Supply Chain chapter 3

Supplier Evaluation & Certification

-A process to identify best & most reliable suppliers -Sourcing decisions are made on facts & not on perception -Frequent feedback can help avoid surprises & maintain good relationships. -Suppliers should be allowed to provide constructive feedback to the customer

Criteria Used in Certification Programs

-No incoming product lot rejections (e.g., less than 0.5 percent defective) for a specified time period. -No incoming non-product rejections (e.g., late delivery) for a specified time period -No significant supplier production-related negative incidents for a specified time period -ISO 9000/Q9000/14001 certified or successfully passing a recent, on-site quality system evaluation -Mutually agreed-upon set of clearly specified quality performance measures -Fully documented process & quality system with cost controls & continuous improvement capabilities -Supplier's processes stable & in control

Benefits derived from automating procurement activities

-Significant cost savings as buyers move toward managing processes by exception -Greater procurement visibility from using SRM software also translates into smoother processes;reduced product development;faster cycle times; streamlined purchasing; improved time to market; reduced inventory costs

Five key points of an SRM system

1. Automation handles routine transactions 2. Integration spans multiple departments, processes, & software applications 3. Visibility of information & process flows 4. Collaboration through information sharing 5. Optimization of processes & decision making

Three Attributes

1. Companies should recognize & celebrate the achievements of their best suppliers. 2. Award winners exemplify true partnerships continuous improvement, organizational commitment, & excellence. 3. Award-winning suppliers serve as role models for other suppliers.

A buyer's activities to improve a supplier's performance and/or capabilities based on the following approach

1. Identify critical products & services 2. Identify critical suppliers not meeting performance requirements 3. Form a cross-functional team 4. Meet with top management of supplier 5. Rank supplier development projects 6. Define details of Agreement 7. Monitor status & modify strategies

The Weighted-Criteria Evaluation System

1. Select the key dimensions of performance mutually acceptable to both customer & supplier. 2. Monitor & collect performance data. 3. Assign weights to each of the dimensions. 4. Evaluate performance measures between 0 & 100. 5. Multiply dimension rating by weight & sum of overall score. 6. Classify vendors based on their overall score: Unacceptable, Conditional, Certified, & Preferred 7. Audit & perform ongoing certification review.

ISO 14000

A family of standards for environmental management. The benefits include reduced energy consumption, environmental liability, waste & pollution, & improved community goodwill.

ISO 9000

Developed by International Organization for Standardization (ISO) - series of management & quality standards in design, development, production, installation, & service. Companies wanting to sell in the global market seek ISO 9000 certification.

Supplier Relationship Management (SRM)

Refers to streamlining the processes and communication between buyer and supplier using software applications manage processes more efficiently and effectively.

Analytic SRM

allows the company to analyze the complete supplier base.

Transnational SRM

is used to track supplier interactions such as order planning, order payment and returns

Supplier Certification

refers to "an organization's process for evaluating the quality systems of key suppliers in an effort to eliminate incoming inspections." -Institute for Supply Management