chapter 1

1. Professionals Purchasing’s
Growing Importance
Supply Chain Management
The Internet and Business-to-Business Sell

2. Supply Chain Management
Just- in- time Inventory System
Advantage and Disadvantage
Material Requirements Planning (MRP)
system
Automatic Replenishment (AR)
Supplier Relationship Management

3. Supply Chain Management
Set of programs undertaken to increase
the efficiency of the distribution channel
that moves products form producer’s
facilities to the end user.

4. Just-in-time Systems
 used by a producer to minimize its
inventory by having frequent deliveries,
sometimes daily, just in time for assembly
into the final product.
The ultimate goal is to eliminate all
inventory except products in production and
transit. Inventory is waste.
Rely on one supplier.

5. Final Product…

6. Inventory is Waste…

7. Advantages of JIT System
Funds that were tied up in inventories can be
used elsewhere.
Areas previously used, to store inventories
can be used for other more productive uses.
Throughput time is reduced, resulting in
greater potential output and quicker response
to customers.
Defect rates are reduced, resulting in less
waste and greater customer satisfaction.

8. PCs Just In Time Management:
Del Computer Corporation has finally tuned its
Just-in-Time system, Dell's low cost
production system allows it to under price its
rivals by 10% to 15%. How does the
company's just in time system deliver lower
costs? "While machines from Compaq and
IBM can languish on dealer shelves for two
months Dell does not start ordering
components and assembling computers until
an order is booked.

9. That may sound like no biggie, but the price
of PC parts can fall rapidly in just a few
months. By ordering right before
assembly, Dell figures its
parts, on average,
are 60 days newer than
those in an IBM or Compaq
machine sold at the same time.
That can translate into a 6% profit
advantage in components alone."

10. Disadvantage of JIT System
 JIT manufacturing also opens businesses to
a number of risks, notably those associated
with your supply chain. With no stocks to fall
back on, a minor disruption in supplies to
your business from just one supplier could
force production to cease at very short notice.

11. Toyota the Developer of JIT System
Just-in-time manufacturing system has many
advantages, but they are vulnerable to
unexpected disruptions in supply. A
production line can quickly come to a halt if
essential parts are unavailable. Toyota, the
developer of JIT, found this out the hard way.
One Saturday, a fire at Aisin seiki Company's
plant in Aichi Prefecture stopped the delivery
of all break parts to Toyota. By Tuesday,

12. Toyota had to close
down all of its
Japanese
assembly line. By
the time the supply
of break parts had
been restored,
Toyota had lost an
estimated $15
billion in sales.

13. Material Requirement Planning
System
 these systems are used to forecast sales,
develop a production schedule, and then
order parts and raw materials with delivery
dates that minimize the amount of inventory
needed, thereby reducing costs.

14. Week 1 2 3 4 5 6 7 8
Gross Requirements
Scheduled Receipts
Projected on hand I
Planned Receipts
Planned order releases

16. Automatic Replenishment
 A form of Just-in-time where the supplier
manages inventory levels of the customer.
 The materials are provided on consignment,
meaning the buyer doesn’t pay for them
until they are actually used.
(industrial settings)

17. Electronic Data Interchange
 Computer-to-computer linkages between
suppliers and buyers sharing information
about sales, production and shipment and
receipts of products.

18. Sales Forecasts
Promotion Schedule
Request For Quote
Change Order
BUYER Material Release
SUPPLIER
Sh Quote Order
A ip
no dva me Acknowledge
s
tu
B tic nc nt
i ll e e S
r
ta
de
of d ta Shipping Notice
ts
sh tu
or
Pi
La
en
ip s
ck
up
nd pi Invoice
m
up
in ng
ck
ip
g Promotion Schedule
or
Sh
Pi
de
r
CARRIER

19. Supplier Relationship
Management
 is a strategy by which organizational buyers
evaluate the relative importance of suppliers
and use that information to determine with
whom they want to develop partnerships.

20. Supplier Relationship Management
Step 1: Annual Spend
Step 2: Vendor Analysis
Step 3: Overall score is developed.

21. Annual Spend
 Is the amount that is
spent with each
vendor (supplier)
and for what
products.

22. Vendor Analysis
 The buyer rates the supplier and its
product on a number of criteria such as;
 Price
 Quality
 Performance
 On- time Delivery

23. Note:
 The ratings of suppliers can be affected by
perceptions and personal needs of the
buyers.

24. Overall score is developed
 The ratings are weighted by importance of
the characteristics.

25. The Internet and Business-to-
Business Selling
 Electronic ordering
through EDI
(Electronic Data
Interchange) has
been common
practice in
business for more
than 10 years.

26. The Internet and Business-to-
Business Selling
 EDI activity, nowadays, was transacted
over private networks that required
buyers and sellers to use specialized
software to communicate with each
other.
 Special secure Internet-based networks
connecting buyers and suppliers are
called extranets.

27. Benefit of Extranet
 Reduced costs by making manuals and
technical documentation available online to
trading partners and customers
 more effective collaboration between
business partners - perhaps members of a
project team - by enabling them to work
online on common documentation
 improved business relationships with key
trading partners because of the close
collaborative working that extranets support

28.  improving the security of communications
between you and your business partners,
since exchanges can take place under a
controlled and secure environment