SUPPLY CHAIN

MANAGEMENT
J.O.Owuor
Department of Optometry
Kenya Medical Training College
 SUPPLY CHAIN MANAGEMENT
Objectives
At the end of this topic the learner will be able to:
 Define the term ‘supply chain management’.
 Outline the functions involved in supply chain
management.
 Define the term logistics and outline the ‘seven rights
concept’.
 Define the term procurement and describe the various
methods employed.
 Describe the various standard documents used in
public procurement practice.
 Objectives cont’d
 Outline the policy and legal framework applicable
in procurement and supply.
 Outline the key ethical considerations in
procurement and supply.
 Introduction
Definition
A supply chain:
- is a network of suppliers, manufacturers,
assemblers, distributors, and logisticians who
perform the functions of procurement of
materials, transformation of these materials
into intermediate and finished products, and
the distribution of these products to
customers.
 Introd. Cont’d
• Supply chain management (SCM) involves
the linkage of immediate seller/buyer
relationship into a longer series of events.
• A company’s suppliers have their own
suppliers, and often our direct customers are
not the ultimate consumers.
• Supply chains arise in both manufacturing and
service organisations.
The sequence begins with basic suppliers of raw
materials and extends all the way to the final
customer.
 Introdn. Cont’d
Functions and activities include forecasting,
procurement, inventory management, information
management, quality assurance, scheduling,
production, distribution , delivery, and customer
service.
There are three kinds of movements in these
systems:
The physical movement of materials (forward)
The flow of cash (backwards)
Exchange of information(both directions along
the chain)
 Key concepts in SCM
a). Inventory control
This is concerned with the levels of inventory (stock)
to be held at various points in the supply chain.
As inventory represents cost, the sensible approach is
to hold as low an inventory as possible.
How to minimize the necessity of holding
unnecessary inventory which increases the cost at the
end is one of the key issues in supply chain
management.
Key concepts in SCM cont’d
b). Distribution
Goods are not necessarily bought direct from a
manufacturer, and services may be provided by a
franchisee or other intermediary.
The distributor links the original maker and the
end-user and offers solutions to a number of
problems.
The distributor is a middleman who usually
assembles, stocks and sells a large assortment of
wares to users.
Key concepts in SCM cont’d
c). Product design
This is concerned with the design of the product and
its impact on total cost of the product.
It is possible that the design determines the strategies
to be followed regarding inventory or transportation.
The design may also determine the length of the life
cycle and the extent of uncertainty associated with
demand for this product.
Key concepts in SCM cont’d
d). Information technology
The concerns of contemporary supply chain
management are the efficient use of modern
technology including Internet and computerized
decision support systems.
The technology allows acquisition of vast quantity
of data, information and their subsequent
processing in accordance with selected decision
criteria.
Key concepts in SCM cont’d
e). Customer value
The key issue is the definition of customer value
in an age of increasing consumer power.
How will supply chains be designed to provide
value to the customers and how will firms define
value?
Storage
f. Storage
may be defined as the process of maintaining or
keeping stock (inventory).
Total material cost is affected by inventory levels,
and procurement has an important role with
respect to stocks of raw materials and bought-in-
parts, especially in times of rapid inflation.
 Logistics
a. Definition
Logistics refers to the movement of materials ,
services, cash, and information in a supply chain.
 Materials include all the physical items used in a
production process and service delivery.
Logistics includes movement within a facility,
overseeing incoming and outgoing shipments of
goods and materials, and information flow
throughout the supply chain.
 Logistics cont’d
b. The seven rights concept
In the quest to provide quality services in the
health systems and satisfy customers, Health
Systems institutions along the supply chains are
guided by the Seven Rights of Fulfillment:
(Objectives of logistics management)
- The right product - In the right
condition
- To the right customer - In the right quantity
- At the right time - At the right cost
- At the right place
 Procurement
Definition
The function of making need available.
When a need is identified by the user, it becomes a
demand.
It then follows that an identified demand must be
made available to the ultimate consumer/user so
that the demand can be satisfied.
Sourcing of organizational requirements in simpler
terms is referred to as procurement.
 Procurement cont’d
Types of Procurement
1. Open tendering
 Applies to both local and international tenders.
 Is the preferred method of procurement open to
all tenderers who feel competent to purchase the
tender documents.
 It is advertised publicly and involves maximum
competition.
 Procurement cont’d
2. Restricted tendering (prequalification)
 This is an alternative method of procurement
other than open tendering which can be used by
entities only after obtaining written approval
from its Tender Committee and if it has
recorded in writing the reasons for using the
alternative procedure.
 Conditions to be satisfied for approval to
use this alternative procurement method are:
 Competition for contract because of its

complexity or specialised nature limited to

prequalified contractors.
 Procurement cont’d
 Time and cost required to examine and evaluate a
large number of tenders would be disproportionate
to the value of the procurement.
 There are only a few known suppliers for a
particular type of procurement.
3. Request for proposals (quotations)
An alternative method of procurement other than
open tendering which can be used by entities if:
 The procurement is of services or a combination
of goods and services.
 Procurement cont’d
 The services to be procured are advisory or
otherwise of a predominantly intellectual
nature.
 The procurement is for goods which are
readily available and for which there is an
established market.
 The estimated value of the goods being
procured is less than or equal to the
prescribed maximum value for using
Request for Quotations.
 Procurement cont’d
4. Direct Procurement
An alternative method of procurement other than
open tendering which can be used by entities only
after obtaining written approval from its Tender
Committee and if it has recorded in writing the
reasons for using the alternative procedure.
Conditions to be satisfied for approval to use this
alternative method of procurement are:
 There is only one person who can supply the
goods, works, or services being procured.
 Procurement cont’d
 There is no reasonable alternative or substitute
for the goods, works or services.
 There is an urgent need for the goods, works or
services being procured
 The circumstances that gave rise to the urgency
were not foreseeable and were not the result of
dilatory conduct on the part of the procurement
entity.
 Documents used in Public
Procurement
These are generally referred to as “Standard” or
“S” documents implying that they are standard
documents:
1. S3:
 A stores ledger and stock control card.
 It records the items received in the store and
the items issued out from the store.
 It also indicates the computed balance in
stock.
 Documents used in Public
Procurement cont’d
2. S5:
 The bin card.
 It is kept against the items on the shelves within
the store premises.
 It also indicates the current balance.
3. S10:
 This is the request for quotation document used
in procurement by quotation method.
 Two copies are given to merchants.
 Documents used in Public
Procurement
4. S11:
 This the counter requisition and issue voucher.
 It is used for requesting for items from the store
and for issuing the same from the store.
 It is used within a procurement entity.
5. S12:
 This is the counter issue and receipt voucher.
 Is used in two ways: as a receipt voucher and an
issue voucher.
 It is used between procurement entities e.g;
between KEMSA and user facilities.
 Documents used in Public
Procurement cont’d
6. S13:
 This the counter receipt voucher used to receive items
in the store as they get delivered by the suppliers.
 May also be used to surrender imprest for items
purchased directly.
7. S16:
 This the Stock-taking and verification card.
 Used for taking stock at the closure of a financial year.
 Documents used in Public
Procurement cont’d
8. S20:
 This the local purchase order (LPO) used for
ordering goods (tangible) from suppliers.
9. S21:
 This the local service order (LSO) used for
services (non-tangible) from suppliers.
 Policy and Legal Framework
Public Procurement and Disposal Act (2005) and the
subsidiary legislation entitled Public Procurement and
Disposal Regulations (2006) were enacted in order to
provide legal framework for regulating public
procurement.
The legislative framework provides for oversight
functions to be carried out by the Public Procurement
Oversight Authority (PPOA), the Public Procurement
Oversight Advisory Board (PPOAB) and for appeals
mechanism to the Public Procurement Administrative
Review Board (PPARB).
Policy and Legal Framework cont’d
Purpose of the Act
To establish procedures for the procurement and
disposal of unserviceable, obsolete, or surplus
stores and equipment by public entities;
specifically to achieve the following objectives:
To maximize economy and efficiency
Promote competition and ensure that
competitors are treated fairly
Promote the integrity and fairness of the
procedures
Policy and Legal Framework cont’d
Increase transparency and accountability
Increase public confidence in the
procurement system
Facilitate promotion of local industry and
economic development.
 Ethical Considerations
Declaration of interest
Confidentiality and accuracy of information
Competition (encouraged)
Business gifts (discouraged)
Hospitality
END OF PART ONE

THANKS & BYE