Purchasing Supply chain management chapter 6

Supplier scorecard

A communication device that serves two key roles for the supply manager: (1) it identifies the supplier performance metrics that are most critical to the supply manager organization, and (2) it enables the evaluation of suppliers against these key metrics.

portfolio analysis

A tool to structure and segment the supply base and is used as a means of classifying suppliers into one of four types. Objective is to categorize every purchase or family of purchases into one of 4 categories: Critical Routine Leverage Bottleneck

E-ra

A/An _____ is an online, real-time dynamic auction between a buying organization and a group of prequalified suppliers who compete against each other to win the business to supply goods or services that have clearly defined specifications for design, quantity, quality, delivery, and related terms and conditions. (p. 236)

Effective category strategy

Allocate resources Validate contribution to other company objectives Sustain the initiative through presentations to senior ex

Spend Analysis

Annual review of a firms entire set of purchases

Stages of supply management strategy evolution

Basic beginnings 1 Moderate development 2 Limited integration 3 Fully integrated supply chains 4

Strategic Sourcing Process

Build the team, market research, strategy development, contract negotiation, SRM

supply management goals

Cost reduction objective Technology/new product development objective Supply base reduction objective Supply assurance objective Quality objective

negotiation

Costly and interactive approach to final supplier selection. Ftf negotiation is best

Purchase categories

Critical Routine Leverage Bottleneck

Triangulate

Explore, compare, and contrast data from multiple sources before you can validate it.

Requests for Information (RFI)

Generally used before a specific requisition of an item is issued. A solicitation document that is used by organizations to obtain general information about services, products or suppliers.

Insourcing/Outsourcing

In _____, purchasing often analyzes whether a new or existing purchase requirement should be internally or externally sourced. (p. 176)

Porter's Five Forces

Model developed by strategy expert Michael Porter that identifies five competitive forces that influence planning strategies. Used widely for marketing, business and marketing strategy development. Higher levels of competition create more options for buyers and suppliers The threat of new entrants The threat of substitute products and services The power of buyers The power of suppliers

Total Cost of Ownership (TCO)

Process of identifying cost considerations beyond unit price transport and tooling

Category

Refers to a specific family of products or services that are used in delivering value to the end customer.

Establish Benchmarks through Industry Standards

Requires identifying the critical performance criteria that are being benchmarked and identifying relative competitive performance.

supply base optimization

The process of determining the appropriate number and mix of suppliers to maintain.

Integrative

The strategy is drafted by (or has significant input from) those responsible for implementation.

RFQ (Request for Quotation)

a formal request for the suppliers to prepare bids, based on the terms and conditions set by the buyer

Insourcing

a practice in which a company contracts with a specialist firm to handle all or part of its supply chain operations

competitive bidding

a selection process in which suppliers submit bids to win the buyer's business

preferred supplier

a supplier that has demonstrated its performance capabilities through previous purchase contracts and therefore receives preference during the supplier selection process

global sourcing

purchasing materials or labor from around the world wherever it is cheapest Major advantage is providing dramatic improvements in cost and quality

supplier research

required to identify the specific capabilities and financial health of key suppliers that are in the supply base or that may not currently be in the supply base Key elements to be documented and included in a comprehensive supplier analysis study should include: Cost structure Financial status Customer satisfaction levels Support capabilities Relative strength and weaknesses How buying company fits in their business How the company is viewed Core capabilities Strategy and future direction Culture

supply base optimization

the determination of the number of suppliers to use

Porter's Five Forces

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

Value Chain Analysis

used to help identify the cost savings opportunities that exist within the supply chain Goal is to understand identify and exploit cost savings opportunities that may have been overlooked by business unit managers or even by suppliers in bringing the products and services to the appropriate location.