Page 115 - DMGT523_LOGISTICS_AND_SUPPLY_CHAIN_MANAGEMENT

Logistics and Supply Chain Management

Notes 5.5 Summary

 Effective procurement strategy to support supply chain operations requires a much closer
working relationship between buyers and sellers than was traditionally practiced.

 An important step in developing an effective procurement strategy is volume consolidation
through reduction in the number of suppliers.

 Cost reduction occurs because the supplier has more information to plan and can reduce
reliance on cost-inefficient practices, such as forecasting and expediting.
 Many firms have achieved operational integration focused on logistical arrangements,
such as continuous replenishment programs and vendor-managed inventory.
 The primary objective of operational integration is to cut waste, reduce cost, and develop
a relationship that allows both buyer and seller to achieve mutual improvements.
 Value management is an even more intense aspect of supplier integration, going beyond
a focus on buyer-seller operations to a more comprehensive and sustainable relationship.

 Value engineering is a concept that involves closely examining material and component
requirements at the early stage of product design to ensure that a balance of lowest total
cost and quality is incorporated into new product design.

 Sourcing is a standard and formal process that incorporates ongoing analysis to evaluate
the right mix of tools and technologies to improve right supplier generation and
management and also reducing the total cost.
 Lean Manufacturing and cost per unit concept is demanding that the managers keep looking
to reduce the procurement cost as well as procurement logistics cost.
 Third Party Logistics Provider (3PL) is defined as, “the services offered by a middleman in
the Logistics Channel that has specialized in providing, by contract, for a given period, all
or a considerable number of the logistics activities for other firms.”
 The Fourth Party Logistics Provider (4PL) is a new-fangled concept in Outsourcing.
 Concept of lean production has taken birth from Japan; the changes in the economic and
competitive climate in Japan led the manufacturing organisations to devise innovative
and cost-effective production methods.

 Manufacturing objectives cover such things as cost, quality, delivery and flexibility and
usually there are trade-offs between them.

5.6 Keywords

E-Procurement: It is the business-to-consumer, business-to-government, or business-to-business
sale and purchase of supplies and services over the web.
Lean Manufacturing: Lean Manufacturing is part of a business wide strategy aimed to increase
market share whilst at the same time attempting to minimise operating costs.
Manufacturing Strategy: A manufacturing strategy is defined by a pattern of decisions, both
structural and infrastructural, which determine the capability of a manufacturing system and
specify how it will operate to meet a set of manufacturing objectives which are consistent with
overall business objectives.
Manufacturing Strategy: Manufacturing strategy consists of a sequence of decisions that over
time, enables a business unit to achieve a desired manufacturing structure, infrastructure and set
of specific capabilities.

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