Samenvatting
SUPPLY CHAIN
MANAGEMENT
Thuline Vanderhaeghen
2MKB
0
,1
, INDEX
INDEX ..................................................................................................................................... 2
PART 1: INTRODUCTION ......................................................................................................... 8
1. SCM & SCOR-model .................................................................................................... 8
1.1. Logistics <> SCM ................................................................................................. 8
1.1.1. The mission of logistics management .......................................................... 8
1.1.2. SC & competitive performance ................................................................... 8
2. Achieving an integrated supply chain ......................................................................... 8
3. The SCOR-model ......................................................................................................... 9
3.1. Process modelling & re-engineering.................................................................... 9
3.2. SCOR framework levels ..................................................................................... 10
4. The era of supply chain competition ......................................................................... 11
5. Modern SCM is about managing the 4 R’s ................................................................ 11
5.1. Responsiveness................................................................................................. 11
5.2. Reliability .......................................................................................................... 11
5.3. Resilience.......................................................................................................... 11
5.4. Relationships .................................................................................................... 11
6. Notions..................................................................................................................... 12
PART 2: PROCUREMENT ....................................................................................................... 13
1. Exploration ............................................................................................................... 13
1.1. What is procurement ........................................................................................ 13
2. Differences between branches ................................................................................. 14
3. The importance of procurement ............................................................................... 14
3.1. Qualitative elements of purchasing................................................................... 15
4. The increasing complexity of purchasing .................................................................. 15
4.1. Changes in the external purchasing environment ............................................. 15
4.2. Changes in the internal purchasing environment .............................................. 15
4.3. Procurement and the logistics function ............................................................ 16
5. Purchasing, part of a commercial policy ................................................................... 17
5.1. Horizontal link between buying & selling.......................................................... 17
5.2. Vertical link between buying & selling .............................................................. 17
2
, 7. Procurement management process .......................................................................... 18
7.1. Purchasing research .......................................................................................... 19
7.2. Purchasing goals ............................................................................................... 19
7.3. Purchasing strategy........................................................................................... 19
7.4. Planning, implementation & control ................................................................. 19
7.4.1. Transaction management.......................................................................... 19
7.4.2. Quality management................................................................................. 19
7.4.3. Supplier management ............................................................................... 19
7.4.4. Communication......................................................................................... 19
PART 3: PURCHASING STRATEGY .......................................................................................... 20
1. Purchasing research ................................................................................................. 20
1.1. The purpose of purchasing research ................................................................. 20
1.2. What is purchasing research? ........................................................................... 20
1.3. The purchasing research process ...................................................................... 20
1.4. Topics of procurement market research ........................................................... 20
1.4.1. Materials, goods and services (WHAT) ...................................................... 20
1.4.2. Suppliers (WHERE) .................................................................................... 21
1.4.3. System- and procedure research (HOW) ................................................... 21
2. Purchasing strategy .................................................................................................. 21
2.1. Purchasing in evolution..................................................................................... 21
2.1.1. Serve the factory à Admin. oriented on factory level ............................... 22
2.1.2. Lowest unit cost à Negotiating techniques, competition, good knowledge
of market 22
2.1.3. Coordinated purchasing à Central purchasing, procedures ...................... 22
2.1.4. Cross-functional purchasing à Working in teams internally & externally.. 22
2.1.5. World-class supply management à professional purchasing policy .......... 22
3. Competitive strategy according to Porter & influence on purchasing ....................... 22
3.1. The value chain and value system ..................................................................... 22
3.2. Porter’s typology .............................................................................................. 23
4. Procurement planning according to Kraljic (EX!) ....................................................... 24
4.1. The analysis of the goods to be purchased ....................................................... 24
4.2. Practical problems in establishing a purchasing portfolio ................................. 25
3
, 4.3. Investigation of the purchasing market for alternatives ................................... 25
4.4. Strategic positioning ......................................................................................... 26
4.5. Development of a policy and the elaboration of this plan in concrete actions ... 26
PART 4: PURCHASING PLANNING & IMPLEMENTATION (THE PURCHASING MIX) ................ 27
1. Transaction management ......................................................................................... 27
1.1. The purchasing procedure ................................................................................ 27
1.2. The procurement process ................................................................................. 27
1.2.1. Determination of purchasing needs .......................................................... 27
1.2.2. Requirements in a quantitative sense (EX) ................................................ 28
1.2.3. Requirements in a quantitative sense ....................................................... 28
1.2.4. Investigation & selection of suppliers to be contacted .............................. 29
1.2.5. Request for quotation ............................................................................... 29
1.2.6. Control of the received bid ........................................................................ 30
1.2.7. The bid evaluation..................................................................................... 30
1.2.8. Negotiations with bidders and final selection ............................................ 30
1.2.9. The purchase order ................................................................................... 31
1.2.10. Types of contracts ..................................................................................... 32
1.2.11. Order control, invoice control and evaluation ........................................... 32
1.3. E-procurement.................................................................................................. 33
1.3.1. Types of e-procurement............................................................................ 33
1.3.2. Applications of e-procurement ................................................................. 33
1.3.3. Components e-procurement ..................................................................... 33
2. Quality management ................................................................................................ 35
2.1. Why assess purchasing activities?..................................................................... 35
2.2. What should be measured? .............................................................................. 35
2.3. How to measure? ............................................................................................. 35
2.3.1. Accounting approaches............................................................................. 35
2.3.2. The purchasing management audit ........................................................... 36
2.3.3. Comparative approach ............................................................................. 36
2.3.4. Management by objectives ....................................................................... 37
2.3.5. Miscellaneous (veelzijdig, divers) .............................................................. 38
3. Supplier management .............................................................................................. 39
4
, 3.1. Sources of supplier information ........................................................................ 39
3.2. Methods of supplier assessment....................................................................... 40
3.2.1. Vendor rating (kwantitatief) ...................................................................... 40
3.2.2. Vendor plant survey .................................................................................. 41
4. Negotiations ............................................................................................................. 42
4.1. Dynamics of negotiations.................................................................................. 42
4.2. the 5 C’s ............................................................................................................ 43
4.2.1. Conditioning.............................................................................................. 43
4.2.2. Cognition .................................................................................................. 43
4.2.3. Conduct .................................................................................................... 43
4.2.4. Conviction ................................................................................................. 43
4.2.5. Conclusion ................................................................................................ 43
4.3. Preparing for the negotiations .......................................................................... 43
4.4. Negotiation techniques..................................................................................... 44
4.4.1. Planning .................................................................................................... 44
4.4.2. Asking and offering ................................................................................... 44
4.4.3. Making concessions .................................................................................. 44
4.4.4. Time tactics ............................................................................................... 45
4.4.5. Competence games................................................................................... 45
4.4.6. Information or questioning tactics ............................................................ 45
4.4.7. Pit falls ...................................................................................................... 45
PART 5: INVENTORY MANAGEMENT .................................................................................... 46
1. Introduction ............................................................................................................. 46
1.1. Types of inventory ............................................................................................ 46
1.1.1. Decoupling stocks ..................................................................................... 46
1.1.2. Strategic stocks ......................................................................................... 46
1.1.3. Technical and economic inventory ............................................................ 46
1.2. Components of an inventory system................................................................. 47
1.2.1. What kind of supply do we have? ............................................................. 47
1.2.2. Type of demand........................................................................................ 47
1.2.3. Information ............................................................................................... 47
1.2.4. Level of service ......................................................................................... 47
5
, 1.2.5. Limitations ................................................................................................ 47
1.2.6. Influences on the cost of inventory ........................................................... 47
1.3. ABC- or Pareto-analysis..................................................................................... 48
2. Models of inventory management............................................................................ 49
2.1. The (ROP,Q) system .......................................................................................... 49
2.2. The (ROP,MAX)-system .................................................................................... 50
2.3. The (ROS,Q)-system.......................................................................................... 51
2.4. The (ROS,MAX)-system .................................................................................... 52
3. Quantifying stock management ................................................................................ 53
3.1. Determining the safety stock ............................................................................ 53
PART 6: PRODUCTION MANAGEMENT ................................................................................. 54
1. Problem definition.................................................................................................... 54
1.1. Introduction ...................................................................................................... 54
1.2. ERP and MRP .................................................................................................... 54
1.3. The logic in an MRP-2 system ........................................................................... 55
1.4. Practical problems ............................................................................................ 57
1.4.1. Uncertainty............................................................................................... 57
1.4.2. The aggregation problem .......................................................................... 57
1.4.3. Integration of tactical planning at strategic & operational level ................ 57
1.4.4. The planning horizon must be defined...................................................... 57
1.5. Cost components .............................................................................................. 57
2. How to use MRP-2 .................................................................................................... 58
2.1. Determining the gross needs ............................................................................ 58
2.1.1. In general .................................................................................................. 58
2.1.2. Drawing up the MPS.................................................................................. 58
2.1.3. The MPS is a key element in the MRP........................................................ 58
2.2. The BOM or bill of material ............................................................................... 59
2.3. The MRP-1-calculation ...................................................................................... 60
2.3.1. Shrinkage (OEFENING) .............................................................................. 60
2.4. Capacity planning ............................................................................................. 61
2.4.1. Capacity planning based on averages ....................................................... 61
6
,7
, PART 1: INTRODUCTION
1. SCM & SCOR-model
1.1. Logistics <> SCM
Def. Logistics
The process of strategically managing the procurement, movement and storage of material
parts and finished inventory through the organization and its marketing channels so that
current and future profitability are maximized through cost-efficient fulfilment of orders.
Def. SCM
The management of upstream and downstream relationships with suppliers and customers
in order to deliver superior customer value at less costs to the supply chain as a whole.
1.1.1. The mission of logistics management
Logistics is a planning concept that seeks to create a framework (=kader) through which the
needs of the marketplace can be translated into a manufacturing strategy and plan, which in
turn links into a strategy and plan for procurement.
1.1.2. SC & competitive performance
A supply chain consists of all parties involved, directly or indirectly, in fulfilling a customer’s
request (bv. Fabrikanten, leveranciers, transporteurs, warenhuizen, retailers, klanten …)
2. Achieving an integrated supply chain
1) Every business function is completely
isolated from the other.
2) Adjacent (=aangrenzende) functions feel
the need to start a moderate integration.
3) Requires an end-to-end planning
framework in the entire organization.
4) The internal supply chain is linked to both
suppliers and customers à SCOR
8
, 3. The SCOR-model
SCOR = Supply Chain Operations Reference = the different supply chain processes, a
framework for relationships between these processes and a set of metrics to measure
process performance.
The 4 pillars of SCOR:
1) Process modelling & re-engineering
2) Performance measurements
3) Best practices
4) Skills
3.1. Process modelling & re-engineering
1) Plan = balance of demand and supply with a series of actions
2) Source = procurement (=buying)
3) Make = producing
4) Deliver = order, distribution & transportation management
5) Return = handling of returned products from supplier or customer
6) Enable = management of the supply chain (bv. Contracten, data, faciliteiten …)
This is an aggregate model = we’re not looking at individual products, but at the bigger
picture (not product itself, but the product line)
9
SUPPLY CHAIN
MANAGEMENT
Thuline Vanderhaeghen
2MKB
0
,1
, INDEX
INDEX ..................................................................................................................................... 2
PART 1: INTRODUCTION ......................................................................................................... 8
1. SCM & SCOR-model .................................................................................................... 8
1.1. Logistics <> SCM ................................................................................................. 8
1.1.1. The mission of logistics management .......................................................... 8
1.1.2. SC & competitive performance ................................................................... 8
2. Achieving an integrated supply chain ......................................................................... 8
3. The SCOR-model ......................................................................................................... 9
3.1. Process modelling & re-engineering.................................................................... 9
3.2. SCOR framework levels ..................................................................................... 10
4. The era of supply chain competition ......................................................................... 11
5. Modern SCM is about managing the 4 R’s ................................................................ 11
5.1. Responsiveness................................................................................................. 11
5.2. Reliability .......................................................................................................... 11
5.3. Resilience.......................................................................................................... 11
5.4. Relationships .................................................................................................... 11
6. Notions..................................................................................................................... 12
PART 2: PROCUREMENT ....................................................................................................... 13
1. Exploration ............................................................................................................... 13
1.1. What is procurement ........................................................................................ 13
2. Differences between branches ................................................................................. 14
3. The importance of procurement ............................................................................... 14
3.1. Qualitative elements of purchasing................................................................... 15
4. The increasing complexity of purchasing .................................................................. 15
4.1. Changes in the external purchasing environment ............................................. 15
4.2. Changes in the internal purchasing environment .............................................. 15
4.3. Procurement and the logistics function ............................................................ 16
5. Purchasing, part of a commercial policy ................................................................... 17
5.1. Horizontal link between buying & selling.......................................................... 17
5.2. Vertical link between buying & selling .............................................................. 17
2
, 7. Procurement management process .......................................................................... 18
7.1. Purchasing research .......................................................................................... 19
7.2. Purchasing goals ............................................................................................... 19
7.3. Purchasing strategy........................................................................................... 19
7.4. Planning, implementation & control ................................................................. 19
7.4.1. Transaction management.......................................................................... 19
7.4.2. Quality management................................................................................. 19
7.4.3. Supplier management ............................................................................... 19
7.4.4. Communication......................................................................................... 19
PART 3: PURCHASING STRATEGY .......................................................................................... 20
1. Purchasing research ................................................................................................. 20
1.1. The purpose of purchasing research ................................................................. 20
1.2. What is purchasing research? ........................................................................... 20
1.3. The purchasing research process ...................................................................... 20
1.4. Topics of procurement market research ........................................................... 20
1.4.1. Materials, goods and services (WHAT) ...................................................... 20
1.4.2. Suppliers (WHERE) .................................................................................... 21
1.4.3. System- and procedure research (HOW) ................................................... 21
2. Purchasing strategy .................................................................................................. 21
2.1. Purchasing in evolution..................................................................................... 21
2.1.1. Serve the factory à Admin. oriented on factory level ............................... 22
2.1.2. Lowest unit cost à Negotiating techniques, competition, good knowledge
of market 22
2.1.3. Coordinated purchasing à Central purchasing, procedures ...................... 22
2.1.4. Cross-functional purchasing à Working in teams internally & externally.. 22
2.1.5. World-class supply management à professional purchasing policy .......... 22
3. Competitive strategy according to Porter & influence on purchasing ....................... 22
3.1. The value chain and value system ..................................................................... 22
3.2. Porter’s typology .............................................................................................. 23
4. Procurement planning according to Kraljic (EX!) ....................................................... 24
4.1. The analysis of the goods to be purchased ....................................................... 24
4.2. Practical problems in establishing a purchasing portfolio ................................. 25
3
, 4.3. Investigation of the purchasing market for alternatives ................................... 25
4.4. Strategic positioning ......................................................................................... 26
4.5. Development of a policy and the elaboration of this plan in concrete actions ... 26
PART 4: PURCHASING PLANNING & IMPLEMENTATION (THE PURCHASING MIX) ................ 27
1. Transaction management ......................................................................................... 27
1.1. The purchasing procedure ................................................................................ 27
1.2. The procurement process ................................................................................. 27
1.2.1. Determination of purchasing needs .......................................................... 27
1.2.2. Requirements in a quantitative sense (EX) ................................................ 28
1.2.3. Requirements in a quantitative sense ....................................................... 28
1.2.4. Investigation & selection of suppliers to be contacted .............................. 29
1.2.5. Request for quotation ............................................................................... 29
1.2.6. Control of the received bid ........................................................................ 30
1.2.7. The bid evaluation..................................................................................... 30
1.2.8. Negotiations with bidders and final selection ............................................ 30
1.2.9. The purchase order ................................................................................... 31
1.2.10. Types of contracts ..................................................................................... 32
1.2.11. Order control, invoice control and evaluation ........................................... 32
1.3. E-procurement.................................................................................................. 33
1.3.1. Types of e-procurement............................................................................ 33
1.3.2. Applications of e-procurement ................................................................. 33
1.3.3. Components e-procurement ..................................................................... 33
2. Quality management ................................................................................................ 35
2.1. Why assess purchasing activities?..................................................................... 35
2.2. What should be measured? .............................................................................. 35
2.3. How to measure? ............................................................................................. 35
2.3.1. Accounting approaches............................................................................. 35
2.3.2. The purchasing management audit ........................................................... 36
2.3.3. Comparative approach ............................................................................. 36
2.3.4. Management by objectives ....................................................................... 37
2.3.5. Miscellaneous (veelzijdig, divers) .............................................................. 38
3. Supplier management .............................................................................................. 39
4
, 3.1. Sources of supplier information ........................................................................ 39
3.2. Methods of supplier assessment....................................................................... 40
3.2.1. Vendor rating (kwantitatief) ...................................................................... 40
3.2.2. Vendor plant survey .................................................................................. 41
4. Negotiations ............................................................................................................. 42
4.1. Dynamics of negotiations.................................................................................. 42
4.2. the 5 C’s ............................................................................................................ 43
4.2.1. Conditioning.............................................................................................. 43
4.2.2. Cognition .................................................................................................. 43
4.2.3. Conduct .................................................................................................... 43
4.2.4. Conviction ................................................................................................. 43
4.2.5. Conclusion ................................................................................................ 43
4.3. Preparing for the negotiations .......................................................................... 43
4.4. Negotiation techniques..................................................................................... 44
4.4.1. Planning .................................................................................................... 44
4.4.2. Asking and offering ................................................................................... 44
4.4.3. Making concessions .................................................................................. 44
4.4.4. Time tactics ............................................................................................... 45
4.4.5. Competence games................................................................................... 45
4.4.6. Information or questioning tactics ............................................................ 45
4.4.7. Pit falls ...................................................................................................... 45
PART 5: INVENTORY MANAGEMENT .................................................................................... 46
1. Introduction ............................................................................................................. 46
1.1. Types of inventory ............................................................................................ 46
1.1.1. Decoupling stocks ..................................................................................... 46
1.1.2. Strategic stocks ......................................................................................... 46
1.1.3. Technical and economic inventory ............................................................ 46
1.2. Components of an inventory system................................................................. 47
1.2.1. What kind of supply do we have? ............................................................. 47
1.2.2. Type of demand........................................................................................ 47
1.2.3. Information ............................................................................................... 47
1.2.4. Level of service ......................................................................................... 47
5
, 1.2.5. Limitations ................................................................................................ 47
1.2.6. Influences on the cost of inventory ........................................................... 47
1.3. ABC- or Pareto-analysis..................................................................................... 48
2. Models of inventory management............................................................................ 49
2.1. The (ROP,Q) system .......................................................................................... 49
2.2. The (ROP,MAX)-system .................................................................................... 50
2.3. The (ROS,Q)-system.......................................................................................... 51
2.4. The (ROS,MAX)-system .................................................................................... 52
3. Quantifying stock management ................................................................................ 53
3.1. Determining the safety stock ............................................................................ 53
PART 6: PRODUCTION MANAGEMENT ................................................................................. 54
1. Problem definition.................................................................................................... 54
1.1. Introduction ...................................................................................................... 54
1.2. ERP and MRP .................................................................................................... 54
1.3. The logic in an MRP-2 system ........................................................................... 55
1.4. Practical problems ............................................................................................ 57
1.4.1. Uncertainty............................................................................................... 57
1.4.2. The aggregation problem .......................................................................... 57
1.4.3. Integration of tactical planning at strategic & operational level ................ 57
1.4.4. The planning horizon must be defined...................................................... 57
1.5. Cost components .............................................................................................. 57
2. How to use MRP-2 .................................................................................................... 58
2.1. Determining the gross needs ............................................................................ 58
2.1.1. In general .................................................................................................. 58
2.1.2. Drawing up the MPS.................................................................................. 58
2.1.3. The MPS is a key element in the MRP........................................................ 58
2.2. The BOM or bill of material ............................................................................... 59
2.3. The MRP-1-calculation ...................................................................................... 60
2.3.1. Shrinkage (OEFENING) .............................................................................. 60
2.4. Capacity planning ............................................................................................. 61
2.4.1. Capacity planning based on averages ....................................................... 61
6
,7
, PART 1: INTRODUCTION
1. SCM & SCOR-model
1.1. Logistics <> SCM
Def. Logistics
The process of strategically managing the procurement, movement and storage of material
parts and finished inventory through the organization and its marketing channels so that
current and future profitability are maximized through cost-efficient fulfilment of orders.
Def. SCM
The management of upstream and downstream relationships with suppliers and customers
in order to deliver superior customer value at less costs to the supply chain as a whole.
1.1.1. The mission of logistics management
Logistics is a planning concept that seeks to create a framework (=kader) through which the
needs of the marketplace can be translated into a manufacturing strategy and plan, which in
turn links into a strategy and plan for procurement.
1.1.2. SC & competitive performance
A supply chain consists of all parties involved, directly or indirectly, in fulfilling a customer’s
request (bv. Fabrikanten, leveranciers, transporteurs, warenhuizen, retailers, klanten …)
2. Achieving an integrated supply chain
1) Every business function is completely
isolated from the other.
2) Adjacent (=aangrenzende) functions feel
the need to start a moderate integration.
3) Requires an end-to-end planning
framework in the entire organization.
4) The internal supply chain is linked to both
suppliers and customers à SCOR
8
, 3. The SCOR-model
SCOR = Supply Chain Operations Reference = the different supply chain processes, a
framework for relationships between these processes and a set of metrics to measure
process performance.
The 4 pillars of SCOR:
1) Process modelling & re-engineering
2) Performance measurements
3) Best practices
4) Skills
3.1. Process modelling & re-engineering
1) Plan = balance of demand and supply with a series of actions
2) Source = procurement (=buying)
3) Make = producing
4) Deliver = order, distribution & transportation management
5) Return = handling of returned products from supplier or customer
6) Enable = management of the supply chain (bv. Contracten, data, faciliteiten …)
This is an aggregate model = we’re not looking at individual products, but at the bigger
picture (not product itself, but the product line)
9
