HW 2
Open the file (Homework 2) for instructions and read (Chapter 03 E) you might need it to answer it
HW 2
What is the effect ofReducing Acquisition CostsonProfit?(2p)
What isthe effect ofIncreasing Sales (volumes)onProfit?(2p)
Whichof the above actions(reducing costs or increasing sales)has a stronger/bigger effecton Profit?Explainwhy.(2p)
What isthe effect ofReducing Acquisition CostsonROA?(2p)
What isthe effect ofIncreasing SalesonROA?(2p)
Whichof the above actions(reducing costs or increasing sales)has a stronger/bigger effecton return?Explain why.(2p)
One paragraph per question is usually sufficient.The use of bullet points could keep you on track.(paper organization and presentation count for2p).I would recommend toinclude the actual questions in your homework(to help you stay focused on the topic,and to ensure that you address all the questions).
Homework Tips
Try to avoid to …
take a hard approach and try to develop a numerical example (often students forget that the denominator for ROA will change in both scenarios)
create a complicated scenario when cost reduction can result in higher sales or lower quality, etc.
use general true statements about good quality, low price, right quantity
You should stay on point and consider that quality, delivery, efficiency, etc. do not change from one scenario to another Chapter 3
Supply Organization
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Key Questions Addressed in Chapter 3
What are the objectives/ goals of supply?
What are the activities and responsibilities of supply management?
How might supply be organized to achieve these objectives effectively and efficiently?
What are the relations between SC and other functions of the organization?
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Nine Goals of Supply
Improve the organizations competitive position
Provide an uninterrupted flow of materials, supplies and services required to operate the organization
Purchase required items and services at lowest TCO
Keep inventory investment and loss at a minimum
Maintain and improve quality
Standardize, where possible, the items and services bought and the processes used to procure them
Find or develop best-in-class suppliers
Achieve harmonious, productive relationships
Accomplish supply objectives at the lowest possible operating costs
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SC Goals & Responsibilities
Traditional View of Supply (purchasing) Objectives
Obtain the right materials/services
Meeting quality requirements
In the right quantity
At the right price in the short and long-term.
Delivery at the right time and place 5Rs
From the right source (a supplier who is reliable and will meet its commitments in a timely fashion)
With the right service (both before and after the sale)
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SC Goals & Responsibilities
Two Main Groups of Responsibilities*
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SC Goals & Responsibilities
Understand the differences between the two responsibilities. (for sure one question on the exam)
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Operational /Tactical
Strategic
Transactional activities
Managing contracts, blanket orders, supplier relations
Insure the flow of materials and services
Failure will result in Disruptions
and Higher Costs
Developing and Integrating Supply Strategy
Supply chain risk management
Day-to-day operations
Long term perspective
Ensures Competitive Advantage, Maximize Opportunities
Collaborative and Alliance relations
Examples of Supply Chain Activities
Forecasting and planning
Outsourcing and subcontracting
Purchasing/buying
Nonproduction/nontraditional purchases
Purchasing research
Transportation
Inventory control
Investment recovery/disposal
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SC Goals & Responsibilities
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Procurement Involvement Level!
Could be no involvement in a specific process
Documentation only (clerical keep records, track documents)
Professional full engagement; provide assistance and expertise
Consultant for developing corporate strategies (mergers; acquisitions; planning; new product development and other corporate activities)
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SC Goals & Responsibilities
Organizational Structures for SC
Small organizations
Few resources
Low (purchasing) specialization
Possible (multiple) secondary responsibilities
Low leverage
Few supply options
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SC Organization
Typical Supply Organization StructureMedium Sized Company, Single Location
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SC Organization
P/SC CPO/ CSO
?
CEO
CFO
Marketing
Operations
RD
Structure Options for Large Organizations
Centralized: Authority and responsibility for most supply-related functions assigned to a central organization
Decentralized: Authority and responsibility for supply-related functions dispersed throughout the organization
Hybrid: Authority and responsibility shared between a central supply organization and business units, divisions, or operating plants
May lean toward centralized or decentralized depending on division of decision-making authority
Example: center-led organization in which strategic direction is centralized and execution is decentralized
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SC Organization
Potential Advantages and Disadvantages of Centralization
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Advantages!
Strategic focus
Greater buying specialization
Ability to pay for talent
Consolidation of requirements – clout
Coordination of policies and procedures
Effective planning and research
Common suppliers
Proximity to major organizational decision makers
Critical mass
Firm brand recognition and stature
Reporting line – power
Cost of supply relatively low
Disadvantages
Lack of business unit focus
Corporate staff appears excessive
Tendency to minimize legitimate differences in requirements
Lack of recognition of unique business unit needs
Focus on corporate requirements, not on business unit strategic requirements
Even common suppliers behave differently in geographic and market segments
Distance from users
Tendency to create organizational silos
Customer segments require adaptability to unique situations
SC Organization
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Potential Advantages and Disadvantages of Decentralization
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Advantages!
Easier coordination/communication with operating department
Speed of response
Effective use of local sources
Business unit autonomy
Reporting line simplicity
Undivided authority and responsibility
Suits purchasing personnel preference
Broad job definition
Geographical, cultural, political, environmental, social, language, currency appropriateness
Hides cost of supply
Disadvantages
Difficult to communicate among business units
Encourages users not to plan ahead
Operational versus strategic focus
Too much focus on local sources – ignores better supply opportunities
No critical mass in organization for visibility/ effectiveness – whole person syndrome
Lacks clout buying power
Suboptimization
Business unit preferences not congruent with corporate preferences
Small differences magnified
Limits functional advancement opportunities
Limited expertise for requirements
Lack of standardization
SC Organization
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Advantages and Disadvantages of Hybrid, Centralized, and Decentralized Structures
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Hybrid structure
Centralized
Decentralized
Disadvantages
Disadvantages
Advantages
Advantages
SC Organization
At Local Level
Departments or Divisions could operate as profit center
Control for specific divisional needs
At Corporate Level
Establishment of Policies, Procedures, Control, Audit
Recruiting, training
Coordination of purchasing of common items
Establish corporate supply strategy
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Specialization within SC
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SC Organization
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Sourcing
Identify Suppliers
Analyze Suppliers
Materials Mgt.
After Contract
Research
Item Alternatives
Select Suppliers
Prices
Contracts
Orders
Ensures Deliveries
Forecast; Demand
Administration
Performance and Benchmark
Procedure
Budgeting
Reporting
Supplier Relationship
Prices
Transportation
Supply Teams
Cross-functional teams
sourcing, new product development/service development, commodity management
Teams with suppliers or with customers
Supplier councils – key suppliers
Purchasing councils – purchasing personnel from different divisions
Consortia especially non-profit; concerns – including legal issues
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SC Organization
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Key Success Factors for Teams
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Right Participation
All functional areas involved
The right talent people with needed skills
Common Purpose
Customer Focus vs. Individual Success Motivation
Measurable Goals, Dedication and Good Communication
Organizational support, Culture
Proper Communication and Resources
SC Organization
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SC and Other Departments^
Complex Relationships
Congruent and/or potential Divergent Positions
Relations determined by Org. Structure
Relations have a Dynamic component
Important to use Teams and to be Process Oriented
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SC and Other Departments
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SC & Marketing
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SC and Other Departments
Marketing:
Customers Needs
Forecast volumes
Consumes Advertising
Price information
Generate Sales
Costs
Production Schedule
Identify the needs
Supply Chain:
Awareness of Sales Practices
SC & Engineering
New Product Development: Early Supply(ier) Involvement (ESI)
Concurrent Engineering
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SC and Other Departments
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Engineering:
Technical Specifications
Quality
Safety
Performance
Regulation
Supply Chain:
Cost
Functionality
Availability concerns
Integrating Perspective
Value
SC & Manufacturing/Operations
Material Resource Planning
Enterprise Resource Planning
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SC and Other Departments
Manufacturing/ Operations:
Delivery Time
Quality
Capacity Utilization
Performance
Supply Chain:
Purchase Timing
Tactical Concern
Inventory levels
Quality
SC & Finance/ Accounting
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SC and Other Departments
Finance
Accounting:
Costs Low Prices
Funds Availability
Treasurer
Accounts Payable
Investment Timing
Supply Chain:
Overall Cost (TCO)
Supplier Relationship
Impact on financial indicators
Operations Concern
Supply Chain and:
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SC and Other Departments
Enforceable contracts
Law:
Litigation
Legal expertise
B2B, e-Commerce
Electronic Purchasing
Electronic Data Interchange
Strategic and Tactical Support
Information Technology:
Tactical Role
Logistics:
Close collaboration required
Part of SC
Recap
SC Goals & Responsibilities
9 Goals and 5 Rs
Tactical and Strategic Responsibilities of SC
Level of involvement
SC Organization
Small vs Medium & Large Organizations
Centralized vs. Decentralized
Teams
SC and other Departments
Chapter Questions: 2; 3; 4; 7; 8
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Director of
Procurement
Commodity
Manager
Buyer
Buyer
Commodity
Manager
Buyer
Buyer
Purchasing and
Materials Analyst
Manager
Administration
and Processes
Manager
Scheduling and
Planning
Inventory Control
Coordinator
Shipping/
Receiving
Manager
Transportation/
Customs Manager
Logistics Manager
