2.3.2 the role of procurement (2) - logistics
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2.3Makingoperationaldecisions
2.3.2Theroleofprocurement– logisticsandsupplydecisions
Theroleofprocurement
Keyelementstothistopic
Logisticsandsupplydecisions
Areminder:Theroleofprocurement
Procurementisthewholeprocessofmanagingtheorderingandreceiptofthegoodsorservicesinthe
business.
Inpairsdiscuss:Whatarethekeypartsofprocurement?
• Decidingwhatisneeded• Selectingsuppliers• Termsofpayment• Negotiatingcontractsbetweenthebusinessanditssuppliers
• Managinghowgoodsareorderedandreceived
• Managinglogistics
Logistics
Aprocesswhichplans,implementsandcontrolsthedistributionandstorageofgoodsandservicesfromwhentheyarereceivedfromthe
suppliertowhentheyaredeliveredtothecustomer.
Logistics isoftenseenasthetransportation ofrawmaterialsandfinishedgoods,butaswithprocurementitisaprocessnotjustasingleactivity.
Logistics
Casestudy
Amazonhasinvestedheavilyintechnologytoimproveitslogisticsoperation.
Amazonbelievethatthiswillgiveitacompetitiveadvantageandensurethefuturesuccessofthebusiness.
Doyouagree?Givereasonsforyouranswer
Watchtheclip
Whatisthesupplychain?
Thenetworkoforganisationsthatgetproductstocustomers.
Suppliersofrawmaterials Manufacturers Wholesalers/Retailers Customers
Supplychainmanagementandsupplydecisions
Ensuresthattherightquantityofgoodsareintherightplaceattherighttimeandtheseareprovidedattherightqualityandataprice thatrepresentsvalueformoney.
Thisshouldcreatevalueforthecustomerandprofitforthebusinesseswithinthe
supplychain.
Justaminute
Youhave60secondstolistthebenefitstoAmazonofeffectivesupplychain
decisions
Benefitsofeffectivesupplychainmanagementandsupplydecisions
Improvedreputation:ifdeliveriesarriveontime,exactlywhentheyareneeded,thebusinesswillgainastrongreputationforreliabilityandahighqualityserviceandislikelytoreceiverepeatorders
Increasedefficiency:forexample, ifproductioncanbecompletedmorequicklyorordertodespatchtimesarereduced
Lowerunitcosts:pricescanbenegotiatedwithsupplierstoensurethatabusinessreceivesvalueformoney;anycostsavingscanbepassedontocustomersintheformoflowerprices;alternativelythebusinesscanenjoyincreasedprofitmarginswhichcouldleadtofutureimprovementsinefficiency
Customersatisfaction:thiscanresultwhentherightproducts,attherightquality(whichreflectsthepricepaid)aredeliveredwhentheyareexpected;thiswillencouragepositivefeedbackandbrandloyalty.Withtheincreasinguseofdigitaltechnology,customershavemoreinformationregardingdeliverytimesandthestatusofanyorders.
Effectivesupplychainmanagement
Planning Procurement Communication Removalofwaste
Changingtransportation
Tobeeffective,systemsneedtobereviewedregularlytomaximiseefficiency
Ensuresalesforecastsareaccuratetoensuretherightquantityofgoodsandservicesare
available
Gettingthebestsupplierswillresultingoodvalueandreliablesuppliesoftheright
quality
Co-ordinationandcommunicationwithsuppliersandlogisticswillensuregoodsarriveontimeanddonotdelayproductionprocesses
Removalofwastecanresultinastreamlinedprocesswhichisfaster,haslowercosts,improvedqualityandbetterreliability.Inmanufacturingbusinesses,
methodssuchasqualityassuranceandjustintimecanhelp
Logisticsneedtobeconstantlyreviewed,asnewtransportoptionsbecomeavailableanddifferentdistributionroutesarerequired
Workingwithsuppliers
Quickquestionsfordiscussion
1. Whatismeantbythetermlogistics?2. Whatisasupplychain?3. Givetwo typesofsuppliesforTesco4. Explainhoweffectivedecision-makinginrelation
tothesupplychaincaninfluenceTesco’s:a)Costsb)Reputationc)Customersatisfaction
Whenthingsgowrong
Let’sconsidersomeexamples
Workingingroupsof3,studythearticle,identifytheproblemseachbusinessfacedandhoweachresolvedtheseproblems
Whenthingsgowrong
Problem:unexpecteddemandandthreatofstrikeactionfromusualdeliveryfirmSolution:Noalternative,butforstafftodelivertheproductsthemselvestoavoidstockwastage;nowreviewedsystemsandhasowndistributionfleetwhichisusedduringpeaktimes
Problem:newbusinessstart-up;failedtoplanthelevelofdemandforitsproducts;hadnotarrangedcollectionofparcelsfromthebusinessSolution:Hadtotravelto10differentpostofficestoensuresuccessfuldistributionofproductsonthefirstday;arrangedforRoyalMailcollectionfromitsofficeswhichstartedtheverynextday
Problem:supplierissuesmeantthatthebusinesswaswithoutthecorrectstock;whenitwasdeliveredtherewereerrorsleadingtocustomercomplaints;theseproblemsreoccurredwiththenextsupplierSolution: nowusesanumberofsupplierstospreadtherisk
LESSONLEARNT:Planning/checkingisthekeytopreventingmistakesfromoccurring!
Issuestoconsiderwhenmakingsupplydecisions
Qualitycansufferifcostsaredrivendowntoolowe.g.suppliersmaynotbededicatediftheyarenotpaidafairprice
SophisticatedITsystemstomonitorthesupplychaincanbeexpensivetoimplement
Relianceonothermembersofthesupplychainmeansabusinessdoesnothavefullcontroloveritsoperations
Supplychainsinaction“FromcowtoKitKat”
Conceptlinks
Effectivesupplydecisions
Logistics
Reducedwaste
Costs
Canyoulinktheseconcepts?
Sentencestarter – OnebenefittoNestleofmakingeffectivesupplydecisionsis…
Conceptlinks
Effectivesupplydecisions
Logisticsthatjourneysareplannedwhichmeansunderfilledlorriesdonottravel.
Reducedwaste
Costs
Sentencestarter - OnebenefittoNestleofmakingeffectivesupplydecisionsis…
Asaresult,fuelisnotusedonpointlessjourneys.
ThiswillmeanNestlecankeepitsfuelcostsdown,whichthereforewillincreaseitsefficiency.