Supply Chain Chapter 6
Reverse Auctions
A sourcing technique where pre-qualified suppliers enter a website and at pre-designated time and date, and try to underbid competitors to win the buyer's business.
Functional Products
MRO items and other commonly low profit margin items with relatively stable demands and high levels of competition
Reasons for multiple suppliers
Need more capacity, spread risk of supply disruption, create competition, more sources of information, dealing with special kinds of business
Pain Share Agreement
Using a penalty or punishment is a negative outcome for poor performance, cost overruns, quality problems
Outsourcing
The traditional definition involves purchasing an item or service externally, which had been produced using a company's own internal resources previously.
Reasons for a single supplier
To establish a good relationship, less quality variability, lower cost, transportation economies, proprietary product or process, volume too small to split
Five key areas of a typical spend analysis are
Total historic expenditure and volumes, future demand projections or budgets, expenditure categorized by commodity and sub-commodity, expenditure by division, department, or user, expenditure by supplier
Gain Share Agreement
Using a reward as a positive outcome from exceptional performance
Supplier Certification procedures verify
verifying that a supplier operates, maintains, improves, and documents effective procedures that relate to the customer's requirements
Strategic sourcing requires analysis of
what an organization buys, from whom, at what price and at what volume.
Strategic Sourcing
A comprehensive approach for locating and sourcing key suppliers, which often includes the business process of analyzing the total-spend by material category.
Single Sourcing
A sourcing strategy where there are multiple potential suppliers available for a product or service, however, the company decides to purchase from only one supplier.
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
Benefits of strategic alliance include
Potential to increase revenue and profits for both parties, Potential to create a competitive advantage or block a competitor from gaining market share, Mitigate risks and ensure a continuity of supply, Position the partners for future strategic opportunities.
Insourcing
Producing goods or services using a company's own internal resources.
Multiple Sourcing
Purchasing a good or service from more than one supplier. Companies may use multiple sourcing to create competition between suppliers in order to achieve higher quality and lower price.
Supply Base Rationalization
Reduction in the supply base to the lowest number of suppliers possible without increasing risk
Leverage Category
commodity items where many alternatives of supply exist and supply risk is low. Spend is high and there are potential procurement savings.
Vendor Managed Inventory
Suppliers directly manage buyer inventories to reduce the buyer's inventory carrying costs and avoid stockouts for the buyer
Supply Base
The group of suppliers from which a company acquires goods and services.
Sourcing
The process of identifying a company that provides a needed good or service.
Supplier Selection is typically conducted by
a cross functional team
Distributive Negotiations
a process that leads to self-interested, one-sided outcome
A strategic alliance is
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
Strategic Alliance Development
an extension of supplier development which refers to increasing a key or strategic supplier's capabilities.
Strategic Sourcing
an institutional procurement process; an approach to supply chain management that formalizes the way information is gathered and used so that an organization can leverage its consolidated purchasing power to find the best possible values in the marketplace.
Innovative Products
characterized by short product life cycles, volatile demand, high profit margins, and relatively less competition
Sustainable sourcing should seek to
grow revenues, reduce costs, go green, manage risk, build intangible assets
Strategic sourcing differs from conventional purchasing because
it places emphasis on the entire life-cycle of a product, not just its initial purchase price.
Non-Critical Category
items that involve a low percentage of the firms' total spend and involve very little supply risk.
Strategic Category
strategic items and services that involve a high level of expenditure and are vital to the firm's success
Ethical Sourcing
that which attempts to take into account the public consequences of organizational buying, or to bring about positive social change through organizational buying behavior
Sustainability
the ability to meet current needs of the supply chain without hindering the ability to meet future needs in terms of economic, social, and environmental challenges.
Business Ethics
the application of ethical principles to business
Corporate Social Responsibility (CSR)
the practice of business ethics
Bottleneck Category
unique procurement problems. Supply risk is high and availability is low. Small number of alternative suppliers.
Two main ethical approaches
utilitarianism, rights and duties