Supply Chain: Ch. 6, Exam 2

sourcing strategies

analysis and ability to make adjustments based on price, evaluation of supplier performance, and the overall needs of the organization

collaborative negotiations

both sides work together to maximize the outcome or create a win-win result. Requires open discussions and a free-flow of information between parties

sustainability

the ability to meet current needs of the supply chain without hindering the ability to meet the future needs in terms of economic, social, and environmental challenges

supply base

the group of suppliers from which a co. acquires goods and services

sourcing

the process of identifying a company that provides a needed good or service

outsourcing

the traditional definition involves purchasing an item or service externally, which had been produced using a co's own internal resources previously

bottleneck (sourcing categories)

unique procurement problems. supply risk is high and availability is low. small # of alternative suppliers

Pain

using a penalty or punishment is a negative outcome for poor performance, cost overruns, quality problems

Gain

using a reward as a positive outcome from exceptional performance

Sustainable Sourcing Programs Should Try To

(1) Grow Revenues (2) Reduce Costs (3) Go "Green" (4) Manage Risks (5) Build Intangible Assets

SOURCING STRATEGIES BY CATEGORY

**fill in

functional products

-def: MRO items and other commonly low profit margin items with relatively stable demand and high levels of competition (ie: office supplies, food staples) -potential strategy: reliable, low cost suppliers -multi-sourced

strategic sourcing

-def: a comprehensive approach for locating and sourcing key suppliers, so that an organization can leverage its consolidated purchasing power to find the best possible values in the marketplace -strategic sourcing requires analysis of what an organization buys, from whom, at what price, and at what volume -emphasis is placed on the entire life-cycle of a product, not just its initial purchase price

strategic alliance development

-def: an extension of supplier development which refers to increasing a key or strategic supplier's capabilities -results in better market penetration, access to new technologies and knowledge, and a higher return on invetsment -eventually extends to a firm's second-tier suppliers as the firm's key suppliers begin to form their own alliances

innovative products

-def: characterized by short product life cycles, volatile demand, high profit margins, and relatively less competition (ie: technology products) -potential strategy: innovative, high-tech, cutting edge, market leading supplier -long term supplier single-sourced

business ethics

-def: the application of ethical principles to business; 2 main approaches: (1) utilitarianism: greatest good for greatest # of people (2) rights and duties: actions that are right regardless of their consequences

Reasons for Multiple Suppliers

-need more capacity -spread risk of supply disruption -create competition -more sources of information -dealing with special kinds of business

Reasons for Single Supplier

-to est. a good relationship -less quality variability -lower cost -transportation economies -proprietary product or process -volume too small to split

Drivers of Strategic Sourcing

1) improve long-term financial performance 2) increase customer focus 3) improve product quality 4) reduce the cost of materials 5) reduce delivery lead times 6) optimize the number of global suppliers 7) deliver more innovative products, in less time, and less expensively than competitors

Objectives of Strategic Sourcing

1) improve the value-to-price relationship 2) understand the category buying and management process 3) examine supplier relationships across the entire organization 4) develop and implement multi-year contracts 5) leverage the entire organization's spend

strategic (sourcing strategies)

strategic items and services that involve a high level expenditure and are vital to the firm's success

Vendor Managed Inventory (VMI)

suppliers directly manage buyer inventories to reduce the buyer's inventory carrying costs and avoid stockouts from the buyer

Non-critical (sourcing categories)

routine items that involve a low % of the firms' total spend and involved very little supply risk

single-source

a sourcing strategy where there are multiple potential suppliers available for a product or service; however, the co. decides to purchase from only one supplier **RISKY!!

reverse auctions

a sourcing technique where pre-qualified suppliers enter a website at a pre-designated time and date, and try to underbid competitors to win the buyer's business

strategic alliance

an agreement between a buyer and a supplier to pursue some agreed upon objectives, while remaining independent organizations

Co-Managed Inventory (CMI)

an arrangement where a specific quantity of an item is stored at the buyer's location

leverage (sourcing categories)

commodity items where many alternatives of supply exist and supply risk is low. Spend is high and there are potential procurement savings.

ethical sourcing

is that which attempts to take into account the public consequences of organizational buying, or to bring about positive social change through organizational buying behaviors

corporate social responsibility (CSR)

practice of business ethics

insourcing

producing goods or services using a co's own internal resources

multi-source

purchasing a good or service from more than one supplier. Co's may use multi-sourcing to create competition between suppliers in order to achieve higher quality and lower price

supply base rationalization

reducation in the supply base to the lowest # of suppliers possible without significantly increasing risk

distributive negotiations

refers to a process that leads to a self-interested, one-sided outcome