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Materials Management BUS 3 – 141 Mr. Jess Marino Fall, 2007
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Agenda Introduction Green Sheet review and other administrative items
Additional comments on the course Initial Lecture
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Introduction
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Marino Background Academics Supply Chain Experience
Graduate in Production and Operations Management Product of CSU system (San Diego State) Developed and presented several courses as a Management Consultant Supply Chain Experience Over 25 years as a practitioner at all levels of responsibility Leadership in small and large organizations Many different hourly and professional jobs Over eight years as a Management Consultant Certified in Production and Operations Management by the Association for Operations Management (APICS) Exposure to many industries and organizations Have done business in 13 countries throughout the world
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Director of Operations Director of Supply Chain Management
Positions Held Director of Operations Director of Supply Chain Management Director of Materials Production Control Manager Executive Director of Fulfillment Production Supervisor Buyer Production Controller Material Controller Stockroom Manager Machine Operator Mail Room Clerk Production Expediter Warehouse Clerk
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Have conducted Business in 13 Countries, Worldwide
SCOTLAND CANADA ENGLAND HOLLAND FRANCE UNITED STATES CHINA TAIWAN MEXICO THAILAND HONG KONG SINGAPORE MALAYSIA
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Green Sheet Review
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Student Information Sheet
NAME MAJOR (and Emphasis) BUS 3 – 140, 141, 142, 143, 144, 145, 146, 147 CURRENT JOB (Company Optional) PREVIOUS SUPPLY CHAIN JOBS / EXPEIRIENCE OTHER
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Course Introduction
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Highest Level Supply Chain Objective
Revenue Utilization of Assets (People, Plant, Equip) Cash Inventory BALANCING keeping Customers completely satisfied and Resources optimally utilized ……. against spending the least amount of Cash and carrying the least amount of Inventory
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Highest Level Materials Management Process
Identify WHAT Items are Required Calculate HOW MUCH is Required Schedule WHEN they are Received & FROM WHOM At the LOWEST Total COST of Ownership With the Highest QUALITY and Reliability
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How this Course supports Supply Chain Objective & Process
The Right PRICE Ensure CONTINUOUS SUPPLY Manage critical FINANCIAL levers Balance Sheet by optimizing Cash and Inventory Income Statement by minimizing Cost of ownership The Right SERVICE paying The Right SUPPLIER and The Right PLACE with the The Right TIME at the The Right QUANTITY at the The Right QUALITY with the
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Course Overview and Objectives
Understanding how an organization determines its materials requirements, including what needs to be purchased, in what quantities, and at what delivery schedule Understanding the significance of cost management and price negotiation, including design, quality, and transportation and logistics considerations Understanding the critical relationship between an organization and its suppliers
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Student Learning Objectives for the Course
Understand how to calculate requirements Understand the purchasing process and how it fits within the overall Supply Chain process Understand the interaction and leverage between the organization and its suppliers Develop an interest in pursuing a career in Materials Management; enhance capabilities of thse already in the field
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Additional Notes on the Course
Buying at work vs. Buying at home Pay the least for the most Sometimes it’s Safeway, sometimes Costco, sometimes 7-11 Focus more time and attention on expensive or critical items 10% of Grade based on Participation Issues and observations from students work experience The positions of Buyer and Material Planner Careers in Supply Chain Management
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Purchasing Process Overview
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Objective How Supply Management supports overall strategy
Initial elements the Supply Management Process
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How Supply Management Supports Overall Strategy
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Supply Strategy Interpreted in Organizational Strategy *
Objectives Organizational Objectives Supply Strategy Organizational Strategy * Adapted from Leenders, Johnson, Flynn, and Fearon, Purchasing and Supply Management, Thirteenth Edition, McGraw Hill Irwin
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Current Needs Future Needs Current Markets Future Markets
Supply Strategy Links Current and Future Markets to Current and Future Needs* Current Needs Future Needs Current Markets Future Markets * Adapted from Leenders, Johnson, Flynn, and Fearon, Purchasing and Supply Management, Thirteenth Edition, McGraw Hill Irwin
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Potential Business-Strategy Contribution Areas *
Social issues and trends Government regulations and controls Financial planning with suppliers Product liability exposure Economic trends and environment Organizational changes Product or service line Competitive intelligence Technology e-Commerce Investment Mergers/acquisitions/ disinvestment Time-based competition It’s not just about COST! * Adapted from Leenders, Johnson, Flynn, and Fearon, Purchasing and Supply Management, Thirteenth Edition, McGraw Hill Irwin
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Tactical Elements of the Supply Management Process
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The 9 Elements of the Supply Management Process
Mgmt Customer Demand Production Schedule Production Shipping Customer Service Identify Requirements Establish Specifications Assess Suppliers Select Supplier(s) Issue Purchase Order Follow-Up & Expedite Receive & Verify Process Payment Maintain Records
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1. Identify Requirements
Establish Specifications Identify Suppliers Select Supplier(s) Issue Purchase Order Follow-Up & Expedite Receive & Verify Process Payment Maintain Records Direct and Indirect Material Requisitions MRP Output Impact of Lead Time Other items to consider As availability becomes scarce, Purchasing alerts users Recommending subassemblies instead of components Proposing substitute items, where appropriate
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2. Establish Specifications
Identify Requirements Establish Specifications Identify Suppliers Select Supplier(s) Issue Purchase Order Follow-Up & Expedite Receive & Verify Process Payment Maintain Records Engineering Drawings and Specifications Samples Requisition Details (electronic or paper) Date originated, Document Number, Dept, Account Number, Signature(s) Complete description of material or service required Quantity and date required Shipping / delivery instructions Authorization to Buy Impact of Lead Time Other items to consider Understanding ultimate purpose (Are they asking for a Mercedes or just a car?) Catalogues and standard items Supplier Input
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3. Identify Suppliers History and Geography Request for Quotation
Requirements Establish Specifications Identify Suppliers Select Supplier(s) Issue Purchase Order Follow-Up & Expedite Receive & Verify Process Payment Maintain Records History and Geography Request for Quotation Request for Proposal Request for Bid Other items to consider Input from Technical Staff Other
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4. Select Suppliers Supply Capability Quality Capacity Reliability
Identify Requirements Establish Specifications Identify Suppliers Select Supplier(s) Issue Purchase Order Follow-Up & Expedite Receive & Verify Process Payment Maintain Records Supply Capability Quality Capacity Reliability Many other factors to be covered later in semester
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5. Issue Purchase Order Relationship to Material Requisition
Identify Requirements Establish Specifications Identify Suppliers Select Supplier(s) Follow-Up & Expedite Receive & Verify Process Payment Maintain Records Relationship to Material Requisition The Requisition provides the information that populates several Purchase Order data fields (see Requisition Details) Ensure Risk Management Acknowledgement Internal Controls Budgets Approvals Recurring Purchase Order Releases Pre-negotiated contracts Other items to consider ALWAYS ensure that the terms and conditions are in WRITING. A Purchase Order is a CONTRACT Continued on next Slide
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5. Issue Purchase Order, continued
Identify Requirements Establish Specifications Identify Suppliers Select Supplier(s) Follow-Up & Expedite Receive & Verify Process Payment Maintain Records Discrete Orders Pre-negotiated Blanket Pre-negotiated Vendor-Managed Maintenance, Repair, and Operating Supplies (MRO) Bid and Auction Corporate Purchase Card (pCard)
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6. Follow-Up and Expedite
Identify Requirements Establish Specifications Identify Suppliers Select Supplier(s) Issue Purchase Order Receive & Verify Process Payment Maintain Records ERP Applications assume that scheduled dates will be received on time A Scheduled delivery date needs to be monitored and managed Possible missed dates must be identified in advance and avoided If delays are inevitable, recovery plans must be developed and managed Other items to consider An understanding of the Supplier’s production process, capacity, and constraints is critical to collaborative problem solving Expediting should be on an exception basis. If it is determined that a particular supplier is consistently being expedited, corrective action should be initiated
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7. Receive and Verify Receive and Verify Identify Requirements Establish Specifications Identify Suppliers Select Supplier(s) Issue Purchase Order Follow-Up & Expedite Process Payment Maintain Records Relationship to Material Requisition and Purchase Order Key data elements travel throughout Key objectives Confirm receipt of goods Ensure proper physical condition, quantity, documentation Quality parameters met Cross functional activity among Purchasing, Receiving, Materials, and Finance Other items to consider Receiving is technically a “non-value-added” activity. It is designed to ensure that something that should have been done properly actually was. The goal is to ensure quality throughout, and eliminate the need for inspection
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8. Process Payment Key Document Flow
Identify Requirements Establish Specifications Identify Suppliers Select Supplier(s) Issue Purchase Order Follow-Up & Expedite Receive & Verify Maintain Records Key Document Flow Requisition Purchase Order Packing Slip (Receiving) Invoice Payment Match the data in the Purchase Order, Packing Slip, and Invoice Discrepancies must be reconciled before payment is issued Some level of discrepancies can be ignored (e.g. if +/- 5% or +/- $25) Audits of all Discounts for early payment are often available and should be taken whenever possible Other items to consider Chronic discrepancies from a single Supplier could lead to a change
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9. Maintain Records Maintain Records Identify Requirements Establish Specifications Identify Suppliers Select Supplier(s) Issue Purchase Order Follow-Up & Expedite Receive & Verify Process Payments Purchase Orders should be archived for up to 7 years Key Records to be Maintained (from p.77) Purchase Order Log of all PO’s Copies of Purchase Orders Commodity file Supplier history file Outstanding Contracts against which PO’s are placed Other items to consider Can be electronic or paper Paper can be managed by a third party
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