Supply Chain Chapter 7

The Weighted-Criteria Evaluation System

- Preferred: work with these suppliers in maintaining a competitive position and on new product development 90-100 - Acceptable: require a plan from these suppliers outlining how they will achieve preferred status 70-89 - Developmental: require corrective actions from these suppliers on how they will achieve acceptable level. Look for alternative suppliers if these do not achieve acceptability within a fixed period of time, e.g., 3 months. 0-69

SRM is often a part of the rollout of Strategic Sourcing and is typically applied with suppliers:

- Providing a high volume of a product/service. - Providing lesser quantities of a crucial product/service.

2 important functions of a supplier development program

- Providing information about products, expected sales growth, etc. Suppliers need to become extensions of their customers. -Training suppliers in the application of lean and six sigma / quality tools. Asking suppliers to lower their price without giving them the knowledge on how to lower their costs is not sustainable in the long-term.

Criteria used for an internal Certification Program

- Supplier has no incoming product rejections. - Supplier has no incoming late deliveries. - Supplier has no significant negative quality related incidents for a specified time period.

ISO certified supplies are preferred by procurement departments because?

- They have to conform to an externally defined set of standards for quality and delivery of service. - They are usually more open to sharing supply chain information. - They are easier for procurement to initially qualify and periodically audit. - Firms have to be re-certified every three years.

External Certification

-International Organization for Standardization (known as ISO) is the world's largest developer of voluntary international standards. - ISO certification is highly sought after as it represents achieving and maintaining a standard of excellence verified by an independent third party organization. - Founded in 1947, today ISO has members from 163 countries and about 150 people working full time for the Central Secretariat in Geneva, Switzerland.

Continuous improvement

-Making a series of small improvements over time results in the elimination of waste in a system. -Buyers and suppliers must be willing to continuously improve their capabilities in meeting customer requirements.

Supplier Development

-Supplier development is the technical and financial assistance given to existing and potential suppliers to improve quality and/or delivery performance. - In simpler terms, it can be described as a buyer's activities to improve a supplier's capabilities.

Trends in Supplier Relationship Management

1. Close alignment of sourcing with supplier relationship management 2. Focus on cross-functional engagement 3. Focus on Innovation 4. Investment in people and soft skills

Benefits of Supplier Recognition Programs

1. Motivate Suppliers to Perform Better 2. Improve Supplier Loyalty and Commitment 3. Encourage Suppliers to Adapt to the Company's Culture 4. Helps to Create Entry Barriers for Competitors 5. Encourages Supplier Participation in Product Innovation

Supplier Relationship Management System (development and integration - 5 key points)

1.Automation is meant to handle routine transactions 2. Integration spans multiple departments, processes, and software applications 3. Visibility of information and clear and concise process flows 4. Collaboration through information sharing 5. Optimization of processes and decision making

Supplier Recognition Programs

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

Win-win competitive performance for the buyer and supplier requires?

A strategic perspective as opposed to a tactical perspective. - Involves a "mutual commitment over an extended time to work together to the mutual benefit of both parties, sharing relevant information and the risks and rewards of the relationship.

Value Engineering

Activities help the buyer's company to reduce cost, improve quality and reduce new product development time.

SRM system can only be implemented in line with?

Associated business process changes.

Change management

Companies must be prepared to manage change that comes with the formation of new partnerships.

Sourcing decisions are made on?

Facts and not decisions.

Both ___ and ___ lines of communication should be set up to facilitate the free flow of information.

Formal and informal.

2 ISO standards commonly used for supplier certification?

ISO 9000 -A series of management and quality standards in design, development, production, installation, and service. -Companies wanting to sell in the global market seek ISO 9000 certification. ISO 14000 - A family of standards for environmental management. -The benefits include reduced energy consumption, environmental liability, waste and pollution, and improved community goodwill.

Win-win situation

If both companies have compatible needs.

Goals of SRM

Improving profits and reducing costs.

Early Supplier Involvement

Key suppliers become more involved in the internal operations of the buyer's company, particularly with respect to new product and process design, concurrent engineering, and design for manufacturability.

Commitment must start at the highest management level...

Partnerships tend to be successful when top executives are actively supporting the partnership.

Strategic Partnerships begin with the development of ___ between people who ___?

Personal relationships; communicate.

Process commonly utilized in continuous improvement?

Plan, Do, Check, and Act

When evaluating key suppliers for developing a collaborative relationship, ___ becomes relatively ___ important.

Purchase costs; less.

The Weighted-Criteria Evaluation System Performance Measure

Rating * weight = final value

Frequent feedback can help avoid?

Surprises and maintain good relationships.

Supplier Relationship Management (SRM)

The discipline of strategically planning for, and managing, all interactions with 3rd party organizations that supply goods and/or services to an organization in order to maximize the value of those interactions.

ISO 9000

There are eight (8) Quality Management Principles on which the ISO 9000 series quality management system standards are based: 1.Customer focus - understand current and future customer needs 2.Leadership - establish unity of purpose and direction of the organization 3.Involvement of people - people are the essence of an organization 4.Process approach - a desired result is achieved through a managed process 5.Systems approach to management - managing interrelated processes 6.Continual improvement - performance improvement is a permanent objective 7.Factual approach to decision making - decision are based on facts and data 8. Mutually beneficial supplier relationship - interdependent benefits create value for both an organization and its suppliers.