Golden Gate University

OP 323 Global Supply Chain Management

Procurement and
Manufacturing Overview

Operations Value Chain Model

Create
Solutions

PLAN
DESIGN STRUCTURE
OPERATING TACTICS

Create
Demand

EXECUTION MANAGEMENT
1.0

2.0

3.0

4.0

5.0

ACQUIRE

CONVERT

DELIVER

SUPPORT

COMMIT

supplier
management

production
management

logistics
management

service
management

order
management

Fulfill Target Demand With Solutions

Common Processes of ALL Organizations

Supply Chain Evolution

Level
Competence
Value
0. Emerging/Basic/None
0
I.
Functional Process Control
low
II. Enterprise Process Integration
med
III. Supply Channel Collaboration
high
IV.

Virtually Connected & Optimized

Examples??

best

SCM Logistics &

Purchasing Process Integration
PLAN
STRUCTURE
OPERATING TACTICS

Create
Solutions

1.0

2.0

3.0

4.0

Create
Demand
5.0

EXECUTION PROCESSES
BUY

Purchasing
& supply mgt

MAKE

production

DELIVER

logistics

SUPPORT

after
sales service

COMMIT

order
management

1. Requirements
4. Supplier Selection & Evaluation
2. Spend Analysis
5. Supplier Development
3. Relationships (SRM) 6. Technology & Improvement

Typical Product Cost

Profit= 10%
8%
=
g
Lo
Mrktg= 20%

Mfg= 12%

Matls = 50%

The Buy Process Evolution

Level

Characteristics

I. Buying = react to the PO to buy stuff

II. Purchsing = internal integration and optimization
by reacting to a forecast & pre-planning for
existing products prior to forecast
III. Supply Management = involves external
collaboration with suppliers for design,
production, and after-market support
IV. Virtual buying networks

Procurement Environment
OLD

Place POs
Lowest price
Long product cycles
Centralized orgs.
Reactive mode
Line position mentality
Domestic base

NEW

Develop sources
Lowest TCO
Shorter product cycles
Flatter organizations
Concurrent NPI
Internal integration
Global

TCO Example
Component
Price per Ton
Logistics
Receiving
Inventory
Waste
Total Cost per Ton

$98.62

106.48

19.96

4.45

.58

.15

2.28

.87

.05

.09

$121.49 $112.04

Procurement-Logistics
Operations Integration

Forecast = supplying historical information

Source Selection = site cost & service data
Transportation = move inbound materials
Warehousing = store inbound materials
Inventory Control = maintain accountability
Value-Added Services = kitting, assembly,
labeling, inspecting, repacking, inbound matls

Supply Chain Logistics and

Production Process
Integration

Production Process Designs

Also called supply chain strategies
Make/Build to Stock (MTS/BTS) = produce a
product or service to a forecast
Configure to Order (CTO) = make assemblies to a
forecast & assemble products to orders
Make to Order (MTO) = begin production after
receipt of the order
Engineer to Order (ETO) = design and produce a
customized product or service to order

Lead Time
A span of time required to perform a process

APICS Dictionary

Delivery lead time

The time from the receipt of a customer order to the delivery of
the product

APICS Dictionary

Cumulative lead time

The longest planned length of time to accomplish the activity in
question

APICS Dictionary

1-11

Lead Time by SCM Process Design

Order Lead Time
Design

Purchase

Manufacture

Assemble

Distribute

Engineerto-Order

Order Lead Time

Inventory

Manufacture

Assemble

Make-toDistribute Order

Order Lead Time

Manufacture

Inventory

Assemble

AssembleDistribute to-Order

Inventory

Distribute

Order Lead Time

Manufacture

Assemble

Make-toStock

Reprinted with permission, J.R. Tony Arnold, Introduction to Materials Management, Prentice-Hall.

1-12