Section I: Supply Managment Concepts

Discuss how each type of buyer-supplier relationship has it uses in a supply chain

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Describe the uses and factors involved in a make-verus buy analysis

Organizations justify their make or buy decision by comparing advantages to the risk and costs of each alternative. As was implied in the previous step-by-step process, a primary aspect of this decision is whether an outsourcing partner can provide the organization with new capabilities because they have complementary core competencies.

Define a make-versus-buy analysis

a comparison of all the costs associated with making an item verus the cost of buying the item. The act of deciding whether to produce an item internally or to buy it from an outside supplier.

Describe how supply plans make use of supply analyses to determine, validate, and win approval for the supply plan

Devolping supply s plans is the strategic design of a supply network based on total cost of ownership, make verus buy decisions, and desiered level of buyer supplier relationships. Supply plans answer these questions are we going to have centralized global sourcing Will we seek local sources over cheapest sources Will allow sole or single source suppliers What are our contingency plans for any and all supply risks What are the differences in our supply plans for strategic versus nonstrategic material sourcing Plan validation and refinement Corporate strategy alignment Corportate mission and alignment Risk assessment Centralized versus autonomus sourcing Additonal optimizing Planning for future growth

Define the Total cost of ownership

In supply chain management, The total cost of ownership of the supply delivery system is the sum of all the costs associated with every activity of the supply stream. The main insight that TCO offers to the supply chain manager is the understanding that the acquisition cost is often very small portion of the total cost ownership. Purchase price/production cost Landed Cost TCO involves all the costs above, plus all other lifetime ownership costs such as durability and ongoing maintenance costs.

Describe the reasons behind decisions to outsource and/or offshore

Outsourcing the process of having suppliers provide goods and services that were previously provided internally. Outsourcing involves substitution that replacement of internal capacity and production by that of the supplier. Insouring using the firm internal resources to provide goods and service. Asynonym for outsourcing is subcontracting. Offshoring is defined as outsourcing a business function to another company in a different country than the original company country. Organizational leaders are increasingly focused on core competencies as the most reliable way to deliver shareholder value and capture market share. Cost is a reason for outsourcing, but it not the only reason. Outsourcing to companies whose core competencies are in the specified area means the supplier may have substantial investments in related infrastructure, equipment, technology, and hiring/training. Effective suppliers do more than save costs; they identify trends, ancipate problems, keep yp with industry changes, and oftern are better equipped to capture and analyze the large amount related to their core competency. Benefits of outsourcing- Economies of scale Risk Reduction Increased capital available for investment Clearer focus Asses to new technologies Faster development cycle times Supply chain outsourcing Supplier relationship management Manufacturing Logistics and logistics management Customer relationship management Information systems Offshoring Market growth Additional sourcing options Streamlining and efficiency

Define supplier relationship management (SRM) and discuss its emphasis on strategic sourcing

SRM- A comprehensive approach to managing an enterpirse interaactions with the organizations that supply the goods and services the enterprise uses. The goal of SRM is to streamline and make more effective the processes between an enterprise and its suppliers. Strategic sourcing involves identifying evaluation, negotiating, and configuring supply across multiple geogrphies in order to reduce csos, maximaze performance, and mitigate risks. The ultimate goal in strategic sourcing is controlling costs while providing essential goods and services throughtout a wide-reaching supply chain network.

Identify the range of buyer-supplier relationships

Strategic relationships lie in the middle of a spectrum of buyer-supplier relationships. At one end is the traditional transaction purchains relationship or buy on the market. At the other end is the translation of external supplier relationships into purely internal prcesses via ownership through mergers and/or acquisitions. Transactional Relationship Buy on the market- organizations buy in response to immediate needs, choosing freely from among all the vendoers that can meet those needs. Strategic relationship Ongoing relationship- involves repeated transactions, perhaps regulated through medium term contracts. The supplier may learn enough about the purchasing organization to suggest opportunities. Partnerships use longer term contracts. A supplier partnership is the establishment of a working relationship with a supplier organization whereby two organizations act as one. The length of the relationship creastes opportunity for increased understanding of each organization increased efficiencies through greater communication. Business with the competition is minimal Collaboration/strategic alliance- a long term arragnemnt that is ruled by more agreements than by contracts. A blanket purchase order a long term commitment to a supplier for material against which short term releases will be generated to satisfy requireents. Focus on strategic alliance replaces shopping for competitive bids. The trust level is high, and there is a greater level of involvement by both parties. Either to enhance the collaboration or because the two organizations share similar values, the culture of the supplier may evolve toward that of the purchaser. Mergers and acquistions- in this type of relationship suppliers are folded into the purchasing entity- business goals are shared; business areas participate in setting stregy and planning integration capabiliites, processes, and information. competition has been eliminated.

Indicate how the total cost of ownership can be used to justify investments in the supply chain

The intent of TCO is to get decision makers in the supply chain to see supply chain activities as an investment in capabilities rather than just an expense to be minimized. TCO is primarily a strategic measurement tool rather than a tactical measurement tool. TCO compares the differences between incremental costs of alternative supply chain solutions. An incremental cost is the cost associated with producing one additional unit of a product or service. TCO considers both tangible and intangible costs. Tangible costs are those costs that can be given a value using objective measures such as market value. Intangible cost are costs that are difficult to measure in financial terms yet may have a real impact, especially in the long term. Intangible costs are cost that are difficult to measure in financial terms but have a real impact. Customer satisfaction, employee moreale, quality, risks, or loss of intellectual capital. Such cost may be estimated and included in TCO, but the estimates should be conservative or based on a formula so they are less likely to be rejected by decision makers. Dividing costs into landed costs, process change costs, and ongoing costs can help deermine what costs to include in an analysis and what costs to omit because they are not relevant or would complicate analysis. Landed cost are most often the most important costs considered in TCO Purchase price/production cost Transportation cost (at each sage), including special packaging costs Customs and related costs Inventory costs Outsourcing cost Monitoring and control costs Some landed costs may or may not differ between alternatives or may be omitted from consideration to simplify analysis. Financing and opportunity costs Sales and marketing Administrative Reverse supply chain Insurance and risk management Taxes and foreign exchange Process change cost- include the costs of evaluating choices and implementing the changes to the supply chain. Requirements identification and research Product development Contract sourcing Process change and training Plant openings/closings, hiring/layoffs supplier education and integration Ongoing costs- are the costs of ownership that occur throughout the life of the product or equipment. for example, a durable product will have lower ongoing costs than one that costs less but has lower quality. Life cycle costs ( quality, durability, and maintainability verus price) MRO Costs of quality Sustainability costs Reputation costs TCO measures the net effect of all cost increases and cost reductions. TCO can help organizations and supply chain partners make and justify wise, cost-effective choices for the long term.

Understand how CRM and SRM interrelate with one another

The key is to integrate CRM seamlsessly with SRM and other processes such as logistics so that for example warehouse know and value their distribution customers and transportation suppliers and so on. The goal is to have all parties consider not only their own intermediate customers needs but also the needs of their suppliers, their suppliers suppliers, their partners, customers, and the ultimate customer.