CHAPTER I – INTRODUCTION

Objectives
A. To maximize overall value generated.
The higher the supply chain profitability
or surplus, the more successful is the
supply chain
B. Customer service performance
improvement
C. Reduction of pre and post production
inventory
D. Minimizing variance by means of
activities like standardization, and
variety reduction.
E. Product quality control
F. Flexible planning and control
procedures
G. Achieving maximum efficiency in using labor, capital, and plant through the company.

TERMINOLOGY
Introduction: This lesson contains the different terminologies alongside with
its definition for you to have a clearer understanding whenever encountering
such terms in the succeeding lessons.

• Purchasing: The act of acquire (something) by paying for it.

• Supply Management: is the act of identifying, acquiring and managing the resources
and suppliers that are essential to the operations of an organization.
• Procurement: the action of obtaining or procuring something.
• Supply Chain Management: is the broad range of activities required to plan, control
and execute a product's flow, from acquiring raw materials and production through
distribution to the final customer, in the most streamlined and cost-effective way
possible.
• Operational Responsibilities: An operations manager is a key part of the
management team and oversees high-level HR duties, such as attracting talent and
setting training standards and hiring procedures.
• Strategic Responsibilities: Involves setting objectives, analyzing the competitive
environment, analyzing the internal organization, evaluating strategies, and ensuring
that management rolls out the strategies across the organization.
• Strategic Sourcing: Is an institutional procurement process that continuously
improves and re-evaluates the purchasing activities of a company.
• Lean Purchasing: Or “Lean Procurement” applies lean principles to
the procurement process for supplies. It is the trademarked strategy that can help you
dramatically reduce what you spend in time and money.
• Lean Supply Management(LSC): Management of an LSC is a process aimed at
eliminating waste and nonvalue-adding activities from the overall value stream in the
supply chain
• Supply and Logistics - Initial need for materials to the delivery of finished product or
service
 The Size of the Organization’s Spend and Financial Significance

Profit-Leverage Effect: It is
leveraging cost savings into profit.
It dictates that reducing operating
expenses is more efficient than
increasing sales.

Return-On-Assets Effect: It is an indicator of how

profitable a company is relative to its total assets. It gives a
manager, investor, or analyst an idea as to how efficient a
company's management is at using its assets to generate
earnings. Return on assets is displayed as a percentage.

Reduction in Inventory Investment: The act of

reducing waste in the form of excess inventory, it allows a
business to invest much less money on their inventory and
positions them to be more responsive to their customers' needs.
 CHAPTER 2
SUPPLY STRATEGY

LEVELS OF STRATEGIC PLANNING

1. Corporate- these are the decisions and plans that answer the question.
2. Business Unit- these decisions mood the plans of particular business unit, as necessary, to
contribute to the corporate strategy.
3. Function – these plans concern the how of each functional area’s contribution to the business
strategy and involve the allocation of internal resources.
MAJOR CHALLENGES IN SETTING SUPPLLY OBJECTIVES AND STRATEGIES
 First major challenge facing the supply manager is the effective interpretation of corporate
objectives and supply objectives.
 The second challenge deals with the choice of the appropriate action plan or strategy to
achieve the desired objectives.
 The third challenge deals with the identification and feedback of supply issues to be in
targeted into organizational objectives and strategies.
Strategic Planning in Supply Management
1. Assurance of supply strategies- designed to ensure that future supply needs are met with
emphasis on quality and quantity.
2. Cost reduction strategies- design to reduce the laid-down cost of what is acquired or the
total cost of acquisition and use life cycle cost.
3. Supply chain support strategies- design to maximize the likelihood that the considerable
knowledge and capabilities of supply chain members are available to the buying organization.
4. Environmental change strategies- Designed to anticipate and recognize shifts in the total
environment so that it can turn them to the long term advantage of the buying organization.
5. Competitive edge strategies- Designed to exploit market opportunities and organizational
strengths to give the buying organization a significant competitive edge.
 6. Risk management strategies- the various aspects of the previous five types of strategies.
This section will be expanded here, not to imply greater importance, but to assure adequate
coverage.

RISK MANAGEMENT
 Operational Risk- Every business continuity plan recognizes
that supply interrupts and delays may occur.
 Financial Risk- Quite different from supply interrupts those
risks directly associated with change in the price of the good
or service purchased.
 Reputational Risk- This may be even more serious than
operational or financial risk, because the loss of reputation
may be catastrophic for a company.
 Managing supply Risk- This should be started at the supply level, but may escalate to the
overall corporate level.
 The corporate context- This supply risk is only one of the various risk to which any
organization i s exposed.
QUIZ # 1: CHAPTER 1 and 2

Instruction:
Kindly look on with the upcoming quiz in our Messenger Group Chat or in
our Google Class. Coverage of the quiz will focus on the Module: Chapter 1 and 2.

Quiz will be in the form of google form. I will be sending you the link for the
quiz. Please be reminded that all quizzes are time bounded.

Reminder: Review before taking up your quiz.

ACTIVITIES # 1

Date: _____________ Score: __________

SUPPLY STRATEGY

Instruction: In a long bond paper, complete the table. List down at least three (3) Pros and Cons of each
type of strategic planning.

Types of Strategic Planning Pros Cons

(Advantages) (Disadvantages)
1. Assurance of supply
strategies
2. Cost reduction strategies
3. Supply chain support
strategies
4. Environmental change
strategies
5. Competitive edge strategies
6. Risk management strategies

CHAPTER 3 - SUPPLY ORGANIZATION

OBJECTIVES OF SUPPLY ORGANIZATION

1.Improve the organizations competitive position.
2.Provide an uninterrupted flow of materials, supplies and services required to operate the
organization
3.Keep Inventory Investment and loss at a minimum.
4.Maintain and improve quality
5.Find or develop best in-class suppliers.
6.Standardize where possible the items bought and the processed used to procure them.
7.Purchase required items and services at lowest total cost of ownership
8.Achieve harmonious, productive internal relationships.
 supply and design engineering

 Supply and operations

 supply marketing/sales

 supply and accounting /finance

9. Accomplish and supply objectives at the lowest possible operating cost.

OBJECTIVES OF SUPPLY MANAGEMENT

• Supply function obtain the optimum mix of these seven rights. Obtaining this balance with an
eye to both the short term and the long term requires supply mangers to both tactical and
strategic perspective.
-Encompassing statement of the overall goals and supply include the following nine goals:
 1. IMPROVE THE ORGANIZATION’S COMPETITIVE POSITION.
>This focused on contributing to overall organizational strategy, goals, and objectives. Supply
can secure the lowest total cost source of supply, provides access to new technologies, and design
flexible delivery arrangement, fast response times, access to high-quality products or services, and
product design and engineering assistance.

2. PROVIDES AN UNINTERRUPTED FLOW OF MATERIALS, SUPPLIES, AND SERVICES

REQUIRED TO OPERATE THE ORGANIZATION.
-Stocks or late deliveries of materials, components, and services can be extremely costly in
term of lost product, lower revenues and profits, and diminished customer good will.
EXAMPLES:
>A. An automobile producer cannot complete the car without the purchased tires
>B. Airlines cannot keep its plane flying on schedule without the purchased fuels
>C. A hospital cannot perform surgery without purchased surgical tools
>D. An office cannot be used without purchased maintenance services.
3. KEEP INVENTORY INVESTMENT AND LOSS AT A MINIMUM.
>One way to ensure an uninterrupted material flow is to hold large inventories. But inventory
assets require use of capital that cannot be invested elsewhere, and the cost inventory may be 20 to
50 percent of its value per year.
4. MAINTAIN AND IMPROVE QUALITY.
>A certain quality level is required for each material or services inputs; otherwise the end
product or services will not meet expectation or will result in higher – than – acceptable costs. The
cost to correct a substandard quality input could be huge.
5. FIND OR DEVELOP BEST-IN-CLASS SUPPLIERS
>Success depends on its ability to link supply base decisions to organization strategy and skills
in locating or developing suppliers, analyzing supplier’s capabilities, selecting the appropriate
suppliers, and then working with the suppliers to obtain continuous improvement. Only final selection
results in supplier who are both responsive and responsible will the firm obtain the items and services
it needs.
6. STANDARDIZE, WHERE POSSIBLE, THE ITEM BOUGHT AND THE PROCESSES USED
TO PROCURE THEM.
>Standardization process refers to agreeing on a common specification or process. Process
maybe standardized across an organization, an industry, nation, or the world. Because
standardization touches on multiple stakeholders, it usually requires cross-functional and sometimes
cross-organizational teamwork.
7. PURCHASE REQUIRED ITEMS AND SERVICES AT LOWEST TOTAL COST OF
OWNERSHIP.
>Purchased goods services in the typical organization represent the largest share of that
organization’s total cost. Price is the most convenient method to compare competing proposals from
suppliers. However, supply’s responsible is to obtain the needed goods and services at the lowest
total cost of ownership.
8. ACHIEVE HARMONIOUS, PRODUCTIVE INTERNAL RELATIONSHIPS.
 >Supply manager cannot effectively accomplish their goal and objectives without effective
cooperation with the appropriate individuals in their functions. Let examine the relationship between
supply and key internal business partners.
• Supply and design engineering
• Supply and operations
• Supply and marketing/ sales
• Supply and accounting / finance
9. ACCOMPLISH SUPPLY OBJECTIVES AT THE LOWEST POSSIBLE OPERATING COSTS.
>The objective of supply must ultimately contribute to the attainments of short-and long term
organizational strategy, goal, and objectives. The process and function can be organized in a number
of different ways to minimize supply’s contribution effectively and efficiently.
ORGANIZATIONAL STRUCTURES FOR SUPPLY MANAGEMENT:
>Supply organization structure must be aligning with the corporate structure and strategy. In
addition, organizational size and the need for specialization with supply also need to be taken into
account.
• SMALL AND MEDIUM – SIZED ORGANIZATIONS.
>In single business unit organization, particularly small enterprises, it is not un-usual to see
supply responsibilities shared by a variety of individuals who have no supply expertise and purchase
their own requirement from local retailer or wholesalers. As the size of the business unit increase, the
idea of assigning a professional the responsibility of supply emerged and a separate function is
created.
• LARGE ORGANIZATION.
>In large companies the centralization-decentralization issue is the key importance for the
supply structure. Centralization refers to where spending decision are made, not where the
purchasing and supply staff are located geographically.
There are three (3) common organizational models.
1. Centralized
2. Hybrid
3. Decentralized
 SUPPLY ORGANIZATION

ADVANTAGE AND DISADVANTAGES OF CENTRALIZED SUPPLE STRUCTURE

ADVANTAGE DISADVANTAGE

Strategic focus Lack of business unit focus

Greater buying specialization Narrow specialization and job boredom
Ability to pay for talent Cost of central unit highly visible
Consolidation of requirements Director
Corporate of Supply
staff appears excessive
Effective planning and research Tendency to minimize legitimate differences in requirements
Common suppliers Lack of recognition of unique business unit needs
Proximity to major organizational Focus on corporate requirements,
Manager not on business unit strategic
decisionCommodity
makers Commodity
requirements Materials
Administration
Manager Manager Manager
and processes
Critical mass Most knowledge sharing one – way
Firm brand recognition and Even common suppliers behave differently in geographic and
stature market segments
Reporting line Distance from users
Store warehouse
Buyer low
Cost of purchasing Buyer Managersilos
Tendency to create organizational Manager
E-purchasing

Manager purchaing Receiving Inspection

Buyer Buyer card Manager

Manager Manager Transportation

Purchasing reseach
 1. POTENTIAL ADVANTAGESAND DISADVANTAGES OF DECENTRALIZED SUPPLY
STRUCTURE

ADVANTAGES DISADVANTAGES
Easier More difficult to communicate among business units
coordination/communication with
operating department
Speed of response Encourages users not to plan ahead
Effective use of local sources Operational versus strategic focus
Business unit autonomy Too much focus on local sources
Reporting line simplicity No critical mass in organization for
visibility/effectiveness
Undivided authority and Lacks clout
responsibility
Suits purchasing personnel Sub optimization
preference
Broad job definition Business unit preferences not congruent with
corporate preferences
Geographical, cultural, political, Small differences get magnified
environmental, social, language,
currency appropriateness
Hide the cost of supply Reporting at low level in organization

2. HYBRID SUPPLY STRUCTURE

>This has led firms to adopt decentralized-centralized supply, or a hybrid organizational
structure, in which supply function is partially centralized at the corporate or head office and partially
decentralized to the business units.
a. Task that are more effectively handled on corporate basis
b. Establishment of policies , procedures, controls, and system
c. Recruiting and training of personnel
d. Coordinate of the purchase of common-use items in which more “clout” is needed
e. Auditing of supply performance
f. Development of corporate wide supply strategies.

QUIZ # 2: CHAPTER 3

Instruction:
Kindly look on with the upcoming quiz in our Messenger Group Chat or in
our Google Class. Coverage of the quiz will focus on the Module: Chapter 3

Quiz will be in the form of google form. I will be sending you the link for the
quiz. Please be reminded that all quizzes are time bounded.

Reminder: Review before taking up your quiz.

 ACTIVITIES # 2, 3, 4

Date: _____________ Score: __________

ORGANIZATION MODEL

Instruction:

Activity # 2: In a long bond paper, list down at least two hospitality sector (either hotel,
resort and a like) that uses Centralized Supply Structure. After listing down what is being
asked, draw a sample model or structure of a Centralized Supply Structure.

Activity # 3: In a long bond paper, list down at least two hospitality sector (either hotel,
resort and a like) that uses Decentralized Supply Structure. After listing down what is being
asked, draw a sample model or structure of a Decentralized Supply Structure.

Activity # 4: In a long bond paper, list down at least two hospitality sector (either hotel,
resort and a like) that uses Hybrid Supply Structure. After listing down what is being asked,
draw a sample model or structure of a Hybrid Supply Structure.