19-Nov-15

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Unit 5 - Topic : Inventory Decisions

Purchasing and Supply Scheduling Decisions

Logistics Concepts & PlanningPurchasing & Supply Scheduling Decisions

Coordination in the supply channel

Good coordination among production, marketing, purchasing and all other supply channel activities cannot be emphasized too strongly.

Interrelationships between these activities frequently exist to the extent that optimizing one activity alone can be a detriment (harm) to one or more of the others.

Failing to recognize this trade-off can negatively affect supply channel performance.

Purchasing & Supply Scheduling Decisions

Supply Scheduling The popularity of JIT, quick response and time compression

concepts highlights scheduling as an important activity in supply channels.

Scheduling to requirements is an alternative to meeting requirements from inventories.

Each represents the end points in a range of alternatives considered for meeting the demand, or requirements, of a supply channel.

Purchasing & Supply Scheduling Decisions

In the supply channel, it is the production requirements (orin the case of service firms, the operations requirements)that represent the demand to be met. A materials managertypically meets this demand in 2 ways:

- Supplies are timed to be available just when they are needed forproduction. A popular technique for handling the mechanics of thescheduling process is materials-requirements planning

- Requirements are met from supplies carried in inventory. Theinventory replenishment rules maintain the stock levels.These rules specify when and in what quantities thematerials will flow within the supply channel.

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19-Nov-15

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Purchasing & Supply Scheduling Decisions

Just In Time Supply SchedulingJIT is defined as a philosophy of scheduling where the entire supply channel is synchronized to respond to the requirements of operations or customers

JIT is characterized by: Close relationships with a few suppliers and transport carriers Information sharing between the suppliers and buyers Frequent production/purchase and transport of goods in small

quantities with resulting in minimal inventory levels Elimination uncertainties where ever possible in supply channel High quality goals

Purchasing & Supply Scheduling Decisions

Kanban

Kanban is an example of JIT is Toyotas production scheduling system. Kanban is card based production control system.

A KAN card instructs a work centre or supplier to produce a standard quantity of an item.

The BAN card requests predefined quantity of a component or part or sub assembly be brought to a work centre. These cards are used as the initiates for the production and movement of items.

KANBAN/JIT scheduling system uses the re-order point method of inventory control to determine standard production purchase quantities and involves very low setup cost and lead time costs.

Purchasing & Supply Scheduling Decisions

Features of Kanban

1. Models in master production schedule is repeated frequently and compared with schedule built to take advantage of economies of scale.

2. Lead times are high predictable because they are short.

3. Proximity of suppliers to operations is an important criteria.

4. The low order quantities lead to low inventory, setup cost and procurement cost

5. The lead time and setup time are targeted in the cost reduction process

6. High level coordination between the supplier and buyer helps to uphold the quality commitments and logistical performance continuously.

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