{"id":339,"date":"2018-06-20T12:44:09","date_gmt":"2018-06-20T12:44:09","guid":{"rendered":"https:\/\/courses.lumenlearning.com\/suny-opmanagement\/?post_type=chapter&#038;p=339"},"modified":"2018-07-09T12:36:38","modified_gmt":"2018-07-09T12:36:38","slug":"5-2-supply-chain-procurement","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/suny-opmanagement\/chapter\/5-2-supply-chain-procurement\/","title":{"raw":"5.2 Supply Chain Procurement","rendered":"5.2 Supply Chain Procurement"},"content":{"raw":"<div id=\"navbar-top\" class=\"navbar\">\r\n<div class=\"navbar-part left\"><\/div>\r\n<div class=\"navbar-part right\">\r\n\r\n&nbsp;\r\n\r\n<\/div>\r\n<\/div>\r\n<div id=\"book-content\">\r\n<div id=\"collins-ch11_s03\" class=\"section\" xml:lang=\"en\">\r\n<h1 class=\"title editable block\"><span class=\"title-prefix\">11.3<\/span> Managing the Production Process in a Manufacturing Company<\/h1>\r\n<div id=\"collins-ch11_s03_n01\" class=\"learning_objectives editable block\">\r\n<div class=\"textbox learning-objectives\">\r\n<h3 class=\"title\">Learning Objective<\/h3>\r\n<ol id=\"collins-ch11_s03_l01\" class=\"orderedlist\">\r\n \t<li>Identify the activities undertaken by the operations manager in overseeing the production process in a manufacturing company.<\/li>\r\n<\/ol>\r\n<\/div>\r\n<\/div>\r\n<p id=\"collins-ch11_s03_p01\" class=\"para editable block\">Once the production process is in place, the attention of the operations manager shifts to the daily activities of <span class=\"margin_term\"><a class=\"glossterm\">materials management<\/a><\/span>, which encompass the following activities: purchasing, inventory control, and work scheduling.<\/p>\r\n\r\n<div id=\"collins-ch11_s03_s01\" class=\"section\">\r\n<h2 class=\"title editable block\">Purchasing and Supplier Selection<\/h2>\r\n<p id=\"collins-ch11_s03_s01_p01\" class=\"para editable block\">The process of acquiring the materials and services to be used in production is called <span class=\"margin_term\"><a class=\"glossterm\">purchasing<\/a><\/span> (or <em class=\"emphasis\">procurement<\/em>). For many products, the costs of materials make up about 50 percent of total manufacturing costs. Not surprisingly, then, materials acquisition gets a good deal of the operations manager\u2019s time and attention.<\/p>\r\n<p id=\"collins-ch11_s03_s01_p02\" class=\"para editable block\">As a rule, there\u2019s no shortage of vendors willing to supply parts and other materials, but the trick is finding the <em class=\"emphasis\">best<\/em> suppliers. In selecting a supplier, operations managers must consider such questions as the following:<\/p>\r\n\r\n<ul id=\"collins-ch11_s03_s01_l01\" class=\"itemizedlist editable block\">\r\n \t<li>Can the vendor supply the needed quantity of materials at a reasonable price?<\/li>\r\n \t<li>Is the quality good?<\/li>\r\n \t<li>Is the vendor reliable (will materials be delivered on time)?<\/li>\r\n \t<li>Does the vendor have a favorable reputation?<\/li>\r\n \t<li>Is the company easy to work with?<\/li>\r\n<\/ul>\r\n<p id=\"collins-ch11_s03_s01_p03\" class=\"para editable block\">Getting the answers to these questions and making the right choices\u2014a process known as supplier selection\u2014is a key responsibility of operations management.<\/p>\r\n\r\n<div id=\"collins-ch11_s03_s01_s01\" class=\"section\">\r\n<h3 class=\"title editable block\">E-Purchasing<\/h3>\r\n<p id=\"collins-ch11_s03_s01_s01_p01\" class=\"para editable block\">Technology is changing the way businesses buy things. Through <em class=\"emphasis\">e-purchasing<\/em> (or <em class=\"emphasis\">e-procurement<\/em>), companies use the Internet to interact with suppliers. The process is similar to the one you\u2019d use to find a consumer good\u2014say, a forty-two-inch LCD high-definition TV\u2014over the Internet. You might start by browsing the Web sites of TV manufacturers, such as Sony or Samsung, or electronics retailers, such as Best Buy. To gather comparative prices, you might go to a comparison-shopping Web site, such as <a class=\"link\" href=\"http:\/\/Amazon.com\" target=\"_blank\" rel=\"noopener\">Amazon.com<\/a>, the world\u2019s largest online retailer. You might even consider placing a bid on eBay, an online marketplace where sellers and buyers come together to do business through auctions. Once you\u2019ve decided where to buy your TV, you\u2019d complete your transaction online, even paying for it electronically.<\/p>\r\n<p id=\"collins-ch11_s03_s01_s01_p02\" class=\"para editable block\">If you were a purchasing manager using the Internet to buy parts and supplies, you\u2019d follow basically the same process. You\u2019d identify potential suppliers by going directly to private Web sites maintained by individual suppliers or to public Web sites that collect information on numerous suppliers. You could do your shopping through online catalogs, or you might participate in an online marketplace by indicating the type and quantity of materials you need and letting suppliers bid on prices. (Some of these e-marketplaces are quite large. Covisint, for example, which was started by automakers to coordinate online transactions in the auto industry, is used by more than two hundred and fifty thousand suppliers in the auto industry, as well as suppliers in the health care field.)<span id=\"fwk-collins-fn11_012\" class=\"footnote\">Jingzhi, \u201cCovisint.com,\u201d <a class=\"link\" href=\"http:\/\/www.sftw.umac.mo\/~jzguo\/pages\/covisint.html\" target=\"_blank\" rel=\"noopener\">http:\/\/www.sftw.umac.mo\/~jzguo\/pages\/covisint.html<\/a> (accessed November 2, 2011).<\/span> Finally, just as you paid for your TV electronically, you could use a system called <span class=\"margin_term\"><a class=\"glossterm\">electronic data interchange (EDI)<\/a><\/span> to process your transactions and transmit all your purchasing documents.<\/p>\r\n<p id=\"collins-ch11_s03_s01_s01_p03\" class=\"para editable block\">The Internet provides an additional benefit to purchasing managers by helping them communicate with suppliers and potential suppliers. They can use the Internet to give suppliers specifications for parts and supplies, encourage them to bid on future materials needs, alert them to changes in requirements, and give them instructions on doing business with their employers. Using the Internet for business purchasing cuts the costs of purchased products and saves administrative costs related to transactions. And it\u2019s faster for procurement and fosters better communications.<\/p>\r\n\r\n<\/div>\r\n<\/div>\r\n<div id=\"collins-ch11_s03_s02\" class=\"section\">\r\n<h2 class=\"title editable block\">Inventory Control<\/h2>\r\n<p id=\"collins-ch11_s03_s02_p01\" class=\"para editable block\">If a manufacturer runs out of the materials it needs for production, then production stops. In the past, many companies guarded against this possibility by keeping large inventories of materials on hand. It seemed like the thing to do at the time, but it often introduced a new problem\u2014wasting money. Companies were paying for parts and other materials that they wouldn\u2019t use for weeks or even months, and in the meantime, they were running up substantial storage and insurance costs.<\/p>\r\n<p id=\"collins-ch11_s03_s02_p02\" class=\"para editable block\">Most manufacturers have since learned that to remain competitive, they need to manage inventories more efficiently. This task requires that they strike a balance between two threats to productivity: losing production time because they\u2019ve run out of materials, and wasting money because they\u2019re carrying too much inventory. The process of striking this balance is called <span class=\"margin_term\"><a class=\"glossterm\">inventory <\/a><\/span>, and companies now regularly rely on a variety of inventory-control methods.<\/p>\r\n\r\n<div id=\"collins-ch11_s03_s02_s01\" class=\"section\">\r\n<h3 class=\"title editable block\">Just-in-Time Production<\/h3>\r\n<p id=\"collins-ch11_s03_s02_s01_p01\" class=\"para editable block\">One method is called <span class=\"margin_term\">just-in-time (JIT)<\/span>: the manufacturer arranges for materials to arrive at production facilities <em class=\"emphasis\">just in time<\/em> to enter the manufacturing process. Parts and materials don\u2019t sit unused for long periods, and the costs of \u201cholding\u201d inventory are significantly cut. JIT, however, requires considerable communication and cooperation between the manufacturer and the supplier. The manufacturer has to know what it needs, and when. The supplier has to commit to supplying the right materials, of the right quality, at exactly the right time.<\/p>\r\n\r\n<\/div>\r\n<div id=\"collins-ch11_s03_s02_s02\" class=\"section\">\r\n<h3 class=\"title editable block\">Material Requirements Planning<\/h3>\r\n<p id=\"collins-ch11_s03_s02_s02_p01\" class=\"para editable block\">Another method, called <span class=\"margin_term\"><a class=\"glossterm\">material requirements planning (MRP)<\/a><\/span>, relies on a computerized program both to calculate the quantity of materials needed for production and to determine when they should be ordered or made. Let\u2019s say, for example, that you and several classmates are planning a fund-raising dinner for the local animal shelter. First, you estimate how many people will attend\u2014say, fifty. Next, you plan the menu\u2014lasagna, garlic bread, salad, and cookies. Then, you determine what ingredients you\u2019ll need to make the food. Next, you have to decide when you\u2019ll need your ingredients. You don\u2019t want to make everything on the afternoon of the dinner; some things\u2014like the lasagna and cookies\u2014can be made ahead of time. Nor do you want to buy all your ingredients at the same time; in particular, the salad ingredients would go bad if purchased too far in advance. Once you\u2019ve made all these calculations and decisions, you work out a schedule for the production of your dinner that indicates the order and timing of every activity involved. With your schedule in hand, you can determine when to buy each ingredient. Finally, you do your shopping.<\/p>\r\n<p id=\"collins-ch11_s03_s02_s02_p02\" class=\"para editable block\">Though the production process at most manufacturing companies is a lot more complex than planning a dinner (even for fifty), an MRP system is designed to handle similar problems. The program generates a production schedule based on estimated output (your food-preparation timetable for fifty guests), prepares a list of needed materials (your shopping list), and orders the materials (goes shopping).<\/p>\r\n<p id=\"collins-ch11_s03_s02_s02_p03\" class=\"para editable block\">The basic MRP focuses on material planning, but there\u2019s a more sophisticated system\u2014called <span class=\"margin_term\"><a class=\"glossterm\">manufacturing resource planning (MRP II)<\/a><\/span>\u2014that goes beyond material planning to help monitor resources in all areas of the company. Such a program can, for instance, coordinate the production schedule with HR managers\u2019 forecasts for needed labor.<\/p>\r\n\r\n<\/div>\r\n<\/div>\r\n<div id=\"collins-ch11_s03_s03\" class=\"section\">\r\n<h2 class=\"title editable block\">Work Scheduling<\/h2>\r\n<p id=\"collins-ch11_s03_s03_p01\" class=\"para editable block\">As we\u2019ve seen, manufacturers make profits by transforming inputs (materials and other resources) into outputs (finished goods). We know, too, that production activities, like all business activities, have to be <em class=\"emphasis\">controlled<\/em>: they have to be monitored to ensure that actual performance satisfies planned performance. In production, the control process starts when operations managers decide not only <em class=\"emphasis\">which<\/em> goods and <em class=\"emphasis\">how many<\/em> will be produced, but <em class=\"emphasis\">when<\/em>. This detailed information goes into a <span class=\"margin_term\"><a class=\"glossterm\">master production schedule (MPS)<\/a><\/span>. To draw up an MPS, managers need to know where materials are located and headed at every step in the production process. For this purpose, they determine the <em class=\"emphasis\">routing<\/em> of all materials\u2014that is, the work flow of each item based on the sequence of operations in which it will be used.<\/p>\r\n\r\n<div id=\"collins-ch11_s03_s03_n01\" class=\"key_takeaways editable block\">\r\n<div class=\"textbox key-takeaways\">\r\n<h3 class=\"title\">Key Takeaways<\/h3>\r\n<ul id=\"collins-ch11_s03_s03_l01\" class=\"itemizedlist\">\r\n \t<li>Once the production process is under way, the attention of the operations manager shifts to the daily activities of <strong class=\"emphasis bold\">materials management<\/strong>, which encompasses materials <strong class=\"emphasis bold\">purchasing<\/strong>, <strong class=\"emphasis bold\">inventory control<\/strong>, and work scheduling.<\/li>\r\n \t<li>Because material costs often make up about 50 percent of total manufacturing costs, vendor selection and material acquisition gets a good deal of the operations manager\u2019s time and attention.<\/li>\r\n \t<li>In recent years, the purchasing function has been simplified through technology advances, including e-purchasing and <strong class=\"emphasis bold\">electronic data interchange (EDI)<\/strong>, which process transactions and transmit purchasing documents.<\/li>\r\n \t<li>Commonly used inventory control methods include <strong class=\"emphasis bold\">just-in-time (JIT) production<\/strong>, by which materials arrive just in time to enter the manufacturing process, and <strong class=\"emphasis bold\">material requirements planning (MRP)<\/strong>, which uses computer programming to determine material needs.<\/li>\r\n \t<li>To schedule jobs, managers create a <strong class=\"emphasis bold\">master production schedule (MPS)<\/strong>.<\/li>\r\n<\/ul>\r\n<\/div>\r\n<\/div>\r\n<div id=\"collins-ch11_s03_s03_n02\" class=\"exercises editable block\">\r\n<h3 class=\"title\">Exercise<\/h3>\r\n<p id=\"collins-ch11_s03_s03_p02\" class=\"para\">What is e-purchasing (or e-procurement)? How does it work? What advantages does it give a purchasing manager? How does it benefit a company? How does it change the relationship between purchasing managers and vendors?<\/p>\r\n\r\n<\/div>\r\n<h1>Unit 5 Discussion<\/h1>\r\n<div class=\"creator\">\r\n\r\n#1\r\n\r\n<\/div>\r\n<div class=\"post\">\r\n\r\nChoosing suppliers for your supply chain is often a challenge. Do you put all your eggs in one basket or look to fulfill your needs through multiple vendors? Using the information provided over choosing a good supplier, apply the criteria to the purchase of a new car. Discuss your answers to the following questions: Is the quality good, is the vendor reliable, does the vendor have a favorable reputation, is the company easy to work with? Based on your answers, which of the vendor would be your choice? Why?\r\n\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n<\/div>","rendered":"<div id=\"navbar-top\" class=\"navbar\">\n<div class=\"navbar-part left\"><\/div>\n<div class=\"navbar-part right\">\n<p>&nbsp;<\/p>\n<\/div>\n<\/div>\n<div id=\"book-content\">\n<div id=\"collins-ch11_s03\" class=\"section\" xml:lang=\"en\">\n<h1 class=\"title editable block\"><span class=\"title-prefix\">11.3<\/span> Managing the Production Process in a Manufacturing Company<\/h1>\n<div id=\"collins-ch11_s03_n01\" class=\"learning_objectives editable block\">\n<div class=\"textbox learning-objectives\">\n<h3 class=\"title\">Learning Objective<\/h3>\n<ol id=\"collins-ch11_s03_l01\" class=\"orderedlist\">\n<li>Identify the activities undertaken by the operations manager in overseeing the production process in a manufacturing company.<\/li>\n<\/ol>\n<\/div>\n<\/div>\n<p id=\"collins-ch11_s03_p01\" class=\"para editable block\">Once the production process is in place, the attention of the operations manager shifts to the daily activities of <span class=\"margin_term\"><a class=\"glossterm\">materials management<\/a><\/span>, which encompass the following activities: purchasing, inventory control, and work scheduling.<\/p>\n<div id=\"collins-ch11_s03_s01\" class=\"section\">\n<h2 class=\"title editable block\">Purchasing and Supplier Selection<\/h2>\n<p id=\"collins-ch11_s03_s01_p01\" class=\"para editable block\">The process of acquiring the materials and services to be used in production is called <span class=\"margin_term\"><a class=\"glossterm\">purchasing<\/a><\/span> (or <em class=\"emphasis\">procurement<\/em>). For many products, the costs of materials make up about 50 percent of total manufacturing costs. Not surprisingly, then, materials acquisition gets a good deal of the operations manager\u2019s time and attention.<\/p>\n<p id=\"collins-ch11_s03_s01_p02\" class=\"para editable block\">As a rule, there\u2019s no shortage of vendors willing to supply parts and other materials, but the trick is finding the <em class=\"emphasis\">best<\/em> suppliers. In selecting a supplier, operations managers must consider such questions as the following:<\/p>\n<ul id=\"collins-ch11_s03_s01_l01\" class=\"itemizedlist editable block\">\n<li>Can the vendor supply the needed quantity of materials at a reasonable price?<\/li>\n<li>Is the quality good?<\/li>\n<li>Is the vendor reliable (will materials be delivered on time)?<\/li>\n<li>Does the vendor have a favorable reputation?<\/li>\n<li>Is the company easy to work with?<\/li>\n<\/ul>\n<p id=\"collins-ch11_s03_s01_p03\" class=\"para editable block\">Getting the answers to these questions and making the right choices\u2014a process known as supplier selection\u2014is a key responsibility of operations management.<\/p>\n<div id=\"collins-ch11_s03_s01_s01\" class=\"section\">\n<h3 class=\"title editable block\">E-Purchasing<\/h3>\n<p id=\"collins-ch11_s03_s01_s01_p01\" class=\"para editable block\">Technology is changing the way businesses buy things. Through <em class=\"emphasis\">e-purchasing<\/em> (or <em class=\"emphasis\">e-procurement<\/em>), companies use the Internet to interact with suppliers. The process is similar to the one you\u2019d use to find a consumer good\u2014say, a forty-two-inch LCD high-definition TV\u2014over the Internet. You might start by browsing the Web sites of TV manufacturers, such as Sony or Samsung, or electronics retailers, such as Best Buy. To gather comparative prices, you might go to a comparison-shopping Web site, such as <a class=\"link\" href=\"http:\/\/Amazon.com\" target=\"_blank\" rel=\"noopener\">Amazon.com<\/a>, the world\u2019s largest online retailer. You might even consider placing a bid on eBay, an online marketplace where sellers and buyers come together to do business through auctions. Once you\u2019ve decided where to buy your TV, you\u2019d complete your transaction online, even paying for it electronically.<\/p>\n<p id=\"collins-ch11_s03_s01_s01_p02\" class=\"para editable block\">If you were a purchasing manager using the Internet to buy parts and supplies, you\u2019d follow basically the same process. You\u2019d identify potential suppliers by going directly to private Web sites maintained by individual suppliers or to public Web sites that collect information on numerous suppliers. You could do your shopping through online catalogs, or you might participate in an online marketplace by indicating the type and quantity of materials you need and letting suppliers bid on prices. (Some of these e-marketplaces are quite large. Covisint, for example, which was started by automakers to coordinate online transactions in the auto industry, is used by more than two hundred and fifty thousand suppliers in the auto industry, as well as suppliers in the health care field.)<span id=\"fwk-collins-fn11_012\" class=\"footnote\">Jingzhi, \u201cCovisint.com,\u201d <a class=\"link\" href=\"http:\/\/www.sftw.umac.mo\/~jzguo\/pages\/covisint.html\" target=\"_blank\" rel=\"noopener\">http:\/\/www.sftw.umac.mo\/~jzguo\/pages\/covisint.html<\/a> (accessed November 2, 2011).<\/span> Finally, just as you paid for your TV electronically, you could use a system called <span class=\"margin_term\"><a class=\"glossterm\">electronic data interchange (EDI)<\/a><\/span> to process your transactions and transmit all your purchasing documents.<\/p>\n<p id=\"collins-ch11_s03_s01_s01_p03\" class=\"para editable block\">The Internet provides an additional benefit to purchasing managers by helping them communicate with suppliers and potential suppliers. They can use the Internet to give suppliers specifications for parts and supplies, encourage them to bid on future materials needs, alert them to changes in requirements, and give them instructions on doing business with their employers. Using the Internet for business purchasing cuts the costs of purchased products and saves administrative costs related to transactions. And it\u2019s faster for procurement and fosters better communications.<\/p>\n<\/div>\n<\/div>\n<div id=\"collins-ch11_s03_s02\" class=\"section\">\n<h2 class=\"title editable block\">Inventory Control<\/h2>\n<p id=\"collins-ch11_s03_s02_p01\" class=\"para editable block\">If a manufacturer runs out of the materials it needs for production, then production stops. In the past, many companies guarded against this possibility by keeping large inventories of materials on hand. It seemed like the thing to do at the time, but it often introduced a new problem\u2014wasting money. Companies were paying for parts and other materials that they wouldn\u2019t use for weeks or even months, and in the meantime, they were running up substantial storage and insurance costs.<\/p>\n<p id=\"collins-ch11_s03_s02_p02\" class=\"para editable block\">Most manufacturers have since learned that to remain competitive, they need to manage inventories more efficiently. This task requires that they strike a balance between two threats to productivity: losing production time because they\u2019ve run out of materials, and wasting money because they\u2019re carrying too much inventory. The process of striking this balance is called <span class=\"margin_term\"><a class=\"glossterm\">inventory <\/a><\/span>, and companies now regularly rely on a variety of inventory-control methods.<\/p>\n<div id=\"collins-ch11_s03_s02_s01\" class=\"section\">\n<h3 class=\"title editable block\">Just-in-Time Production<\/h3>\n<p id=\"collins-ch11_s03_s02_s01_p01\" class=\"para editable block\">One method is called <span class=\"margin_term\">just-in-time (JIT)<\/span>: the manufacturer arranges for materials to arrive at production facilities <em class=\"emphasis\">just in time<\/em> to enter the manufacturing process. Parts and materials don\u2019t sit unused for long periods, and the costs of \u201cholding\u201d inventory are significantly cut. JIT, however, requires considerable communication and cooperation between the manufacturer and the supplier. The manufacturer has to know what it needs, and when. The supplier has to commit to supplying the right materials, of the right quality, at exactly the right time.<\/p>\n<\/div>\n<div id=\"collins-ch11_s03_s02_s02\" class=\"section\">\n<h3 class=\"title editable block\">Material Requirements Planning<\/h3>\n<p id=\"collins-ch11_s03_s02_s02_p01\" class=\"para editable block\">Another method, called <span class=\"margin_term\"><a class=\"glossterm\">material requirements planning (MRP)<\/a><\/span>, relies on a computerized program both to calculate the quantity of materials needed for production and to determine when they should be ordered or made. Let\u2019s say, for example, that you and several classmates are planning a fund-raising dinner for the local animal shelter. First, you estimate how many people will attend\u2014say, fifty. Next, you plan the menu\u2014lasagna, garlic bread, salad, and cookies. Then, you determine what ingredients you\u2019ll need to make the food. Next, you have to decide when you\u2019ll need your ingredients. You don\u2019t want to make everything on the afternoon of the dinner; some things\u2014like the lasagna and cookies\u2014can be made ahead of time. Nor do you want to buy all your ingredients at the same time; in particular, the salad ingredients would go bad if purchased too far in advance. Once you\u2019ve made all these calculations and decisions, you work out a schedule for the production of your dinner that indicates the order and timing of every activity involved. With your schedule in hand, you can determine when to buy each ingredient. Finally, you do your shopping.<\/p>\n<p id=\"collins-ch11_s03_s02_s02_p02\" class=\"para editable block\">Though the production process at most manufacturing companies is a lot more complex than planning a dinner (even for fifty), an MRP system is designed to handle similar problems. The program generates a production schedule based on estimated output (your food-preparation timetable for fifty guests), prepares a list of needed materials (your shopping list), and orders the materials (goes shopping).<\/p>\n<p id=\"collins-ch11_s03_s02_s02_p03\" class=\"para editable block\">The basic MRP focuses on material planning, but there\u2019s a more sophisticated system\u2014called <span class=\"margin_term\"><a class=\"glossterm\">manufacturing resource planning (MRP II)<\/a><\/span>\u2014that goes beyond material planning to help monitor resources in all areas of the company. Such a program can, for instance, coordinate the production schedule with HR managers\u2019 forecasts for needed labor.<\/p>\n<\/div>\n<\/div>\n<div id=\"collins-ch11_s03_s03\" class=\"section\">\n<h2 class=\"title editable block\">Work Scheduling<\/h2>\n<p id=\"collins-ch11_s03_s03_p01\" class=\"para editable block\">As we\u2019ve seen, manufacturers make profits by transforming inputs (materials and other resources) into outputs (finished goods). We know, too, that production activities, like all business activities, have to be <em class=\"emphasis\">controlled<\/em>: they have to be monitored to ensure that actual performance satisfies planned performance. In production, the control process starts when operations managers decide not only <em class=\"emphasis\">which<\/em> goods and <em class=\"emphasis\">how many<\/em> will be produced, but <em class=\"emphasis\">when<\/em>. This detailed information goes into a <span class=\"margin_term\"><a class=\"glossterm\">master production schedule (MPS)<\/a><\/span>. To draw up an MPS, managers need to know where materials are located and headed at every step in the production process. For this purpose, they determine the <em class=\"emphasis\">routing<\/em> of all materials\u2014that is, the work flow of each item based on the sequence of operations in which it will be used.<\/p>\n<div id=\"collins-ch11_s03_s03_n01\" class=\"key_takeaways editable block\">\n<div class=\"textbox key-takeaways\">\n<h3 class=\"title\">Key Takeaways<\/h3>\n<ul id=\"collins-ch11_s03_s03_l01\" class=\"itemizedlist\">\n<li>Once the production process is under way, the attention of the operations manager shifts to the daily activities of <strong class=\"emphasis bold\">materials management<\/strong>, which encompasses materials <strong class=\"emphasis bold\">purchasing<\/strong>, <strong class=\"emphasis bold\">inventory control<\/strong>, and work scheduling.<\/li>\n<li>Because material costs often make up about 50 percent of total manufacturing costs, vendor selection and material acquisition gets a good deal of the operations manager\u2019s time and attention.<\/li>\n<li>In recent years, the purchasing function has been simplified through technology advances, including e-purchasing and <strong class=\"emphasis bold\">electronic data interchange (EDI)<\/strong>, which process transactions and transmit purchasing documents.<\/li>\n<li>Commonly used inventory control methods include <strong class=\"emphasis bold\">just-in-time (JIT) production<\/strong>, by which materials arrive just in time to enter the manufacturing process, and <strong class=\"emphasis bold\">material requirements planning (MRP)<\/strong>, which uses computer programming to determine material needs.<\/li>\n<li>To schedule jobs, managers create a <strong class=\"emphasis bold\">master production schedule (MPS)<\/strong>.<\/li>\n<\/ul>\n<\/div>\n<\/div>\n<div id=\"collins-ch11_s03_s03_n02\" class=\"exercises editable block\">\n<h3 class=\"title\">Exercise<\/h3>\n<p id=\"collins-ch11_s03_s03_p02\" class=\"para\">What is e-purchasing (or e-procurement)? How does it work? What advantages does it give a purchasing manager? How does it benefit a company? How does it change the relationship between purchasing managers and vendors?<\/p>\n<\/div>\n<h1>Unit 5 Discussion<\/h1>\n<div class=\"creator\">\n<p>#1<\/p>\n<\/div>\n<div class=\"post\">\n<p>Choosing suppliers for your supply chain is often a challenge. Do you put all your eggs in one basket or look to fulfill your needs through multiple vendors? Using the information provided over choosing a good supplier, apply the criteria to the purchase of a new car. Discuss your answers to the following questions: Is the quality good, is the vendor reliable, does the vendor have a favorable reputation, is the company easy to work with? Based on your answers, which of the vendor would be your choice? 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