Operation Management

GOP L2

Sourcing strategies

Operational costs

Managerial costs

Strategic costs

• Sourcing arrangements

Single sourcing (one supplier supplying part)

Advantages:

Multiple sourcing (having more than one supplier providing same part)

Advantages:

Delegated sourcing strategy: having one supplier take responsibility for other related suppliers

The 75%-25% rule

Rule: Supplier A gets 75% of the business

Supplier B 25%

Advantages: obtain scale economies from supplier A

                 Security by supplier B

Large company tend to use large supplier cuz more reliable and their capacity capability of supply can match

• General sourcing strategy

Toyata strategy: adjusting time-reduce number of warehouse

              Toyata production system?

Less suppliers—OC MC减少SC增加或减少-system provider

Create a long term contract with the company who can provide more tier of suppliers

Analyze supply chain analyze suppliers

Nestle

L3- design and analysis of operation

• Sourcing strategies
• Kralijic’s positioning Matrix- widely used in industry and by consultancy firms

-4 key purchasing strategies

- maps types of products to sourcing strategies

• 2 variables: supply risk/ supply market complexity( external issues)

impact on business

• strategy 1 suitable for purchasing routine items

low value/cost

low technical risk

-no significant

• strategy 2 bottlenck

suitable for products that could seriously affect delivery to customer if delayed

• strategy3 leverage: seek to get the best deal, even when the product is not of great value
• S4 critical:when the part has a significant impact on the buyer’s business in terms of value or cost
• Routine: multiple suppliers
• Leverage: single /few suppliers
• Bottleneck: high rick; transfer the risk to supplier, delegation of supplier
• Critical: long term supplier, single supplier, cooperation

Sourcing strategies

Pareto analysis applied to purchasing

• Pareto principle: “80-20” rule

For many events, 80% of the effects come from 20% of the causes

• Because you have limited resource to be used in your business, you need to focus on the 20% which is the most important
• ABC analysis

A: 20% cost/sales represents 80% volumes of products

Dis: fail to identify the low level items

Global operation & Competitive advantage

Operations are essential to strategy

Operations are to find winning model, to preform competitive management

Global operations & sustainability

Analyze sustainability of your operation and supply chain

Innovation

Design supply chain develop relationship with suppliers