Supply Chain Management (SCM) Slides PDF

Course Title: Supply Chain Management (SCM) Course Code: BUS 1308 Credit hours: 4 Hours SCM Chapter One Introduction to Supply Chain Management Learning Objectives Understand the Concept of Supply Chains Grasp the Importance of Integration in Supply Chains D...

Course Title: Supply Chain Management (SCM) Course Code: BUS 1308 Credit hours: 4 Hours SCM Chapter One Introduction to Supply Chain Management Learning Objectives Understand the Concept of Supply Chains Grasp the Importance of Integration in Supply Chains Define Supply Chain Management (SCM) and its Objectives Identify the Cultural and Strategic Aspects of SCM Recognize the Importance and Benefits of SCM Understand the Evolution of SCM Explore the Foundations of Supply Chain Management Gain Insights into Operations, Logistics, and Integration Elements of SCM Identify Current Trends in SCM Analyze Real-world Applications of SCM Concepts Chapter Contents Introduction to Supply Chain Management Understanding Supply Chains Stages and Partners Integration in Supply Chains What is Supply Chain Management (SCM)? Definitions Culture & SCM Keys to Successful Supply Chain Management Importance of Supply Chain Management Progression of Supply Chain Management Efforts Other Reasons to Employ SCM What is the Bullwhip Effect? Origins of Supply Chain Management The Foundations of Supply Chain Management Supply Elements Supplier Management Strategic Partnerships Ethics and Sustainability Chapter Contents Operations Elements Introduction Demand Management Linking Buyers & Suppliers Inventory Management and Control Lean Production and Six Sigma Logistics Elements Transportation Management Third-Party Logistics Providers (3PLs) Distribution Networks Integration Elements Supply Chain Process Integration (SCPI) Supply Chain Performance Measurement Current Trends in Supply Chain Management Supply Chain Analytics Supply Chain Sustainability Supply Chain Visibility Vision 2030: KSA, A Logistics Hub Understanding Supply Chains  Understanding Supply Chains Supply chain represents the Flow of products & services through various stages from: Raw Material Suppliers: Firms extracting resources (e.g., iron ore, oil, wood, and food items). Raw Material Manufacturers: Convert raw resources into usable forms for component makers (e.g., lumber companies, steel mills). Intermediate Component Manufacturers: Produce components based on end- product manufacturers' specifications (e.g., electrical wires, plumbing items). End Product Manufacturers: Craft finished products (e.g., automobiles, electronics). Wholesalers & Distributors: Facilitate the supply to retailers (e.g., food distributors). Retailers: Direct providers to end consumers (e.g., grocery stores, electronics outlets). Understanding Supply Chains Integration is achieved through transportation, storage, information, planning, and activity integration. Key Insight: Many modern firms are stepping away from vertical integration, a system where they own all stages from raw material to retail. This trend is driven by the challenges of managing such vast entities and the financial burdens associated with them. What is Supply Chain Management (SCM)? Council of Supply Chain Management Professionals (CSCMP): "The planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Coordination and collaboration with channel partners, suppliers, intermediaries, third-party service providers, and customers." Institute for Supply Management (ISM): "The design and management of seamless, value-added processes across organizational boundaries to meet the real needs of the end customer." Association for Operations Management (APICS): "The design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand, and measuring performance globally." Culture & SCM: Traditional company-focused, short-term cultures can conflict with SCM objectives. Keys aspects to Successful supply chain management: Trust: High levels of trust between participants.. Cooperation & Collaboration: Working together effectively. Benefits: All participants in the supply chain gain advantages. Communication: Honest and accurate information sharing. Flexibility: Firms can freely engage or disengage based on beneficial supply chain relationships. Dynamic Boundaries: From "the firm’s suppliers’ suppliers to its customers’ customers.“(i.e., second tier suppliers and customers). Inclusion of Reverse Logistics: Addressing returned products, warranty repairs, and recycling. Recognition & Excellence: Gartner's annual ranking of top SCM performers. Importance of Supply Chain Management Firms with large system inventories, many suppliers, complex product assemblies, and highly valued customers gain the most from SCM. Benefits include: Lower purchasing & carrying costs. Better product quality. Higher customer service levels. Increased sales and profits. Progression of Supply Chain Management Efforts Start with key suppliers Move on to other suppliers, customers, and logistics services Integrate second tier suppliers and customers (second tier refers to the customer’s customers and the supplier’s suppliers) and this Enhanced coordination leads to more benefits Other reasons to employ SCM are achieving Cost savings, better coordination of resources and reduced Bullwhip Effect What is the Bullwhip Effect? A cycle of erratic demand leading to overestimated safety stocks. These stocks further skew demand forecasts, creating production planning problems. Consequences of the Bullwhip Effect: Safety stock magnification up the supply chain due to erratic demand patterns. Excess costs of 12-25% for each firm in a supply chain. The solution: Collaborative planning, forecasting, and replenishment to counteract this effect. Origins of Supply Chain Management 1950s-1960s: Manufacturers focused on mass production techniques as their principal cost reduction and productivity improvement strategies. 1960s-1970s: Introduction of new computer technologies led to the development of Materials Requirements Planning (MRP) and Manufacturing Resource Planning (MRPII) to coordinate inventory management and improve internal communication. 1980s-1990s: Increased golbal compettition led manufacturers to adopt: Supply Chain Management (SCM): Manufacturers saw the need for strategic and cooperative supplier-buyer-customer relationships as they experimented with JIT and TQM. JIT (Just-In-Time): A manufacturing environment with little inventory. Firms began to realize the potential benefits and importance of strategic supplier-buyer-customer relationships. TQM (Total Quality Management): Manufacturers utilized TQM strategies to improve quality and manufacturing efficiencies. BPR (Business Process Reengineering): Radical rethinking and redesigning of business processes introduced in the early 1990s to reduce waste and increase performance. CRM (Customer Relationship Management): Long-term, close relationships with customers meant the need for less finished product safety stock and better resource focus on top customers 2000s and Beyond: 1. 2-fold Evolutions Supply management emphasis from industrial buyer: Firms focus on improving supply chain capabilities, involving suppliers in design and quality improvement. 2. Logistics and customer service emphasis from wholesalers and retailers: Focus on location, logistics, and customer service. New initiatives appeared during this period to improve SC capabilities such as: Third-Party Logistics Providers (3PLs): Relationship building has increasingly occurred with these providers to ensure a continuous, uninterrupted supply of goods. Client/server SCM software: Including integrated supply chain management and e-commerce components, typically referred to as Enterprise Resource Planning (ERP). Today: Emphasis is being placed on the environmental and social impacts of supply chains. Sustainability: Ability to meet the needs of current supply chain members without hindering the ability to meet the needs of future generations. Triple bottom line: Caring for people, planet, and profits. The Foundations of Supply Chain Management Supply Elements: 1- Supplier management - A strategic approach to purchasing, emphasizing long-term, mutually beneficial relationships. Supplier evaluation: Assess current capabilities for both potential and existing suppliers. Supplier certification: Reduces need for repeated evaluations. Example: Deere's Achieving Excellence Program. 2- Strategic partnerships - Key to supply chain success. Focuses on quality, delivery, service/support, then price. Example: Wallenius Wilhelmsen Logistics achieving partner-level status in Deere's program. 3- Ethics and sustainability – Ensuring environmental sustainability and ethical practices in sourcing. Recognizing supplier's influence on a firm's reputation, carbon footprint, costs, and profits. Operations Elements: introduction Foundation of Supply Chain Management: Along with supply management, operations management is also essential for assembling or processing purchased items into finished products. Seasonal Demand Variations: Firms use forecasting techniques to predict demand patterns to ensure they neither overstock nor understock products. Impact of Incorrect Forecasting: Not meeting demand can lead to significant brand switching among consumers. Operations Elements: These elements include: 1- Demand Management The Objective is to match available capacity to demand through improved production scheduling, using back-order systems (waiting lists for out-of-stock items), or increasing capacity. 2- Linking buyers & suppliers via MRP and ERP systems: Material Requirements Planning (MRP): Software systems that manage inventories, purchases, and production schedules. Enterprise Resource Planning (ERP): Integrates different departments and functions across a company into a single system providing real- time data. Operations Elements: 3- Inventory management and Control Radio frequency identification (RFID) systems scan cartons describing contents of the packages Barcode System: Scanned barcodes automatically update the local MRP system. Automatic Reordering: When inventory reaches a preset reorder point, the local system communicates with the distribution center's MRP system to generate an order. Real-time Inventory Visibility: With the integration of technological systems like Material Requirements Planning (MRP) and Radio Frequency Identification (RFID), Firm now has the ability to view and track its inventory levels immediately and as they change. Operations Elements: 4- Lean Production and Six Sigma in Operations: Lean Production: A system emphasizing minimal inventory levels resulting in faster delivery times, fewer stockouts, and improved quality by focusing on high-quality inputs and streamlined processes. Quality Assurance: Higher incoming purchased items' quality reduces the need for safety stock. Six Sigma: Originated at Motorola in the 1980s, it's a quality management strategy ensuring continued quality compliance among suppliers. Many firms, including Ford and GE, have reported substantial savings using Six Sigma. Logistics Elements: 1- Transportation management - tradeoff decisions between cost & timing of delivery / customer service via trucks, rail, water & air Trucks offer flexibility, especially for short routes but may cost more. Air carriers are the quickest but come at a higher cost. Rail and water carriers provide cost- effective solutions with the former being relatively faster and the latter being slower. 2- Third party logistics providers (3PLs) –hiring outside agencies providing transportation and services 3PLs are considered Strategic Partners, They are not just service providers but essential partners in the supply chain. They aid in visibility, flexibility, and delivery performance, especially in environments with external risks such as natural disasters 3- Creating distribution networks based on tradeoff decisions between cost & sophistication of distribution system Firms might choose many regional warehouses for quick delivery but incur higher costs. Conversely, a few centralized warehouses might save costs but offer a limited range of service. The design choice directly impacts cost, speed, and customer satisfaction. Integration Elements: Supply Chain Process Integration (SCPI): When members of the supply chain work for common goals and collaborate to make crucial decisions (like purchasing, inventory, production, logistics, etc.) aiming to boost overall supply chain profits.. Successful Integration is achieved through inter-firm functional integration, with efforts to change attitudes & adversarial relationships among partners. Example: If a key process, such as production, is interrupted, it can delay subsequent stages like delivery. Integration Elements: Supply Chain Performance Measurement: Importance: Essential for monitoring SCM efforts, enabling firms to know if strategies are delivering the expected outcomes. Measurement Criteria: Metrics should emphasize detailed descriptors of supply chain activities rather than just focusing on sales or costs. Example: Tracking production efficiency and lead times to evaluate the speed and effectiveness of the supply chain. High-Level Supply Chain Performance: Superior performance is observed when strategies of each firm fit well with overall supply chain strategies. Example: manufacturer optimizing production to meet distribution deadlines, recognizing its crucial role in timely sales. Current Trends in Supply Chain Management Supply Chain Analytics: a computer-based method of examining raw supply chain data to draw conclusions or make predictions. Growth Drivers: Rise in computing capabilities Emergence of Big Data Huge data generation across sectors: retail, healthcare, manufacturing, electronics Real-world Application: Blue Yonder's forecasting methods for retailers uses data to ensure right product replenishment, leading to inventory savings. it optimizes routes in real-time according to traffic through analytics. Current Trends in Supply Chain Management Most companies are trying to improve their “supply chain sustainability” performance Supply chain sustainability refers to meeting the needs of current supply chain members without hindering the ability to meet the needs of future generations in terms of economic, environmental, and social challenges Benefits: Enhancing processes Cost reduction Boosting productivity Discovering product innovation Gaining market differentiation Positively impacting society Real-world Application: Ford's Partnership for a Cleaner Environment shares best practices with suppliers to reduce water, energy, and CO2 emissions. Current Trends in Supply Chain Management Increasing Supply Chain Visibility Supply Chain Visibility: can be defined as the ability of suppliers, manufacturers, business partners, and customers to know exactly where products are, at any point in the supply chain. Inventory visibility is made easier by technology. Sophisticated software applications for tracking orders, inventories, deliveries, returned goods, and even employee attendance Benefits: Improved response to disruptive events like floods or political conflicts. Enhanced customer service with real-time tracking. Real-world Application: Renault uses a cloud platform to track spare parts globally. Vision 2030: KSA, A Logistics Hub Saudi Arabia is positioning itself as the logistics hub of the region with its Vision 2030 initiatives, driving growth in the logistics sector. The National Industrial Development and Logistics Program (NIDLP) is a key component of this vision, aimed at boosting the logistics sector's To gain a deeper understanding of these initiatives and their impact on global supply chain resilience, we invite you to visit the following link https://www.frost.com/frost-perspectives/global-supply-chain- resilience-initiative/ Please provide a one page summary of the key points presented in the above article. SCM Prepared from the Textbook: D. Wisner, Keah-Choon Tan, et al (2019) Principles of Supply Chain Management: A Balanced Approach, Fifth Edition, Cengage. Thank you For listening SCM Chapter Two Purchasing Management Learning Objectives Define Purchasing and Contracting Identify the Types of Buyers Explain Supply Management Outline the Primary Goals of Purchasing Describe the Purchasing Process Discuss the Advantages of E-Procurement Understand Supplier Selection Criteria Analyze Sourcing Decisions (Make-or-Buy) Determine the Optimal Number of Suppliers Understand Purchasing Organization Structures: Explore Global Sourcing Chapter Contents Introduction Definition of Purchasing Definition of Contracting Types of Buyers Merchant Buyers Industrial Buyers Supply Management Definition and Scope The Purchasing Goals Uninterrupted Flows of Raw Materials Improvement of Finished Goods Quality Maximization of Customer Satisfaction The Purchasing Process Manual (Traditional) Purchasing Process Material Requisition/Purchase Requisition Request for Quotation (RFQ) The Purchase Order Automated, Electronic Purchasing Process (e-Procurement) Purchase Request Entry Purchase Requisition Approval Buyer's Review and Supplier Assignment Supplier Selection Chapter Contents Advantages of the E-Procurement System Time Saving Cost Saving Accuracy Real-Time Use Mobility Trackability Management Benefits Supplier Benefits Etimad Portal Supplier Selection Supply Base Selection Criteria Sourcing Decisions: The Make-or-Buy Decision Reasons for Buying or Outsourcing Reasons for Making How Many Suppliers to Use Single Supplier Reasons Multiple Suppliers Reasons Purchasing Organization Centralized Purchasing Decentralized Purchasing Global Sourcing Reasons for Global Sourcing 1/Introduction: Purchasing can be defined as: the act of obtaining merchandise, capital equipment, raw materials, services, or maintenance, repair, and operating (MRO) supplies in exchange for money or its equivalent. Contracting: is a term often used for the obtaining of services. Purchasing can be classified into two categories: merchant and industrial buyers. The first category merchant buyers, includes the wholesalers and retailers who primarily purchase for resale purposes. Generally, merchants purchase their merchandise in volume to take advantage of quantity discounts and other incentives such as transportation economy and storage efficiency. The second category: is the industrial buyers, whose primary task is to purchase raw materials for conversion purposes. Industrial buyers also purchase services, capital equipment, and (MRO) supplies. Supply Management Supply Management - is a recent term that refers to the broader scope of duties undertaken by purchasing professionals in recent times. Definition: Institute of Supply Management defined supply management as: the “Identification, acquisition, access, positioning, and management of resources an organization needs or potentially needs in the attainment of its strategic objectives.” 2/The Purchasing goals The primary goals of purchasing are: 1/To ensure uninterrupted flows of raw materials at the lowest cost. 2/ To improve quality of finished goods produced. 3/ To maximize customer satisfaction. Purchasing can contribute to these objectives by actively seeking better materials and reliable suppliers. 3/The purchasing process There are two main purchasing process: 3/1/ The Manual (traditional) purchasing process: is a manual, paper- based system. 3/2/ The Automated, electronic purchasing process (e-Procurement), : Many companies are moving toward automated, electronic-based system. The goal of a proper purchasing system is to ensure the efficient transmission of information from the users to the purchasing personnel and to the suppliers. Once the information is transmitted to the appropriate suppliers, the system must also ensure the efficient flows of the purchased materials from the suppliers to the users and the flow of invoices from the suppliers to the accounting department. Finally, the system must have adequate operational or internal control to prevent abuse of purchasing funds. 3/1/The Manual purchasing system The manual purchasing system is slow and prone to errors due to duplication of data entries during various stages of the purchasing process. 1/ The Material Requisition /Purchase Requisition : The Purchasing process starts when the material user initiates a request for material by issuing a material requisition (MR) in duplicate. A Purchase requisition includes: a material requisition like The product quantity, and delivery due date are clearly described. Generally, the issuer retains a copy and the warehouse receives the original plus a duplicate The duplicate accompanies the material as it moves from the warehouse to the user. This copy also provides the essential information for the accounting department. 2/ The Request for Quotation (RFQ) – Buyer identifies suppliers & issues a request for quotation (RFQ), for routine items or a Request for Proposal (RFP) for highly technical products 3/ The Purchase Order: When a suitable supplier is identified, or a qualified suppliers is on file, the buyer issues a Purchase order (PO) in duplicate to the selected supplier. The purchase order: is the buyer’s offer and became a legally binding contract when accepted by the supplier. Once an order is accepted, purchasing personnel need to ensure on-time delivery of the purchased material by using a follow-up or by expediting the order. A follow-up is considered a proactive approach to prevent the delivery delay. 3/2/ The Automated, electronic purchasing process( e-Procurement) Developed to improve the purchasing process. 1/Material user enters a purchase request The e-procurement system allows users to submit their purchase requisitions to the purchasing department electronically and enables buyers to transmit purchase orders to suppliers over the internet, fax, or e-mail. The material user initiates the e-procurement process by entering a purchase request and other information, such as quantity and date needed into the purchase requisition module. The material user may recommend suppliers or potential sources for the requisition. 2/Purchase requisition approved and transmitted electronically to buyer Next, the purchase requisition is approved and transmitted electronically to a buyer at the purchasing department, 3/Buyer reviews requisition, assigns qualified suppliers to bid The buyer reviews the purchase requisition for accuracy and appropriate approval level and determines the value of the requisition. 4/ Buyer reviews closed bids & selects a supplier 4/Advantages of the e-procurement system 1/ Time saving: E-procurement is more efficient when: A- selecting and maintaining a list of potential suppliers. B- processing requests for quotation and purchase orders. C- making repeat purchases. Advantages of the e-procurement system Individual buyers can create preferred supplier lists for each category of products and services. 2/ Cost saving: Buyers can handle more purchases, and the manual task of matching bids to purchase requisitions is reduced. Other cost savings include: A- lower prices of goods and services ( since more suppliers can be contracted) Advantages of the e-procurement system B- reduce inventory costs (due to the ability to purchase on a more frequent basis). C- use of fewer buyers. D- lower administrative costs. E- elimination of the need for preprinted purchase requisition forms. F- faster order fulfillment. Advantages of the e-procurement system 3/ Accuracy: - The system eliminates double-key inputs-once by the material users and then once again by the buyers. -The system also enhances the accuracy of communication between buyers and suppliers. -More up-to-date information on suppliers, with goods and services readily available online. -Allows users to assess their options before preparing a purchase requisition. Advantages of the e-procurement system 4/ Real-time use: -Buyers have real-time access to the purchase requisition once it is prepared. -Once the purchase requisition is processed, the buyers can post the bid instantly, in stead of waiting to contact all the suppliers individually to alert them of the bids. -The system enables buyers to initiate bids and suppliers to respond in real time. Advantages of the e-procurement system 5/ Mobility: The buyer can submit, process, and check the status of bids, as well as communicate with suppliers regardless of the buyer’s geographical location and time of day. Thus, the e-procurement system is highly flexible.  Advantages of the e-procurement system 6/ Trackability: The e-procurement system allows submitters and buyers to track each purchase requisition electronically through the process-from submission, to approval, and finally conversion to a purchase order. Moreover, audit trails can be maintained for all transactions in electronic form. Tracking an electronic bid and trans-action is much easier and faster than tracking paper trails. Buyers and suppliers can ask additional information online, leave comments, or indicate whether they are interested in bidding. Advantages of the e-procurement system 7/ Management benefits: The system can be designed to store important information, including whether suppliers are minority or locally owned, thus allowing the buyers to support such businesses. Summary statistics and supplier performance reports can be generated for management to review and utilize for future planning. Advantages of the e-procurement system 8/ Supplier benefits: Benefits include lower barriers to entry and transaction costs, access to more buyers, and the ability to instantly adjust to market conditions, thus making e-procurement attractive to most suppliers. Etimad Portal In the Saudi business environment, the electronic government procurement system, known as the Etimad Portal, is a prime example of an automated, electronic purchasing process (e-Procurement). This system is integral to the Kingdom's e-government efforts, consolidating and facilitating the bidding and government procurement process across all government sectors. It aims to enhance transparency, competitiveness, and the quality of government projects by allowing broader access to bids. The Etimad Portal offers services such as access to current and upcoming tenders, submission of tenders, and electronic submission of financial claims, significantly streamlining the procurement. Source: https://shorturl.at/kJMSW 5/ Supplier selection Supply Base: list of suppliers a firm uses to acquire its materials, services, supplies, and equipment Emphasis on long-term strategic supplier alliances, consolidating volume into one or a few suppliers, resulting in a smaller supply base Preferred suppliers provide: Product and process technology & expertise to support buyer’s operations Information on latest trends in materials, processes, designs, and the supply market Capacity for meeting unexpected demand Cost savings due to economies of scale 5/Supplier selection The process of selecting suppliers, is complex and should be based on multiple criteria Factors that firms should consider while selecting suppliers include: 1- Process and product technologies. 2-Willingness to share technologies and information. 3-Quality level of the purchased item. 4-Cost of an item, total costs of ownership. 5-Reliability. a reliable product quality level. 6-Order system and cycle time. Supplier selection Single sourcing 7-Capacity: The firm should consider whether the supplier has the capacity to fill orders to meet requirements. 8-Communication capability. 9- Location: Geographical location is important factor in supplier selection. 10-Service: Suppliers must able to back up their products by providing good services when needed. 6/Sourcing decisions: The make- or- buy decision The term outsourcing is commonly used to refer to buying materials or components from suppliers instead of making them in- house. The make or buy decision is a strategic one that can impact an organization’s competitive position. Reasons for buying or outsourcing: Organizations buy or outsource materials, components, and/ or services from suppliers for many reasons: Sourcing decisions: The make- or- buy decision 1/ Cost advantage :for many firms, cost is an important reason for outsourcing, especially for suppliers and components that are nonvital to the organization’s operations and competitive advantage. 2/ Insufficient capacity: a firm may be running at or near capacity, making it unable to produce the components in-house. This can happen when demand grows faster than anticipated. Sourcing decisions: The make- or- buy decision 3/ Lack of expertise: The firm may not have the necessary technology and expertise to manufacture the item. 4/ Quality: purchased components may be superior in quality because suppliers have better technologies, processes, skilled labor and the advantage of economies of scale. Reasons for making: An organization also makes its own materials, components, services, and/or equipment in-house for many reasons: Sourcing decisions: The make- or- buy decision 1/ protect proprietary technology: a major reason for the make option is to protect proprietary technology. A firm may have developed an equipment, product, or process that need to be protected for the sake of competitive advantage. 2/ No competent supplier: If existing suppliers do not have the technology or capability to produce component, the firm may be forced to make an item in-house, at least for the short time. Sourcing decisions: The make- or- buy decision 3/ Better quality control: If the firm is capable, the make option allows for the most direct control over the design, manufacturing process, labor, and other inputs to ensure that high-quality components are built. 4/ Use existing idle capacity: A short-term solution for a firm with excess idle capacity is to use the excess capacity to make some of its components, this strategy is valuable for firms that produce seasonal products. Sourcing decisions: The make- or- buy decision 5/ Control of lead time, transportation, and warehousing costs: The make option provides better control of lead time and logistical costs since management controls all phases of the design, manufacturing, and delivery processes. 6/ Lower cost: if technology, capacity, and managerial and labor skills are available, the make option may be more economical if large quantities of the component are needed on a continuing basis. 7/ How many suppliers to use The issue of how many suppliers to use for each purchased item is a complex one. Reasons favoring a single supplier: 1/ To establish a good relationship. 2/ Less quality variability. 3/ lower cost. 4/Transportation economies. 5/ proprietary product or process phurchases. 6/ volume too small to split. How many suppliers to use Reasons favoring multiple suppliers: 1/ Need capacity. 2/ Spread the risk of supply interruption. 3/ Create competition. 4/ Information. 5/ Dealing with special kinds of businesses. 8/ Purchasing Organization Purchasing structure can be viewed as a continuum, with centralization at one extreme and decentralization at the other. 1/Centralized purchasing: Is where a single purchasing department, usually located at the firm’s corporate office, makes all the purchasing decisions, including order quantity, pricing policy, contracting, negotiations and supplier selection and evaluation. Purchasing Organization 2/ Decentralized purchasing: Is where individual, local purchasing departments, such as at the plant level, make their own purchasing decisions. Advantages of centralization: 1/ Concentrated volume. 2/ Avoid duplication. 3/ Specialization 4/ Lower transportation costs. 5/ No competition between units. Common supply base. Purchasing Organization Advantages of Decentralization: 1/ Better knowledge of unit requirements. 2/ Local sourcing. 3/ Less bureaucracy. 9/ Global sourcing Global sourcing referred to international purchasing. There are numerous international trade organizations designed to reduce tariff and non tariff barriers among members countries. A tarrif is an official list or schedule showing the duties, taxes, or customs imposed by the host country on imports or exports. Global sourcing Reasons for global sourcing: Firms expand their supply bases to include foreign suppliers for many reasons. These can include lower prices, better quality, an overseas supplier holding the patent to the product, faster delivery to foreign units, better services, and better process or product technologies. Exercise Select two companies in Saudi Arabia and make a comparison between them about the Purchasing system employed. SCM Prepared from the Textbook: D. Wisner, Keah-Choon Tan, et al (2019) Principles of Supply Chain Management: A Balanced Approach, Fifth Edition, Cengage. Thank you For listening SCM Chapter Three Supplier Relationship Management Learning Objectives Explain the importance of supplier partnerships. Understand the key factors for developing successful partnerships. Develop a supplier evaluation and certification program. Understand Supplier Development Processes Understand the capabilities of supplier relationship management. Explain the benefits of using SRM software to manage suppliers. Implement Effective Supplier Management Strategies Chapter Contents Introduction to Supplier Relationship Management Overview Importance in the Supply Chain Definition of Supplier Partnership Concept and Significance Benefits of Long-Term Commitments The Key Factors of Successful Partnerships: "Strategic Alliance" Trust Shared Vision and Objectives Personal Relationships Mutual Benefits and Needs Commitment and Top Management Support Change Management Information Sharing and Lines of Communication Relationship Capabilities Performance Metrics Continuous Improvement Chapter Contents Supplier Development Definition and Scope Steps of Supplier Development Supplier Relationship Management (SRM) Introduction to SRM Benefits of Effective SRM SRM Software Example: SAP Types of SRM Transactional SRM Analytic SRM Exercise: Supplier Evaluation Performance Evaluation Scenario Weighted Point Method Application 1- Definition of Supplier Partnership “A commitment over an extended time to work together to the mutual benefit of both parties, sharing relevant information and the risks and rewards of the relationship” 2- The key factors of successful partnerships : “Strategic Alliance” 1- Trust : It must be built not just at the senior management level but at all levels of the organization. However, in a trusting relationship conflicts motivate you to probe for deeper understandings and search for constructive solutions 2- Shared Vision and Objectives : All partnerships should state the expectations of the buyer and supplier, reasons and objectives of the partnership, and plans for the dissolution of the relationship 2- The key factors of successful partnerships : “Strategic Alliance” 3- Personal Relationships : Interpersonal relationships in buyer– supplier partnerships are important 4- Mutual Benefits and Needs “ Partnering should result in a win–win situation, which can only be achieved if both companies have compatible needs. 5- Commitment and Top Management Support : Commitment must start at the highest management level. Partnerships tend to be successful when top executives are actively supporting them. 2- The key factors of successful partnerships : “Strategic Alliance” 6- Change Management : With change comes stress, which can lead to a loss of focus. Companies must be prepared to manage change that comes with the formation of new partnerships. 7- Information Sharing and Lines of Communication Both formal and informal lines of communication should be set up to facilitate free flows of information. -8 Relationship Capabilities : Organizations must develop the right capabilities for creating long-term relationships with their suppliers 2- The key factors of successful partnerships : “Strategic Alliance” 9- Performance Metrics : By evaluating supplier performance, organizations hope to identify suppliers with exceptional performance or developmental needs, improve supplier communication, reduce risk, and manage the partnership based on an analysis of reported data 10- Continuous Improvement : The process of evaluating suppliers based on a set of mutually agreed performance measures provides opportunities for continuous improvement. 3- Supplier Evaluation and Certification ( 1/3) Definition : “an organization’s process for evaluating the quality systems of key suppliers in an effort to eliminate incoming inspections” Only the best suppliers are targeted as partners. Companies want to develop partnerships with the best suppliers to leverage their expertise and technologies to create a competitive advantage. 3- Supplier Evaluation and Certification (2/3) A supplier evaluation and certification process must be in place so that organizations can identify their best and most reliable suppliers. The supplier evaluation and certification can be both internal ( see the example) and external as “ISO” ( see TQM course). Example (3/3) 1. Select the key dimensions of performance mutually acceptable to both customer and supplier. 2. Monitor and collect performance data. 3. Assign weights to each of the dimensions of performance based on their relative importance to the company’s objectives. The weights for all dimensions must sum to one. 4. Evaluate each of the performance measures on a rating between 0 (fails to meet any intended purpose or performance) and 100 (exceptional in meeting intended purpose or performance). 5. Multiply the dimension ratings by their respective importance weights and then sum to get an overall weighted score. 6. Classify vendors based on their overall scores, for example: Unacceptable (less than 50)—supplier dropped from further business Conditional (between 50 and 70)—supplier needs development work to improve performance but may be dropped if performance continues to lag Certified (between 70 and 90)—supplier meets intended purpose or performance Preferred (greater than 90)—supplier will be considered for involvement in new product development and opportunities for more business 7. Audit and ongoing certification review 4- SUPPLIER DEVELOPMENT (1/2) Definition : “any activity that a buyer undertakes to improve a supplier’s performance and/or capabilities to meet the buyer’s short- and/or long-term supply needs.” Supplier development requires financial and human resource investments by both partners and includes a wide range of activities such as training of the supplier’s personnel, investing in the supplier’s operations, and ongoing performance assessment 4- SUPPLIER DEVELOPMENT (2/2) Steps of Supplier development 1- Identify critical goods and services. 2-Identify critical suppliers not meeting performance requirements 3- Form a cross-functional supplier development team. 4- Meet with the top management of suppliers 5- Rank supplier development projects 6- Define the details of the buyer–supplier agreement 7- Monitor project status and modify strategies 5- SUPPLIER RELATIONSHIP MANAGEMENT (1/3) - SRM involves streamlining the processes and communication between the buyer and supplier and using software applications that enable these processes to be managed more efficiently and effectively - Example of SRM software : SAP (www.sap.com) - Organizations that successfully implement supplier relationship management can improve quality, reduce cost, access new technologies from their suppliers, increase speed to market, reduce risk, and achieve high performance. 5- SUPPLIER RELATIONSHIP MANAGEMENT (2/3) There are two types of SRM: transactional and analytic A- Transactional SRM : enables an organization to track supplier interactions such as order planning, order payment, and returns. Transactional SRM tends to focus on short-term reporting and is event driven, focusing on such questions as: What did we buy yesterday? What supplier did we use? What was the cost of the purchase? 5- SUPPLIER RELATIONSHIP MANAGEMENT (2/3) B- Analytic SRM : allows the company to analyze the complete supplier base. The analysis provides answers to questions such as: Which suppliers should the company develop long-term relationships with? Which suppliers would make the company more profitable? Analytic SRM focuses on long-term procurement strategies 6- Exercise : Supplier evaluation One of Saudi companies deals with three suppliers (A, B, C) to supply a specific type of raw materials. What is required is a performance evaluation of each suppliers in order to classify them based on the Weighted Point Method. - Supplier (A) delivered 35 units, 5 units were rejected. 32 units were delivered on time, and the dealing price was 0.90 SAR per unit. -Supplier (B) delivered 24 units, 4 were rejected while, 8 units were delivered late The dealing price is 1.20 SAR per unit,. - Supplier (C) delivered 20 units, 5 units were rejected, and only 12 units were delivered on time. The dealing price is 1 SAR per unit. The weights of performance dimensions are distributed as follows: Vendor Quality : 40 points, Cost : 35 points, Delivery : 25 points 6- Solution : Supplier evaluation Equations: 1) Quality = (accepted items / total items)* weight 2) Cost= ( lowest price/ supplier’s price) * weight 3) delivery= ( items on time/total items) * weight solution Weights Supplier A's Supplier B's Supplier C's points points points Vendor 40 (35-5/35) *40 = 34.28 (24-4/24)* 40= ( 20-5/20)*40= 30 33.33 Quality Cost 35 (0.90/0.90 )*35= 35 (0.9/1.20)*35= 26.25 (0.90/1)*35= 31.5 Delivery 25 (32/35)*25= 22.85 (24-8/24)*25= 16.66 (12/20 )*25= 15 Total Score 100 92.13 76.24 76.5 Appreciation Preferred Certified Certified /Evaluation Note : the lowest price is 0.90 Exercise Explain how Saudi companies evaluate their suppliers in real life (give three different companies as an example) SCM Prepared from the Textbook: D. Wisner, Keah-Choon Tan, et al (2019) Principles of Supply Chain Management: A Balanced Approach, Fifth Edition, Cengage. Thank you For listening SCM Chapter Four Resource Planning Systems Learning Objectives Understand the Fundamentals of Resource Planning Differentiate Between Types of Operations Planning Explain Aggregate Production Plan (APP) Analyze Different Production Strategies Explain MPS and its relationship to APP Explain the purpose of MRP and how it supports production planning Chapter Contents Introduction Overview of Resource Planning Importance of Resource Planning in Production Management Definitions Resource Planning Capacity Goal of Resource Planning Missed Due Date or Stock-Out Types of Operations Planning Long-range Planning Aggregate Production Plan (APP) Intermediate-range Planning Master Production Schedule (MPS) Short-range Planning Materials Requirement Planning (MRP) Aggregate Production Plan (APP) Definition and Objectives Product Families Planning Horizon and Updates Cost Considerations Chapter Contents Production Strategies Chase Strategy Main Idea and Approach Advantages and Challenges Level Strategy Main Idea and Approach Inventory and Costs Mixed Production Strategy Main Idea and Approach Application in Product Families Master Production Schedule (MPS) Definition and Relation to APP Detailed Planning in MPS Material Requirements Planning (MRP) Purpose and Components Inputs Required for MRP Key Outputs of MRP Definitions Resource planning - process of determining the production capacity required to meet demand Capacity - maximum workload that an organization is capable of completing in a given period of time Goal of resource planning - minimize the discrepancy between an organization’s capacity and demand Missed due date or stock-out may cascade downstream, magnifying the bullwhip effect  Types of Operations Planning Operations planning can be divided into three broad categories: Long-range – Aggregate Production Plan (APP) usually covers a year or more, involves the construction of facilities & major equipment purchase Intermediate-range –master production schedule (MPS) plan spans six to eighteen months. Shows the quantity & timing of end items ( Short-range – materials requirement planning (MRP) plan covers few days to few weeks. Detailed planning process for components & parts to support the master production schedule Aggregate Production Plan Aggregate Production Plan (APP) – a long-term plan that translates annual business plans and demand forecasts into a detailed production plan for a product family for a product family Product family - consists of related products sharing similar features, parts, or manufacturing processes Determines overall output rate, workforce levels, machine utilization, inventory levels for the facility Planning horizon at least one year & usually updates every 3 months Considers costs like inventory, hiring, firing, training, overtime  Aggregate Production Plan Chase Strategy Main Idea: Workforce size fluctuates to match changing demand Hires workers during high demand periods, lays off in low demand periods Keeps finished goods inventory constant Suited for make-to-order firms producing customized, low volume products Works with low skilled labor that can be easily hired and trained Difficult when needing expert workers in areas with few available For example, in saudi arabia during the date season, a larger number is employed  Aggregate Production Plan Level Strategy Main Idea: firms always produce at the same rate, but let their stock levels go up or down based on demand Builds inventory during low demand, uses inventory during high demand Suited for make-to-stock firms producing high volume standardized goods Inventory carrying and stockout costs are major concerns Works well when skilled labor is needed and hiring/training is difficult  Aggregate Production Plan Mixed Production Strategy Main Idea: firms Maintains a stable fixed number of full-time skilled workers Uses overtime, part-time, temporary workers to handle short-term spikes in demand Might make different products that are in demand at different times (like summer and winter items) Useful for firms producing multiple product families (firms making various products for different customer needs) Avoids over-hiring full-time workers for short-term demand Provide the Names Of 2 Companies In Saudi Arabia That Follow the following Production Strategies: Chase Strategy Level Strategy Master Production Schedule (MPS) What is MPS? A detailed plan showing exactly what items to produce and when. A close-up look of the bigger Aggregate Production Plan (APP). Key Features More Detail: Gives a clearer view than the APP. Planning Time: Not as long as APP, but definitely longer than the time it takes to make the item. note: In services (dr sulaiman al habib hospital), the MPS might just be an appointment book Material Requirements Plan (MRP) What is MRP? A computer system to figure out: What parts are needed? How many of them? When to get them ready? It helps in preparing everything needed to make the final product. What does MRP need to work? Demand Info: How much of the final product do people want? Parts Details: Info from the Bill of Materials (BOM). Stock Status: What's already available and what's not. Key Output: Planned Order Releases: This tells when to start making things or when to buy them. It's a very crucial part of MRP. SCM Prepared from the Textbook: D. Wisner, Keah-Choon Tan, et al (2019) Principles of Supply Chain Management: A Balanced Approach, Fifth Edition, Cengage. Thank you For listening SCM Chapter Five Inventory Management Learning Objectives Understand the concept of inventory, including its types and the role it plays in an organization's operations. Differentiate between dependent and independent demand and their implications for inventory management. Grasp the basic principles of inventory management and its primary functions. Identify the four broad categories of inventories: Raw Materials, Work-in-Process (WIP), Finished Goods, and Maintenance, Repair & Operating (MRO) Supplies. Comprehend the various types of inventory costs, including direct, indirect, fixed, variable, order, holding or carrying, and setup costs. Learn how to measure investment in inventory using metrics such as absolute value and inventory turnover or turnover ratio. Understand the ABC inventory control system and its application in categorizing inventory items for efficient management. Recognize the importance of effective inventory management in reducing waste, avoiding stockouts, and improving a firm's financial performance. Chapter Contents Inventory Management Introduction What is Inventory Dependent & Independent Demand Dependent Demand Independent Demand Understanding Inventory Management Basics Primary functions of inventory Four Broad Categories of Inventories Raw Materials Work-in-Process (WIP) Finished Goods Maintenance, Repair & Operating (MRO) Supplies Chapter Contents Inventory Costs Direct Costs Indirect Costs Fixed Costs Variable Costs Order Costs Holding or Carrying Costs Setup Costs Measuring Investment in Inventory Metrics for Evaluating the Efficiency of Inventory Management ABC Inventory Control System Economic Order Quantity Concept and Definitions EOQ with Discounts Introduction What is Inventory: all the goods, materials, or items that a company stores for a specific period. These items can either be used in the production of other goods/services or sold directly to customers.. Inventory is a major expense for many organizations, including manufacturing and service firms Effective inventory management is crucial to reduce waste and avoid stockouts, while enabling firms to meet customer demands Too much inventory negatively affects the financial performance (like return on assets)  Dependent & Independent Demand there are two main Types Types of Demand in Inventory Management: 1. Dependent Demand: internal demand for parts based on demand of the final product in which parts are used Example: If you make 100 cars, you know you'll need 400 tires. The demand for tires "depends" on the demand for cars. 2. Independent Demand – demand for finished , end products which are affected by trends, seasonal patterns, & general market conditions. Example: demand for new cars at the distribution channels. Dependent Demand Independent Demand –  Understanding Inventory Management Basics Primary functions of inventory are : 1) Buffer from uncertainty in the marketplace: helps companies deal with sudden changes in what people want to buy) e.g. keep safety stock of umbrellas to meet the sudden demand of customers for an unexptected rainy day 2) Decouple dependencies in the supply chain: helps each partner/work center can operate smoothly even if other centers/partners are down e.g.: phone factory doesn’t have to stop if the screen supplier is late. Four broad categories of inventories 1- Raw materials- unprocessed purchased inputs for manufacturing e.g. raw wood for furniture 2- Work-in-process (WIP)- partially processed materials not yet ready for sales e.g. chair parts after cutting but before assembly 3- Finished goods- completed products ready for shipment e.g. assembled chairs ready to deliver to customers 4- Maintenance, repair & operating (MRO) supplies- materials & supplies used in production but not part of final product e.g. lubricants for machines, cleaning supplies  Inventory Costs Direct costs: Costs that can be directly linked to each unit produced (e.g., labor) (e.g, Cost of labor for manufacturing a chair). Indirect costs: Costs that cannot be directly linked to a single unit but are necessary for production (e.g., Electricity costs for operating the factory) Fixed costs: Costs that remain constant regardless of the production output quantity (e.g, Rental costs for buildings) Variable costs: Costs that change depending on the level of production output quantity (e.g. Amount of wood needed to produce additional chairs) Order costs: a kind of variable costs incurred specifically for every time the firm places a new order (purchasing stuff and communication costs needed to process a new wood order to suppliers) Holding or carrying costs: are costs for holding inventory in storage (e.g. Warehouse costs for storing manufactured chairs) setup costs: (In mfg) are Costs incurred to prepare production machines (e.g. Costs to calibrate and prepare machinery before starting the production of a new batch of products)  Measuring Investment in Inventory Metrics for Evaluating the Efficiency of Inventory management include: 1) Absolute Value: The total monetary value of all inventory, typically recorded on a firm's financial statement. 2) Inventory Turnover or Turnover Ratio: Indicates how often a firm's entire inventory is sold and replenished within a specific period. A higher number is generally favorable. Example: A ratio of 5 implies that the firm sold and replenished its entire inventory five times within a year.  ABC inventory control system The ABC inventory control system: is a useful tool to determine which inventories should be counted more frequently and managed more closely and which others should not. According the ABC inventory control system inventory items are grouped or classified as A, B, & C Items: * A items are given the highest priority with larger safety stocks. A items account for approximately 20% of the total items & about 80% of the total inventory cost * B items account for the other about 40% of total items & 15% of total inventory cost. * C items have the lowest value and hence lowest priority. They account for the remaining 40% of total items & 5% of total inventory cost. Economic Order Quantity The EOQ Model is a tool used to determine the optimal order size that minimizes total inventory costs EOQ model applier to items that are: Replenished in batches or orders Not produced and delivered instantaneously Only two costs are considered: 1. Carrying costs 2. Ordering costs Will decide 1. When to order 2. How many to order Notations EOQ= Economic order quantity in units H = Holding (carrying) cost per unit R = Demand, usually in units per year I = Ordering cost TC= Total Cost C = Unit Price Equations: 2RI = 2 (Annual Demand) (Order Cost) EOQ= H Annual Holding Cost per unit EOQ Length of order cycle = (as fraction of a year) R EOQ number of days in a year Length of order cycle = R (as number of days) * # Orders / Year = R EOQ  Annual Annual Total cost = carrying + ordering cost cost EOQ R TC = H + I 2 EOQ Where: EOQ = Economic order quantity in units H = Holding (carrying) cost per unit R = Demand, usually in units per year I = Ordering cost  According to the figure, the EOQ is reached when ordering cost equals to holding ( carrying) cost) Annual Cost The Total-Cost Curve is U-Shaped Carrying Costs Ordering Costs EOQ (optimal order quantity) Order Quantity (Q) EOQ Example Jeraisy group supply store expects to sell 392 printers next year. Annual carrying cost is $5 per printer, and ordering cost is $20. The company operates 300 days a year. A) What is the EOQ? B) How many times per year does the store reorder? C) What is the length of an order cycle? D) What is the total annual cost if the EOQ quantity is ordered? EOQ with Quantity Discounts A price discount on an item if predetermined numbers of units are ordered TC = Carrying cost + Ordering cost + Purchasing cost = (Q / 2) H + (R / Q) I + RC where C = Unit Price EOQ with Quantity Discount Example JARIR BOOKSTORE. wants to reduce a large stock of laptops it is discontinuing. It has offered the University Bookstore a quantity discount pricing schedule as shown below. Given the discount schedule and its known costs, the bookstore wants to determine if it should take advantage of this discount or order the basic EOQ order size. Quantity Price Carrying Cost: $200 70 – 99 $800 Ordering Cost $500 100 – 149 $600 Annual Demand 720 units 150 + $500 Basic Price $1,000  Quantity Discount Example R 720 Q1 70 C1 800 H 200 Q2 100 C2 600 I 500 Q3 150 C3 500 C 1000 A( EOQ =60 =SQRT(2*720*500/200) B) TC(EOQ) =(720*1000)+(720/60*500)+(60/2*200) =$732,000 C) TC(Q1) =$588,142.86 =(720*800)+(720/70*500)+(70/2*200) D) TC(Q2) =$445,600 =(720*600)+(720/100*500)+(100/2*200) E) TC(Q3) =$377,400 =(720*500)+(720/150*500)+(150/2*200) F) # Orders / Year =4.8 =720/150 G) Length of order cycle =0.21 =150/720 Homework #1 A local electronics store expects to sell 400 flat-screen TVs each month during next year. Annual carrying cost is $20 per TV, and ordering cost is $50. The company operates 360 days a year. A) What is the EOQ? B) How many times per year does the store reorder? C) What is the length of an order cycle? D) What is the total annual cost if the EOQ quantity is ordered? Homework #2 A mail-order house # Boxes Unit Price uses 18000 boxes a year. Carrying costs 500-999 $125 are $ 50 per box per year and ordering 1000-1499 $120 costs are $86. The basic price is $140. 1500+ $110 Questions 1- What is the EOQ? 2- How many times per year does the company reorder? 3- Which quantity the company must buy to reduce the total cost? SCM Prepared from the Textbook: D. Wisner, Keah-Choon Tan, et al (2019) Principles of Supply Chain Management: A Balanced Approach, Fifth Edition, Cengage. Thank you For listening SCM Chapter Six Process Management Lean & Six Sigma In The Supply Chain Learning Objectives You should be able to understand : The principles of Lean Production and its origins. The key elements of Lean Production. The importance of Lean Production in achieving faster delivery times, fewer stockouts, and improved quality by focusing on high-quality inputs and streamlined processes. The concept of Six Sigma. The use of statistical tools and techniques in Six Sigma to achieve near-perfect quality. The five phases of Six Sigma (DMAIC):. Chapter Contents Lean Production System and Operating Philosophy and origins The key elements of Lean Production Waste elimination Lean supply chain relationships Lean layouts Inventory and setup time reduction Small batch production scheduling Continuous improvement Workforce empowerment Six Sigma Enterprise and Supply Chain-wide Philosophy Commitment Towards Excellence Statistical Tools and Techniques Flow Diagrams Pareto Charts Cause and Effect Diagrams (Fishbone or Ishikawa diagrams) The five phases of Six Sigma (DMAIC) Define Measure Analyze Improve Control The concept of Lean Management from Saudi Leaders perspective: The case of Abdul Latif Jameel Company Lean Production A system and an operating philosophy emphasizing minimal inventory levels resulting in faster delivery times, fewer stockouts, and improved quality by focusing on high-quality inputs and streamlined processes It was originally created as Toyota Production System (TPS) by key Toyota executives.  The key elements of Lean Production 1. Waste elimination: Eliminating waste is the primary concern of lean thinking. This includes reducing excess inventories, material movements, production steps, scrap losses, rejects, and rework. 2. Lean supply chain relationships: Firms work with suppliers and customers with the mutual goal of eliminating waste, improving speed, and improving quality. Key suppliers and customers are considered partners. 3. Lean layouts: Work-in-progress (WIP) inventories are positioned close to each process, and layouts are designed to reduce movements of people and materials. Processes are positioned to allow smooth and level flows of work through the facility. 4. Inventory and setup time reduction: Inventories are reduced by reducing production batch sizes, setup times, and safety stocks. This tends to create or uncover processing problems which are then controlled.  The key elements of Lean Production 5. Small batch production scheduling: Firms produce frequent small batches of product, with frequent product changes to enable a level production schedule. Smaller, more frequent purchase orders are communicated to suppliers, and more frequent deliveries are offered to customers. 6. Continuous improvement: As queues and lead times are reduced, problems surface more quickly, causing the need for continual attention to problem-solving and process improvement. With lower safety stocks, quality levels must be high to avoid process shutdowns. Attention to supplier, WIP, and finished goods quality levels are high. 7. Workforce empowerment: Employees are cross-trained to add processing flexibility and to increase the workforce's ability to solve problems. Employees are trained to provide quality inspections as parts enter a process area. Employee roles are expanded and they are given top management support and resources to identify and fix problems.  Six Sigma Six Sigma is an enterprise and supply chain-wide philosophy, that emphasizes a commitment toward excellence & includes suppliers, employees, and customers. Six Sigma employs a variety of statistical tools and techniques to achieve Near quality perfection, including: Flow Diagrams - Annotated boxes representing process to show the flow of products or customers. Pareto Charts – Charts for presenting data in an organized fashion, indicating process problems from most to least severe. Cause and Effect Diagrams (Fishbone or Ishikawa diagrams) – diagrams used to aid in brainstorming & isolating the causes of a problem. Example: Flow Diagram for a Restaurant Example: Pareto Charts showing Problems for a Restaurant Example: Cause-and-Effect Diagram for the Long Wait Problem for a Restaurant  The five phases of Six Sigma (DMAIC) 1. Define: Identify customers service or product requirements critical to achieving customer satisfaction. 2. Measure: Prepare a data-collection plan. Determine what to measure for each process gap and how to measure it. 3. Analyze: Perform a process analysis.Use Pareto charts and fishbone diagrams to identify the root causes of the process variations or defects. 4. Improve: Design an improvement plan. Remove the causes of process variation by implementing the improvement plan. 5. Control: Monitor the process to assure that performance levels are maintained. If performance gaps are identified, repeat Steps 1–5. The concept of Lean Management from Saudi Leaders perspective: The case of Abdul Latif Jameel Company Source: https://shorturl.at/czD57 SCM Prepared from the Textbook: D. Wisner, Keah-Choon Tan, et al (2019) Principles of Supply Chain Management: A Balanced Approach, Fifth Edition, Cengage. Thank you For listening SCM Chapter Seven Domestic & Global Logistics Learning Objectives You should be able to : Understand the roles of domestic and global logistics in providing time and place utility to customers. Define logistics and comprehend its importance in the efficient and effective transportation and storage of goods from the point of origin to the point of consumption. Identify and compare the modes of transportation in logistics, including motor carriers, rail carriers, air carriers, water carriers, pipeline carriers, and intermodal transportation, along with their respective advantages and disadvantages. Grasp the concept and importance of warehousing in logistics, including the functions and types of warehouses such as private warehouses, public warehouses, and cold chains. Understand the advantages and disadvantages of private versus public warehousing and the strategic role of warehousing in logistics. Recognize the role and importance of Third Party Logistics (3PL) providers in facilitating logistics operations, especially for small businesses and global logistics. Familiarize with the functions and roles of global logistics intermediaries such as customs brokers, international freight forwarders, and trading companies in facilitating international trade. Chapter Contents Introduction to Logistics Time and Place Utility Definition of Logistics Modes of Transportation Motor Carriers Flexibility and Types of Carriers Rail Carriers Advantages for Heavy or Bulky Shipments Air Carriers Speed and Limitations Water Carriers Cost-Effectiveness for Bulky Materials Pipeline Carriers Characteristics and Types of Materials Transported Intermodal Transportation Combining Modes for Efficiency Chapter Contents Warehousing & Distribution Importance of Warehousing Types of Warehouses Private Warehouses Advantages and Disadvantages Public Warehouses Services Provided Cold Chains Temperature-Controlled Logistics Crossdocking Process and Benefits Third Party Logistics (3PL) Services and Advantages for Global Logistics Global Logistics Intermediaries Customs Brokers International Freight Forwarders Trading Companies  Introduction Products have little value to the customer until they are moved to the customer’s point of consumption Logistics provides: Time utility- products are delivered at the right time Place utility- products are delivered to the desired location definition of logistics: The process of planning, implementing, and controlling procedures for the efficient and effective transportation and storage of goods including services, and related information from the point of origin to the point of consumption for the purpose of conforming to customer requirements.”  Modes of Transportation 1) Motor Carriers (trucks) - most flexible mode of transportation Competes with rail & air for short-to-medium hauls Less-than-truckload (LTL) & truck-load (TL) carriers move small shipments & fees are higher General freight carriers carry the majority of goods shipped & include common carriers Specialized carriers transport liquid petroleum, agricultural commodities, building materials, & other specialized items 2) Rail Carriers - compete when the distance is long & the shipments are heavy or bulky Slow & inflexible offer point-to-point pickup & delivery service known as trailer-on-flatcar (TOFC) service One trend is use of high-speed trains  Modes of Transportation 3)Air Carriers - Expensive relative to other modes but fast Account for a small portion of total freight hauled Cannot carry extremely heavy or bulky cargo For light, high value goods over long distances quickly Limited in terms of geographic coverage Half of the goods transported by air are carried by freight–only airlines, like FedEx. 4) Water Carriers- Inexpensive, slow & inflexible. Includes inland waterway, coastal & intercoastal, & deep-sea. Inland waterway transportation is used for heavy, bulky, low-value materials (e.g., coal, grain) Development in deep-sea transportation and use of supertankers & containerships have made water transportation cheaper and more desirable Competes w/rail & pipeline Water carriers paired w/trucks for door-to-door delivery  Modes of Transportation 4) Pipeline Carriers - limited in variety they can carry Little maintenance once pipeline is running Materials hauled in a liquid or gaseous state Transported items include water, oil, gasoline and natural gas 5) Intermodal – the use of multiple modes of transportation Most common trailer-on-flatcar (TOFC) service, container-on-flatcar (COFC) Water & motor offer point to point service for overseas manufacturers Warehousing & Distribution Warehousing Allows firms to store purchases, WIP, & finished goods and perform break bulk and assessment services Provides faster & more frequent deliveries & better customer service Crossdocking To receive, breakdown, repackage, & distribute components to a manufacturing location or finished products to customers warehouse. Sometimes called distribution center Warehousing & Distribution Importance & Types of Warehouses Support purchasing, production, & distribution Consolidation warehouses collect Less-than-truck-load (LTL) shipments for transport in truck-load (TL) or Container-load (CL) quantities Private Warehouses - Owned by the firm storing goods Public Warehouses - Owned by for profit organizations & contracted out Cold Chains - Temperature-controlled transportation, transfers, and warehousing Warehousing & Distribution Private Warehouses Advantages Reduces the purchasing and transportation cost Offers greater control of service Provides better workforce utilization Take advantage of cheaper sources of supply or labor Can generate income & tax advantages through leasing of excess capacity &/or asset depreciation Disadvantages Financial risk & loss of flexibility Binds firms to locations that may not prove optimal Insurance companies do not like insuring goods in private warehouses Warehousing & Distribution Public Warehouses Breakbulk - shipments broken down & items combined into specific customer orders Repackaging Assembly - create customized final products Incoming & outgoing quality inspections Material handling, equipment maintenance, & documentation services Short and long-term storage Used in conjunction with cold chains - temperature-controlled transportation, transfers, and warehousing Third Party Logistics (3PL) Provide reliable & timely delivery Moves items into foreign locations effectively Favored by small businesses Some provide network optimization, light manufacturing, and other services Allows firms to concentrate more on core competencies Demand is growing rapidly The share market of 3PL in Saudi Context Saudi Arabia 3PL Market Leaders Source : Modor Intelligence link: https://shorturl.at/dfs12  Global Logistics Intermediaries Customs Brokers - move through customs & handle documentation International Freight Forwarders - move goods to and from foreign destination Trading Companies - put buyers & sellers together & handle export/import arrangements SCM Prepared from the Textbook: D. Wisner, Keah-Choon Tan, et al (2019) Principles of Supply Chain Management: A Balanced Approach, Fifth Edition, Cengage. Thank you For listening SCM Chapter Eight Supply Chain Integration Learning Objectives Understand the importance of process integration in supply chains Identify key steps/elements of successful supply chain integration (SCI) Analyze and understand the key business processes to be integrated within a supply chain Recognize the holistic approach for effective supply chain integration Chapter Contents Introduction Steps / Elements of Supply Chain Integration (SCI) Identify Critical SC Trading Partners Review & Establish SC Strategies for Components purchased and suppliers Manufacturing processes Design of the products manufactured Transportation methods Warranty and return services Outsourcing Sustainability policies Align SC Strategies with Key SC Process Objectives Chapter Contents Key Supply Chain Business Processes to be Integrated Customer Relationship Management Customer Service Management Demand Management Order Fulfillment Manufacturing Flow Management Supplier Relationship Management Product Development and Commercialization Returns Management Saudi Aramco’s SC Integration Introduction  Firms in the supply chain must integrate processes to create value for the services and products provided to end customers.  Process integration means sharing information and coordinating resources to jointly manage a process or processes.  The benefits of collaboration and information sharing between trading partners can be significant. Steps / Elements of Supply Chain Integration (SCI) 1/3 1. Identify Critical SC Trading Partners Use trusted suppliers that provide a large share of the firm’s critical products and services Identifying primary trading partners allows the firm to concentrate on managing links with these companies Firms should map the network of primary trading partners Steps / Elements of Supply Chain Integration (SCI) 2/3 2. Review & Establish SC Strategies for: Parts purchased & suppliers Manufacturing processes Design of the products manufactured Mode of transportation Warranty & return services Outsourcing Sustainability policies  Steps / Elements of Supply Chain Integration (SCI) 3/3 3. Align SC Strategies with Key SC Process Objectives Key processes and methods used to manage process links will vary among supply chain partners functional silos (departments whose only concern is about itself) may affect integration A process is a set of activities designed to produce a product or service Key Supply Chain Business Processes to be Integrated Customer Relationship Management Identifying key customer segments, tailoring product and service agreements to meet their needs, measuring customer profitability and firm’s impact on customers. Customer Service Management Providing information to customers such as product availability, shipping dates, and order status; administering product and service agreements. Key Supply Chain Business Processes to be Integrated Demand Management: Balancing customer demand with the firm’s output capacity; forecasting demand and coordinating with production, purchasing, and distribution. Order Fulfillment: Meeting customer requirements by synchronizing the firm’s marketing, production, and distribution plans. Key Supply Chain Business Processes to be Integrated Manufacturing Flow Management: Determining manufacturing process requirements to enable the right mix of flexibility and velocity to satisfy demand. Supplier Relationship Management: Managing product and service agreements with suppliers; developing close working relationships with key suppliers.  Key Supply Chain Business Processes to be Integrated Product Development and Commercialization Developing new products frequently and getting them to market effectively; integrating suppliers and customers into the process to reduce time to market. Returns Management: Managing used product disposition, product recalls, packaging requirements; and minimizing future returns.. Saudi Aramco’s SC Integration Saudi Aramco integrates technology into its operations, particularly in marketing through electronic marketing to improve efficiency and customer engagement. This integration allows for effective dissemination of product information, facilitating consumer decision- making. Aramco's supply chain strategies are designed to be agile, meeting demands amid the industry's dynamism and competitive landscape. The company focuses on lean supply chain practices, minimizing excess inventory and streamlining processes to enhance operational efficiency and reduce costs​ source: https://shorturl.at/jopS0 SCM Prepared from the Textbook: D. Wisner, Keah-Choon Tan, et al (2019) Principles of Supply Chain Management: A Balanced Approach, Fifth Edition, Cengage. Thank you For listening