Page 324 - DMGT501_OPERATIONS_MANAGEMENT

Operations Management

Notes Technology, Quality, and Timely Delivery: Any make or buy decision should take into account
considerations other than the economic factors. What technology is being used by the potential
supply sources? Better technology generally results in lower rejections and long-term cost
savings. What is the quality of the management? Do they meet the minimum requirements for
the job?
In addition, quality and delivery need to be integrated with the economic analysis when deciding
whether to make or to buy. Such qualitative factors need to be given weightage. These decisions
require judgment and are often subjective. However, a careful analysis of the opportunity costs
due to failure of performance has to be worked out to reach a good decision.

14.2.5 Expediting and Follow-up

Expediting is the monitoring of supplier deliveries of materials that in some way have become
critical for the customer.

Example: Production schedulers may have forgotten to order floppy disk drives, and
now they are needed quickly. Inventory records may overstate the number of hair pins available.
The supplier may not have met the delivery date for some reason. Expediters phone suppliers to
talk about the importance of an order. They plead with and threaten suppliers to get their order
moved up in line for fast delivery.

Expediting is usually caused by a failure of the organization or its suppliers. Efforts should be
made to solve the problem by eliminating the source of the problem, rather than by relying on
expediting. Eliminating the source of the problem involves better supplier selection and improved
control of purchasing functions. A well-run purchasing operation should strive to eliminate
expediting by making suppliers responsive to the organization's needs.

Follow-up and Evaluation

As part of an organization's supplier certification program, the purchasing department should
collect and maintain information about each supplier. This information should be used to evaluate
performance and to determine the future acceptability of all suppliers. In addition, both positive
and negative information should be given as feedback to all suppliers. Suppliers who are doing
a good job should be positively reinforced. Suppliers who are not performing well may not
fully understand the importance of their performance to the customer's organization. These
poorly performing suppliers may not even be aware of the extent of their shortcomings. Clear
and immediate feedback may help them improve.

14.2.6 Procurement Cycle

The procurement cycle occurs at the manufacturer/supplier interface and includes all processes
necessary to ensure that materials are available for manufacturing to occur according to schedule.
The procurement cycle begins when the manufacturer orders components from suppliers to
replenish the component inventories. The relationship is quite similar to the other cycles with
one significant difference. Whereas retailer/distributor or customer/retailer orders are triggered
by uncertain customer demand, component orders can be determined precisely if lead times are
not very large.
Component orders depend on the production schedule and the manufacturer decides what the
production schedule will be by the distributor order and current product availability in the
manufacturer's finished-goods warehouse. Suppliers are linked to the manufacturer's production

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