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Supply Chain Management Introduction. Supply Chain Management. Session Agenda 1) Introduction to module 2) Assessments 3) Source of information Text Books On-line sources Digital Library. Supply Chain Management. Text Books

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Supply chain management
Supply Chain Management

Session Agenda

1) Introduction to module

2) Assessments

3) Source of information

  • Text Books

  • On-line sources

  • Digital Library

Supply chain management1
Supply Chain Management

  • Text Books

  • Lysons, K. Farrington, B. Purchasing and Supply Chain Management. FT Prentice Hall. 7th Edition 2006

  • Slack, N et al. Operations Management. FT Prentice Hall. 4th Edition 2004

  • Donald J. Bowersox, David J. Closs, M. Bixby Cooper, Supply Chain Logistics Management, McGraw-Hill, First Edition.

  • Simchi-Levi, D and E and Kaminsky, P. (2003), Designing and Managing the Supply Chain, McGraw-Hill, Second Edition

Supply chain management2
Supply Chain Management

Definition: Supply Chain Management

“The management of the flow of goods or services between

entities in the chain to realize the delivery of end products

or services, satisfying customers at minimum cost”

Definition 2: Supply Chain Management is a set of approaches utilized to efficiently integrate suppliers, manufacturers, warehouses and stores, so that merchandise is produced and distributed in the right quantities, to the right locations at the right time in order to minimize system wide costs while satisfying service level requirements.

Supply chain management more realistic supply chain
Supply Chain ManagementMore Realistic Supply Chain

Supply chain management3
Supply Chain Management


  • The acquisition of goods and services needed to support the various activities of an organization, at the best possible cost and from reliable suppliers.

Supply chain management4
Supply Chain Management

Purchasing professional's goal to a company

should be to provide:

  • The best pricing

  • Communication

  • Research in finding sources

  • Supplier performance Evaluation

  • Service level agreements (SLA’s)

Supply chain management5










Supply Chain Management

Supply chain management6
Supply Chain Management

Purchasing Topics to Cover:

  • Importance of Purchasing Today

  • Purchasing Processes

  • Letter of Credit

  • Import Documentation

  • Negotiation Skills

  • Make – or – Buy Analysis

  • Ethics in Buying

Supply chain management7
Supply Chain Management

Importance of purchasing:

  • Competition

  • Material cost

  • Lead time

  • Customer Demand

  • Quality

Supply chain management8
Supply Chain Management

Cost of manufacturing company, 1979 Cost of same manufacturing company, 1999

The bigger the percentage of total spend is allocated to purchasing, the bigger the

potential saving to the organisation by cutting the purchasing costs. (Lysons (2000), pp3-4)

Supply chain management9
Supply Chain Management

Single Sourcing


  • Potentially better quality because more SQA possibilities.

  • Strong relationships

  • Greater dependency encourages more commitment and effort.

  • Better communication.

  • Easier to cooperate on new product/service development.

  • More scale economies.

  • Higher confidentiality.


  • More vulnerable to disruption if a failure to supply occurs.

  • Individual supplier more affected by volume fluctuations.

  • Supplier might exert upward pressure on prices if no alternative supplier is available.



  • Purchaser can drive price down by competitive tendering.

  • Can switch sources in case of supply failure.

  • Wide sources of knowledge and expertise to tap.


  • Difficult to encourage commitment by supplier.

  • Less easy to develop effective SQA.

  • More effort needed to communicate.

  • Suppliers less likely to invest in new processes.

  • More difficult to obtain scale economies.

Supply chain management10
Supply Chain Management

Purchasing Process

  • Recognize, describe and define the need

  • Transmit the need (requisitions)

  • Determine sources, investigate, and select supplier/analyze

  • bids

  • Prepare and issue the PO

  • Follow-up the order (including expediting and de-

  • expediting) 

  • Receive and inspect the material

  • Clearance of the invoice and payment to supplier

Supply chain management11

(Slack, 2001, p417)

(Slack. 2001. p417)

Supply Chain Management

The purchasing function brings together the operation and its suppliers

Supply chain management12
Supply Chain Management

Letter of Credit (L/C)

  • Written commitment to pay from buyer bank to seller bank.

    Types of L/C:

  • Revocable

  • Irrevocable

Supply chain management13
Supply Chain Management

Import Documents:

  • Bill of Lading

  • Commercial Invoice

  • Packing List

  • Weight Memo

  • Certificate of Inspection

  • Certificate of Origin

  • Insurance Policy

  • Sales Contract

Supply chain management15
Supply Chain Management

Negotiation Definition and Comments:

“The process whereby two or more parties decide what each will give and take in an

Exchange between them.” (Lysons & Farrinton)

“Negotiation is the process by which we search for terms to obtain what we want from

somebody who wants something from us.” (Total Success Training)

“Negotiating is a trading game. There is only one way to play the game; that is to trade what

we want from somebody else for what they want from us. The best way of being able to do

this is to know what we want and what we are prepared to give to get it.” (Total success


“Negotiation is discussing or bargaining in order to reach agreement.” (Owen)

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Supply Chain Management

Negotiation (What it isn’t):

• Negotiation is not selling.

• Negotiation is not ‘giving in’ or conceding.


Supply chain management17
Supply Chain Management

Types of negotiation:

Adversarial and Collaborative

Adversarial Negotiation (distributive or win-lose


  • Is an approach in which the focus is on ‘positions’ staked out by the participants and the assumption is that every time one party wins, the other loses, so, as a result the other party is regarded as an adversary (opponent).

    (Lysons & Farrington)

Supply chain management18
Supply Chain Management

Collaborative Negotiation (integrative or win

-win negotiation)

  • Is an approach in which the assumption is that, by means of creative problem solving, one or both parties can gain without the other having to lose and, as the other party is regarded as a collaborator rather than an adversary, the participants may be more willing to share concerns, ideas and expectations than would otherwise be the case.

    (Lysons & Farrington)

Supply chain management20
Supply Chain Management

Why would we buy something

(items, components, services)

when we could provide it ourselves?

Supply chain management21
Supply Chain Management

Reasons to buy:

  • -The unit cost is cheaper,

  • -We don't use it enough,

  • -We don't have space,

  • -We don't understand the technology,

  • -We don't have the skill,

  • -It's not our core business/expertise,

  • -It's expensive to set up the process,

Supply chain management22
Supply Chain Management

Reasons to provide in-house:

  • - The unit cost is cheaper,

  • - It's critical to the business,

  • - Retain specialist knowledge/skills,

  • -We have control over the supply,

  • - Quality issues are critical,

  • - No suitable supplier,

  • - It's part of our core business/expertise,

Supply chain management introduction

HBL - March '06

Case Study

HBL Sacks over 2,000 employees

An announcement of HBL said on Friday that the bank had abolished

the entire cadres of manual workers with immediate effect under a

retrenchment order of March 10.

The order further said that it had been decided to concentrate on

core banking activities and retrench all non-clerical cadres including

guards, messengers, godown guards, drivers, maintenance staff and

other categories of manual workers.

The bank has also decided to outsource services with service providers

for providing quality and efficient services at competitive market rate.

Currently, there are over 2,300 employees working in the HBL

dedicated to non-core activities including security, transport and other

manual work.

The announcement said the administration and management of these

activities like business development and customer services.

Supply chain management introduction

All Manual (I.e. Non-Clerical) Workmen in Habib Bank Ltd. Retrenchment (cutback)

In order to focus on core banking activities and rationalize our staff strength,

HBL had introduced Voluntary Separation Schemes in the past.

Currently there are over 2300 employees working in HBL dedicated to non

-core activities including Security, Driver and other manual work.

The administration and management of these activities is causing a severe

lack of focus on core activities like business development and customer

service etc. the market practices amongst progressive Bank dictates an urgent

need for outsourcing such services.

Supply chain management23
Supply Chain Management Retrenchment (cutback)

Ethics in Buying:

  • Child Labor

  • Environment

  • Green Supply Chain

  • Fair Trade

Supply chain management24
Supply Chain Management Retrenchment (cutback)

End of Topic