Supply Chain Management Chapter 6

Sustainability

Ability to meet current needs of supply chain without hindering ability to meet future needs in terms of economic, social, and environmental challenges (3 P's- people, planet, profit)

Strategic Alliance

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

Business Ethics

Application of ethical principles to business

Co-Managed Inventory (CMI)

Arrangement where specific quantity of item is stored at buyer's location

Ethical Sourcing

Attempts to take into account the public consequences of organizational buying, or bring about positive social change through organizational buying behavior

Collaborative Negotiations

Both sides work together to max the outcome or create a win-win result

Innovative Product

Characterized by short product life cycles, volatile demand, high profit margins, & relatively less competition (higher demanded products like laptops, tvs)

Spend Analysis

Collecting, cleansing, classifying, and analyzing expenditure data for purpose of decreasing costs, improving efficiency, and monitoring compliance (using stats in the world of supply chain)

Leverage

Commodity items where many alternatives of supply exist and supply risk is low, spend is high and there's potential procurement savings (high value, low level) Ex. Transportation

Strategic Sourcing

Comprehensive approach for identifying and selecting key suppliers for org.'s critical supply needs

Corporate Social Responsibility (CSR)

Corporation's initiatives to assess and take responsibility for company's effects on environmental and social well being

Supplier Certification Programs

Differentiate strategic supplier alliance candidates from others

Strategic Alliance Development

Extension of supplier development which refers to increasing a key or strategic supplier's capabilities

Utilitarianism

Greatest good for greatest number of people

Supply Base

Group of suppliers that firm uses to acquire materials, finished goods, equipment, MRO supplies and services

Non-Critical

Items that involve low percentage of firms' total spend and involve very little supply risk (low value, low risk) Ex. office supplies

Functional Products

MRO items & other commonly low profit margins with relatively stable demands & high levels competition (every products like paper, pens)

Multiple Sourcing

Purchasing a good or service from more than one supplier to create competition between suppliers to achieve higher quality, lower price and reduce risk

Rights and Duties

Recognize rights of others and the duties those rights impose on your actions

Supply Base Rationalization

Reduction in supply base to consolidate the number of suppliers as low as possible without increasing risk

Distributive Negotiations

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

Reverse Auctions

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

Strategic

Strategic items and services that involve a high level of expenditure and are vital to firm's success (high value, high level) Ex. processors, chips

Single Sourcing

Strategy where there are multiple potential suppliers available for product or service, but, company decides to purchase from only one supplier Can increase supply risk depending on the stability of supplier

Vendor Managed Inventory (VMI)

Suppliers directly manage buyer inventories to reduce buyer's inventory carrying costs and avoid stock outs for buyer

Preferred Suppliers

Trusted partners, provide higher value, reliable, responsive, flexible, cost effective

Bottleneck

Unique procurement problems, supply risk is high and availability is low, small number of alternative suppliers (low value, high risk) Ex. better phone camera

Gain Provision

Using a reward as positive outcome from exceptional performance

Pain Provision

Using penalty/punishment is negative outcome for poor performance, cost overruns, quality problems, etc.

5 Key Areas of Typical Spend Analysis

1. Total historic expenditure and volumes 2. Future demand projections or budgets 3. Expenditure categorized by commodity and sub-commodity 4. Expenditure by division, department, or user 5. Expenditure by supplier