared information o Lot size reduction shipping discounts reduced ordering costs o Single stage control of replenishment Single supply chain member responsible for ordering o Vendor managed inventory VMI o Collaborative planning forecasting and replenishment CPFR through the supply chain o Blanket orders against which actual orders are released o Standardization o Postponement withholds modification as long as possible o Electronic ordering and funds transfer speed transactions and reduce paperwork o Drop shipping and special packaging by passes the seller and reduces costs Building the Supply Base Supplier evaluation o Finding potential suppliers o Determine likelihood of their becoming good suppliers o Supplier certification Qualification Education Certification Supplier development o Integrate the supplier into the system Quality requirements Product specifications Schedules and delivery Procurement policies Training Engineering and production help Information transfer procedures Negotiation o A significant element in purchasing o Highly valued skills Cost price model Supplier opens books Market based price model Based on published auction or indexed prices Competitive bidding Common policy for many purchases Does not generally foster long term relationships Contracting o Share risks benefits create incentives Centralized purchasing o Leverage volume o Develop specialized staf o Develop supplier relationships o Maintain professional control o Devote resources to selection and negotiation o Reduce duplication of tasks o Promote standardization E Procurement Speeds purchasing reduces costs integrates supply chain o Online catalogs and exchanges Standard items or industry specific web sites o Online auctions Low barriers to entry Reverse auctions for buyers Price not always the most important factor Internet Trading Exchanges Health care products Retail goods Defense and aerospace products Food beverage consumer products Steel and metal products Hotels Logistics Management Objective is to obtain efficient operations through the integration of all material acquisition movement and storage activities Is a frequent candidate for outsourcing Allows competitive advantage to be gained through reduced costs and improved customer service Shipping Systems Trucking o Moves the vast majority of manufactured goods o Chief advantage is flexibility Railroads o Capable of carrying large loads o Little flexibility though containers and piggybacking have helped with this Airplanes o Fast and flexible for light loads o May be expensive Waterways o Typically used for bulky low value cargo o Used when shipping cost is more important that speed Pipelines o Used for transporting oil gas and other chemical products Multimodal o Combines shipping methods o Common especially in international shipments o Aided by standardized containers Warehousing May be expensive but alternatives may be more so Fundamental purpose is to store goods May provide other functions o Consolidation o Break bulk o Cross docking o Channel assembly Third Party Logistics 3PL Outsourcing logistics can reduce inventory costs and improve delivery reliability and speed Coordinate suppliers inventory with delivery services May provide warehousing assembly testing shipping customs Ethics and Sustainable Supply Chain Management Personal ethics o Critical to long term success of an organization o Supply chains particularly susceptible Ethics within the supply chain Ethical behavior regarding the environment Principles and Standards for Ethical Supply Management Conduct Loyalty to your organization Justice to those with whom you deal Faith in your profession ISM Ethical Standards 1 Perceived Impropriety Prevent the intent and appearance of unethical or compromising conduct in relationships actions and communications 2 Conflicts of Interest Ensure that any personal business or other activity do not conflict with the lawful interests of your employer 3 Issues of Influence Avoid behaviors or actions that may negatively influence or appear to influence supply management decisions 4 Responsibilities to your employer Uphold fiduciary and other responsibilities using reasonable care and granted authority to deliver value to your employer 5 Supplier and Customer Relationships Promote positive supplier and customer relationships 6 Sustainability and Social Responsibility Champion social responsibility and sustainability practices in supply management 7 Confidentiality and Proprietary Information Protect confidential and proprietary information 8 Reciprocity Avoid improper reciprocal agreements 9 Applicable Laws Regulations and Trade Agreements Know and obey the letter and spirit of laws regulations and trade agreements applicable to supply management 10 Professional Competence Develop skills expand knowledge and conduct business that demonstrates competence and promotes the supply management profession