Chapter 1 Materials Management

Three majors areas of Supply Chain Management
Procurement (Supply), production, and distribution
Main objective of Supply Chain Management
by efficiently balancing the supply and demand, we can meet customer demand at the lowest cost
Order qualifiers
minimum customer requirements related to the price, features, quality, delivery, etc…
order winners
those characteristics that persuade the customers to select their product or service
Main costs involved in product creation
Labor, materials, and overhead
Materials Management
planning and controlling flow of materials, provide required level of customer service, and minimize overall cost of meeting demand
Manufacturing Strategy
involves meeting or exceeding the customer requirements at the minimum cost(usually depends on the product)
Make to order
manufacturer does not start until the order is received, inventory usually held as raw materials and longer delivery lead time
assemble to order
manufacturer does not start until the order is received, inventory is standard components, only assembly required to make the product
make to stock
manufacturer produces goods in anticipation of customer demand(most common), Inventory is held as finished goods, typically shorter delivery lead time
Manufacturing Planning and Control
planning and controlling the flow of materials in a manufacturing environment, provide required level of customer service, minimize overall cost of meeting demand
Production Planning
meet demands or marketplace, make long term and short term plans, establish priorities and ensure capacity
Implementation and Control
putting into action and achieving the plans
Inventory Management
provide a buffer against differences in demand rates and the production rates, to support production
production rate
demand – beginning inventory + ending inventory / number of production periods
Bill of Materials
Describes the components used to make the product. Describes subassemblies at various stages of manufacture.
Objective of Materials Management
Deliver what customers want, when and where they want it and do so at minimum cost.
Measurable variable that can be either quantitative or qualitative.
Performance Measure
How close to the performance standard (goal) you are. At least two parameters.
Old Saying about performance measurement.
“What you do not measure, you cannot control.”
Physical and Supply Distribution
Activities Involved in Moving Goods from the suppliers to the production system and from the production system to the customers.
Marketing, Operations and Finance Objetives
Marketing cares about increasing revenue and satisfy customers. Therefore the customer service here is a must.

The main objective of operations is to reduce the manufacturing cost. The focus here is in the production efficiency.

The main objective of Finance is to increase profit and cash flow, reduce investment. In other words is doing more with less resources.

The principal trade-off
Customer Service x Inventory Levels x Production Efficieny
A business strategy that maximizes possible benefit and minimizes risk by delaying further investment into a product or service until the last possible moment
Different Layers of Customers/Suppliers
Supply Chain Management Definition:
design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand and measuring performance globally.

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