L4M6 Supplier Relationships all chapters revision

3) Timescales

ISSUES if timescales are not met by suppliers: Bottlenecks or stoppages Lost time costs e.g. overheads, salaries Reputational damage if late delivery or unavailability for customers. STRATEGY for reducing lead times: Pay higher prices for shorter delivery times Simplify time taken to convert PR to PO Holding more stock. Expediating Balance between lower costs from developing countries to longer delivery times.

How can using supply positioning (Kraljic) help a buyer?

Identifies the sourcing and relationship opportunities that can add value Identify opportunities to gain competitive advantage. Provide a framework for decision making and action planning. Improving risk management by identifying products/suppliers which pose a vulmerability.

The relationship spectrum

Identify where efforts need to be focused that will be beneficial for the business. Adversarial > Arms Length > Transactional > Closer tactical > Single sourced > Outsourced > Strategic alliance > Partnership > Co destiny.

1.1 Differentiate between types of relationships in supply chains

Internal and external relationships Relationship Spectrum The relationship Life cycle.

Private sector - Selection and award

RFP can be issued to short listed suppliers requesting key information including: >Detailed info on how products and services will be delivered. >Risk assessments >Full pricing information. Evaluation criteria is weighted and suppliers scored. Criteria often a mix of price and quality. Cross functional group to evaluate. Scored presentation stage. If suppliers are similar an e auction may be used or further negotiations may take place to extract further value. Negotiations will also take place with a sole supplier.

Supplier relationship management (SRM)

Process for identifying all interactions with key suppliers and then managing them in a way that increases the value and risk mitigation for both parties.

2) Relationship life cycle- Segmentation and risk mgt

Products segmented and classified to ensure that correct relationship is developed with each supplier.

Return on relationship investment (RORI)

RORI - The financial benefits for a buyer of establishing developing and maintaining buyer-supplier relationships.

2.4 Identify the process for terminating stakeholder relationships.

Reasons for termination The process of termination Timing Relationship impacts - amicable v hostile Legal considerations - finances, confidentiality, IPR, security, employee rights. Succession issues - continuity of supply.

Relationship Life cycle

Qualification > Segmentation and risk mgt > Performance mgt > Develoment and innovation.

STEEPLE factors that affect supply chains

Social, technological, economic, environmental, political, legislative and ethical.

Focus strategy - procurement objectives

Source a supplier able to support needs of the niche buyers e.g. a low cost supplier/country, using ESI for value engineering and to drive innovation.

Differentiation strategy - procurement objectives

Source supplier who can support 'unique element' of product > early supplier engagement > reduce costs.

1.3 identify the competitive forces that impact on relationships in supply chains.

Sources of competitive advantage. Competitive forces: Porters Five Forces. STEEPLE factors that affect supply chains.

3) Relationship life cycle - Development and innovation

Supplier development may take place with strategic suppliers to improve their processes. Reasons and benefits 1) performance issues 2) buying org needs to make improvements e.g. reducing waste 3) buyer wants supplier to adopt new technologies e.g. ordering system 4) buyer wants to develop new products and services.

Three portfolio analysis techniques (models/matrices) for the development of sourcing and supplier relationship strategies.

Supply positioning (the Kraljic model) Supplier preferencing model Market management matrix

Staff and resources as a competitive advantage

Tacit knowledge is the vast amount of unwritten knowledge held in the minds of people based on experience and observations.

Benefits of cost modelling

1) By understanding supplier costs, through negotiations, buyer can target areas where Supplier has higher profit margins and therefore more likely to reduce costs. 2) Gives buyer power in negotiations. 3) Data can be used for further cost saving strategies.

Five key principles to ensure accurate cost models

1) Capture cost drivers (not just cost elements) 2) Consider the impact of the total cost of ownership 3) Triangulate data to improve accuracy.

Advantages of External Suppliers

1) Often an expert in their field. 2) Can drive innovation and introduce new technologies. 3) Take advantage of economies of scale - if supplier is producing the same for multiple customers. 4) Frees up internal resources to focus on other activities creating value. 5) ES can produce small lots which would be prohibitive internally.

Poor team working characteristics

1) Poor communication between members 2) Lack of clarity on job roles and responsibilities 3) Blaming other team members for failure 4) Lack of focus on objectives 5) Not meeting deadlines 6) Low levels of motivation 7) Low levels of trust

Ways in which procurement can add value through relationships with external suppliers

1) Pricing and cost management 2) improving quality 3) timescales 4) quantities and place considerations.

Business Continuity Planning - A process to support an organisation to recover from a disruption in the shortest possible time.

1) Risk identification - risk mapping exercise of supply chain and the market 2) Risk assessment - review of likelihood of occurrence e.g. high risk of natural disasters, are there any sole source 3) Risk ranking - rank and prioritise risks identified 4) Risk management - risk taking, accepting the risk or transferring the risk.

Kraljic - Strategy for Bottle neck (high risk/low value but with few options in the market. e.g. computer chips. ISSUE Supply Risk due to limited availability and few suppliers.

1) Secure long term supply contracts with clauses regarding late delivery charges. 2) Look for alternatives in the market. Type of relationship - Single source, long term contracts.

Kuber-Ross Model - An individual goes through various phrases when resisting change.

1) Shock and denial 2) Anger and depression 3) Acceptance and integration

Benefits of Kraljic

1) Simple to understand. 2) Can be applied across all industries and organisations. 3) Understanding of product portfolio - importance and risk of each to the org and the relationship which should be used to maximise value.

The Procurement Cycle

1) Understanding need - Make or buy/Involve stakeholders/Develop specification/ESI. 2) Review the market - Porters Five Forces, STEEPLE. 3) Develop Strategy - spend review, supplier relationship mgt 4) Contract management 5) Supplier selection - Developing documentation e.g. RFI and criteria. Then evaluating against criteria to identify suppliers who can progress to request RFP. 6) Award Stage - selection and awarding criteria.

Kraljic - Strategy for Routine (low risk/low value) items e.g. stationery, low level temporary labour.

1) Use on line catalogues to improve efficiency. 2) Construct framework agreement/ call off contracts to reduce burden of tendering. 3) Standardise products as much as possible to increase volumes, gain economies of scale/ consolidate suppliers. Type of relationships - Arms length, transactional.

Cross organisational teams

A cross organisational team allows procurement to have access to more information on what the business considers to be the right quantity, time, price, place and quality. This could include: End users Procurement team to source a supplier Finance team - budget Legal team - contract

Value mapping

A process in which value is created by reducing or eliminating waste and operational inefficiencies. TIMWOOD - Seven Wastes

Cost Modelling

A process that buyers use to understand all of the costs that make up a suppliers price. It can be used to identify overpriced elements. Generally undertaken on spend in the strategic quadrant of Kraljic. Requires input of internal stakeholders / also can be as part of a collaborative relationship with a supplier.

Porters Value Chain (1985)

A set of activities an organisation uses to create value for customers over and above the sum of the costs. The more value created the more profit can be generated e.g. operations, marketing, logistics, after sales service. A review of a supply chain should look to eliminate wasteful processes and implement competitive strategies.

Price inelasticity

A situation In which demand of a commodity is unaffected by an increase in price. Ex: cigarettes

Price elasticity

A slight change in price brings about significant change in demand e.g. stationery.

Vendor managed inventories (VMI)

A system in which the supplier has access to the customer's inventory data and is responsible for maintaining the inventory on the customer's site

The relationship spectrum - mnemonic

Amazing Annie Tried Cooking Some Onions Sadly Peeling Cried.

Just-in-time (JIT)

An inventory-management approach in which supplies arrive just when needed for production or resale

Factors that define Value for money

Fitness for purpose Quality Total Lifetime costs Is it a high risk Is it low environmental impact, sustainable CSR policy of org.

Public sector - selection and award

Five Key procurement processes 1) Open Tender - Similar to an RFP - called an ITT. Used when few suppliers - no PQQ 2) Restricted tender process 3) Competitive procedure with negotiation 4) Competitive dialogue - used for a complex procurement - only one where negotiation can take place. 5) innovative partnership procedure MEAT (most economically advantageous tender)- is public sector evaluation criteria made up of mainly of price and quality.

1 Use Pareto Analysis (ABC) - 80/20 rule to identify how to move non contract spend to contract spend.

For example 80% of spend with 20% of Suppliers - this is where effort of procurement should be focused. A Items - Top 20% suppliers, B items - those in the middle C items -80% low spend.

3.2 Appraise the process of partnership implementation

How to identify items potentially suitable for partnership sourcing. Sell the philosophy to senior management and other functions of the organisation. Define the standards that potential partners will be expected to meet. Establish joint commitment to the partnership. Reviews and audits.

How to manage conflict

1) Avoiding - does not deal with the conflict, low concern for oneself and others. 2) Competing - high concern for oneself and low for others linked to power, assertive behaviour. Competing behaviours in a project need to be managed carefully. 3) Accommodating - low concern for oneself but high for others. Might be used with v important stakeholders. 4) Collaborating - high concern for others and oneself - trying to find a solution suitable for all. 5) Compromising - reaching a middle ground.

Reasons for termination of a contract

1) Contract comes to a natural end - product/service no longer required. 2) Contract has reached end date in terms and conditions. 3) Contract is re-tendered and moves to a new supplier. 4) Through the buyer doing a Supply base rationalisation exercise. 5) Supplier increases prices with no justifiable reason. 6) Due to a material breach e.g. supplier underperforming. 7) Supplier involved in unethical practices which could damage reputation of buyer. 8) Contract frustration - An unforeseen incident making the obligations of the contract impossible to perform. Under UK law the contract can be terminated. Can be avoided by adding a Force Majeure clause naming the possible event.

Disadvantages of external suppliers

1) Dependency on the supplier 2) Risk of reputational damage if supplier is for eg unethical. 3) Logistic risk and costs. 4) Risk of relationship issues.

Advantages of 'Make' / using an Internal supplier.

1) Greater control and continuity of supply 2) Stable relationship between internal colleagues with shared organisation processes, values and culture. 3) Potential lower costs with no external supplier margin. 4) Intellectual property (IP) is protected from passing to competitors.

Barriers to 'Make'

1) High costs of production if volumes are low 2) Legislative barriers e.g. permits required. 3) Lack of technical expertise or resource to meet the need.

Three examples of how portfolio Analysis techniques can achieve procurement objectives

1) How to reduce costs by moving non contract spend to contract spend. This could be achieved by undertaking a Pareto analysis (also an ABC analysis) of the top non contract suppliers. 2) Identify key products and services by using a Kraljic model to identify strategic items. 3) Reviewing where strategic suppliers are on the Supplier Preferencing model and whether more collaborative relationships are possible.

Supplier termination process

1) Identify supplier performance issues 2) Undertake contract management 3) Obtain business approval to terminate 4) Develop exit strategy 5) Review market/qualify new supplier 6) Give written notice of termination 7) Manage exit strategy/on board new supplier.

Disadvantages of using an internal supplier

1) If price isn't externally benchmarked its difficult to know if IS is offering value for money 2) Ensuring IS maintains standards. 3) Investment in equipment, machinery required - is there a good return on investment or could the capital be used more effectively.

Risk management strategies

1) Involve internal stakeholders e.g. finance to review supplier accounts, health & safety professional to conduct H & S check. 2) Dual or multiple source rather than sole source. 3)Trusting relationship with supplier who will provide early warning of issues. 4)Stock could be held to minimise impact of Force majure events. 5) Escrow Agreement - Third party support. 6) Formal contract management process - regular reviews can identify any issues.

Kraljic - Strategy for Strategic (high risk/ high impact on profit) E.g. Major IT providers. ISSUES Small number of suppliers who may have monopoly and power.

1) Long term relationships as switching could be costly and difficult. 2) Balancing power. Type of relationship - Strategic alliance.

Limitations of Mendelows Model

1) Mapping of stakeholders could be subjective which could result in under engagement 2) Concept of power may be misunderstood 3)Only provides a snapshot in time.

Managing conflict in a termination

1) Mediation - Attempts to get both parties to reach a compromise. 2) Arbitration - The settling of a dispute by an impartial third party.

How to work with a supplier to reduce the impact of price fluctuations

1) Monitor each component in the market that could increase costs. 2) Forward buying - Buying a greater quantity than currently required to avoid future price increases. 3) Jointly look to reduce waste and inefficiencies. 4) Look to source in own country to avoid tariffs. 5) Track commodity markets and interest rates. 6) Hedging - Involves buying similar quantities of same product in two separate markets on basis that a price increase in one will be offset by decrease in other.

Qualitative KPIs - to measure buyer and supplier relationships

1) Mutual trust. 2)Power 3) Communication 4) Commitment 5) Co-operation 6) Transparency and information sharing. Cycle - >Define the KPIs >Measure the supplier against KPIs >Analyse the buyer-supplier relationship >Identify areas for improvement >Ongoing monitoring.

Overcoming resistance model

1) Negative leaders - try to convince but not reinforce 2) Promoters - Support and empower 3) Silent opponents - Monitor the influence 4) Supporters - Keep satisfied, try to enlarge their audience.

ESI - Handfield et al Sliding Scale Model

1) No Supplier involvement 2) White box - informal, buyer consults with supplier about design. 3) Grey box - Formal, joint development activity. 4) Black box - Design is primarily supplier driven based on buyers performance specification.

Limitations of Kraljic

1) Not always easy to classify products into a quadrant due to complexity of market. 2) Subjectivity of where products and services are located on the model. 3) It is only a snapshot of a point in time due to constant change in the market. 4) Applies to the products or services and not the supplier.

Quadrants of Supplier Preferencing Matrix

1) Nuisance - Customer difficult or expensive to service/little profit for supplier. STRATEGY for buyer - try and move into development quadrant e.g. work on a high value/growth project that the supplier would be interested in. 2) Exploitable - Supplier in position of strength, does not go out of way for buyer, price increases and lack of negotiation. Strategy for buyer - try to move to CORE quadarnt. 3) Development - buyer has potential for growth, therefore Supplier is proactive, going the extra mile to win more business. Strategy for buyer - reward Supplier with more business, involve in Supplier development activities. 4) Core - V important customer. Supplier gives great customer service and drives innovation to defend and retain business. Strategy - Ensure core position is maintained.

Kraljic - Strategy for Leverage (low risk/high value) Product specific materials. ISSUES Can have a large impact in profit due to high value.

1) Obtain best deal with competitive tendering. 2) Engage in consortia procurement (group spending to leverage buying power - often done in Public sector). Type of relationship - closer tactical/outsourcing.

Market management Matrix

A combination of the Kraljic model and Supplier Preferencing Matrix to provide guidance on strategy to adopt from own point of view and suppliers perspective.

LO1 The dynamics of relationships in supply Chains

1.1 Different types of commercial relationships in supply chains. 1.2 Portfolio analysis techniques to assess relationships in supply chains. 1.3 Competitive forces that impact on supply chains. 1.4 Sources of added value that can be achieved through supply chain relationships.

LO2 Understanding processes and procedures for successful working with stakeholders.

2.1 The purpose of organisational procedures and processes in sourcing goods and services. 2.2 Team management techniques to ensure positive stakeholder relationships. 2.3 The practical considerations of stakeholder management.

LO3 Understanding the concept of partnering.​

3.1 Concept of partnering and where it is a suitable approach. 3.2 The process of partnership implementation. 3.3 The reasons why partnerships fail LO3 Understanding the concept of partnering.

Pareto Principle (80/20 rule) - Use to Focus efforts

80% of effects come from 20% of the causes. In an organisation 80% of spend will be with around 20% of its supplier base. This is where focus of suplier relationships should be.

Benefits of ESI

> Expert knowledge and innovation at the design stage. > Improved quality as well as potential cost savings. >Can increase the speed for a product coming to market. >Improved relationship between the supplier and buyer.

Early Supplier Involvement (ESI)

> Involves a cross organisational team including supplier. >Aim is to create a product or service with greater value that could have been created by buying organisation alone. >Supplier needs to be involved from the specification stage. >Strategic Supplier ideally that views the buyer as either a 'development' or 'core' customer.

Disadvantages of ESI

> Relationship could break down resulting in issues. >Ensure correct supplier is chosen - strategic/how they view they buyer. >risk of IPR - information that provides competitive advantage to buyer could be leaked to competitors.

Importance of procurement processes and procedures

>Company policy on threshold for quotes >Contracts/ agreed terms and conditions in place - without these different parts of business could be paying different prices. >Prevent Maverick buying activity >Ensure formal specifications are used. >Supplier checks.

Benefits of Mendelow's Model

>Involving stakeholders makes them more likely to support a procurement >Support from powerful stakeholders can mobilise resources and capital. >Expert input for specification. ESI >Fewer project delays caused by resistance.

Comparison of Partnership relationship and traditional contract

>joint product development rather than buyer developed specification >No tender process or win-lose negotiation >Shared costs and benefits >Joint performance measures >no defined end period

Preferred Customer

A buying organisation that a supplier treats better than other customers for example in terms of product quality, availability, delivery and prices.

2.3 Compare the practical considerations of stakeholder management.

Accurate cost modelling Reduced impact of price fluctuations Early supplier involvement in product and/or service development. knowledge transfer and access to innovation Common metrics to drive change for both organisations. Improving risk management and continuity of supply..

Cost Leadership Strategy - Procurement objectives

Achieve savings/reduce costs >Improve economies of scale>review market for new suppliers to improve competition>look at opportunities to source from low cost countries>standardise>reduce waste.

2.1 Analyse the purpose of organisational procedures and processes in sourcing goods and services

Achieving value for money Supplier identification, assessment and selection. Selection and awarding criteria.

1) Relationship life cycle- Qualification

Buyer searches the market > list of suitable suppliers > on boarding process - undertake supplier qualification and selecting activities. CARTERS 10Cs used for selection criteria.

Public sector Supplier selection and assessment

Buyers are required to advertise the requirement in the Official Journal of the European Union (OJEU). Threshold values. Common Procurement vocabulary (CPV) is used. If a public sector buyer is unsure about the level of competition in the marketplace it can issue a prior indicative notice (PIN). 4 key principles of procurement in the EU - Public Sector - transparency, equality of suppliers, non discrimination - advertised to all EU suppliers, proportionality to the value.

Price fluctuations

Can have a big impact on organisations and occur for a number of reasons: 1) Demand outstrips supply. 2) Increases in import duty or exchange rates 3) Political instability

Access to Capital, natural resources, technology as competitive advantage

Capital helps a business to develop and grow. Natural resources e.g. a farmer close to fertile soils can grow more crops.

4) Quantities - benefits of holding stock

Continuity of supply in unforseen circumstances Reduction of long lead times Potential discounts for buying bulk Can support demand management.

2) Improving quality

Correct specification to avoid costs of reworking faulty or incorrect components. Cost of downtime Reputation of org through poor quality products. Appraisal of suppliers quality accreditations. Four processes involved in ensuring right quality - quality planning, control, assurance and improvement.

Quantities - limitations of holding stock

Cost of storage space Cost of capital Obsolescence Opportunity costs - where else could the capital be invested.

3. Use Supplier Preferencing Matrix to develop value added relationships with strategic suppliers.

Developed by Steele and Court (1996) this matrix allows a buyer to understand how suppliers view the buying organisation. It can be important for a buyer to be viewed attractively (Vertical axis) in terms of 1) Profitability 2) Supplier sees an opportunity for growth with the buyer 3) Reputation 4) Ethical trading practices 5) Openess to Collaboration. Then the horizontal axis is the relative value of the business - the greater the value of the business the more important a buyer will be to a supplier.

Comprehensive processes and practices as a competitive advantage

Embedded efficient processes that are difficult for competitors to replicate can prevent the development of substitute products and services.

3) Relationship Life cycle- Performance mgt

Examples of KPIs - 1) Safety - near miss incidents 2) Quality - stock accuracy, shrinkage, stock loss/ damage. 3) Delivery - % of products with a defect, % of products delivered on time, compliance to paperwork, good receipt discrepancies. 4) Cost to budget. 5) Morale - attendance/ absence 6) environment - co2 emissions.

Exit Strategy - continuity of supply

Exit strategy should be agreed before the start of a contract 1) Obligation for continuity of supply during transition period. 2) Obligation to abide by terms and conditions during transition 3) access to all information for the buyer following transition 4) Can include a specific business continuity clause.

1.4 Compare the sources of added value that can be achieved through supply chain relationships.

Link between relationships and achievement of added value Sources of added value: five rights of procurement. link between organisations in supply networks.

1.2 Appraise Portfolio analysis techniques to assess relationships in supply chains. ​

Matrices to identify supply, supplier and purchaser positioning. Developing value adding relationships with strategic suppliers Developing action plans.

Mendelow Matrix

Minimal effort - low power/low interest. More likely to accept changes. Cleaner of the uniform. Keep satisfied - high in power/low interest e.g. HR or managers of the staff Keep informed - interested but lack power. Can gain power by joining with others, need to be communicated with e.g. staff re a new uniform/ current supplier. Manage closely - high in power and in interest - need to be involved early on and regularly updated e.g. marketing department responsible for the branding

What is Value for Money?

Most advantageous combination of quality and price that makes a product fit for purpose achieving the buyers required outcomes. Described as the Three 'E's: Economy - spending less, minimising costs. Efficiency - spending well Effectiveness - spending wisely, achieve objectives.

Legal considerations with terminating a contract

Organisations need to have adequate termination provisions and so will often avoid 'Evergreen contracts (no end date) and 'Auto-renewal' contracts (if supplier does not give e.g. 90 days notice the contract will auto renew). There can be financial penalties if supplier contracts are terminated early. Exit plan should detail how confidential data should be transferred back to the buyer. Also, IPR and its use after termination (depends on who owns the IPR - buyer or supplier). GDPR requires that all data be deleted or returned at end of contract.

External Supplier

Outside firms hired to fulfill a company's needs. Selecting, having a contract and managing an external supplier are the three main reasons for the existence of the procurement department.

Internal supplier IS

Part of the same company, referred to as 'in house'. Decision to stay in house is often a strategic decision linked to 'make or buy'. Products are generally core to the organisation. By keeping in house there can be the greater degree of control needed with such products.

The Five Rights of procurement adds value

Place, quality, quantity, price, time.

3.3 Identify the reasons partnerships fail

Poor communication Lack of senior management support and trust Lack of commitment by one or both parties. Poor planning. Lack of value added benefit. Changes in the market. Corporate cultural differences. Logistics and distance barriers.

Sources of Competitive Advantage

Porter (1985) states three strategies for achieving above average performance in a market. 1) Cost Leadership - Lowest cost producer in the market - through economies of scale/standardisation e.g Primark (low cost clothes), Ryanair (low cost flights). 2) Differentiation - Be unique in a way valued by customers either by the product, marketing strategy, service, premium price e.g. Waitrose, Burberry. 3) Cost focus AND/OR Distribution focus - Select a segment in the market to focus on e.g The Body Shop - animal welfare and vegan food.

2.2 Compare team management techniques to ensure positive stakeholder relationships.

Positive relationships through positive contributions Overcoming resistance Identifying conflict and coping processes. Cross organisational teams Stages of team development- forming, storming, norming, performing.​

1) Pricing and cost management

Reduce unit cost paid for a product. Getting additional products for the same price. Increasing payment terms. Specification development - Ensure user has not over specified requirement and that it is clear to get accurate prices > Early Supplier involvement > Can any products be substituted for non branded alternatives. Competitive tender - Price is often a criteria. open book costings can be used so that the buyer knows the make up of all costs. Following the tender, E auction may be used to drive further cost savings - routine or leverage items. Negotiation Contract management

2. Use Kraljic Model to identify key products and services and identify strategic items.

The model plays a key part in CATEGORY MANAGEMENT. Products and services are classified to maximise buying power whilst minimising risk either as a long term strategy for the procurement department OR an individual category / area of spend.

Supply Chain Management (SCM)

The ongoing development and monitoring of a supplier and the links between supply chain members to ensure that the buyers and end customers needs are met.

3.1 Analyse the concept of partnering and where it is a suitable approach.

The three types of partnering Partnering vs traditional contracting arrangement The drivers for partnership sourcing. Advantages for purchaser and supplier High spend. High risk Technically complicated supplies. New Services. Fast changing technology Restricted markets.

Thomas Kilman Conflict Model

There are five methods which can be used to cope with conflict situations - 1) avoiding 2) compromising 3) accommodating 4) competing 5) collaborating.

Stages of team development - forming, storming, norming, performing. (Tuckman)

These stages are inevitable in order for a team to grow to become effective producing high quality results. Forming - team learn about each other, team building activities are useful, manager should set clear objectives. Storming - Competition for status, idea acceptance - could lead to conflict. Needs to be managed. Norming - Team performance begins to improve - differences are valued, trust grows, team members take on more responsibility, manager moves to mentor/coach role. Performing - meeting objectives and working together. Not every team achieves this.

Contract for ESI

This should include: 1) Non disclosure agreement (NDA) - to protect any confidential information. 2) sets out key roles and responsibilities. 3) Clarify ownership of intellectual property rights (IPR).

Porters Five Forces

Threat of entry, threat of substitute, supplier power, buyer power, and competitive rivalry

Private Sector - the key method for supplier assessment and selection is RFI

To create a shortlist of suppliers. Key information requested: 1) Financial information 2) References 3) Certificates e.g. ISO 4) Suppliers acceptance of terms and conditions.

Competitive Bidding - When to use and not.

To use - Item is of sufficient value > Clear specification > Competition exists > time for the process. Not to use - Not possible to obtain firm prices > Specification is likely to change > price is not the main driver > time constraints.

Public sector - key procedure used to assess, pre qualify and select suppliers in the Public sector - Restricted tender process.

Two stage process 1) Initial Pre qualification questionnaire (PQQ) - to create a shortlist of suppliers 2) Invitation to Tender (ITT) for those who meet the PQQ requirement. 3) Electronic PQQ must be issued to a supplier for a minimum of 30 days (timesale is required for it to be legal).

The three types of Partnerships

Type 1 Short term focus, may involve only one function e.g. to improve an aspect such as delivery which has been problematic. Type 2 Long term focus, integration of activities, number of functions e.g. supplier and buyer invest in the same ordering system to improve integration. Type 3 Significant sharing of operations, no fixed end date e.g. Supplier is viewed as a key partner. Many relationships are Type 1 & 2 as type 3 requires a large amount of resources and time.

Conflict and coping processes

Typical example of conflict in procurement - Sales and marketing want customisation, on demand delivery, whilst finance want better payment terms, user wants to keep current supplier. Kurt Lewin's (1951) Force field analysis model can help to identify where conflict may occur.