Supply Chain Ch. 6

Strategic Alliance Development

an extension of supplier development which refers to increasing a key or strategic supplier's capabilities results in better market penetration access to new technologies and knowledge, and higher return on investment

Ethical sourcing

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

Collaborative Negotiations

both sides work together to maximize the outcome or create a win-win result requires open discussions and a free-flow of info between parties

Business Ethics

the application of ethical principles to business

Supply Base

the group of suppliers from which a company acquires goods and services Firms want this to be as small and consolidated as possible

Corporate Social Responsibility (CSR)

the practice of business ethics

Sourcing

the process of identifying a company that provides a needed good or service

Outsourcing

the traditional definition involves purchasing an item or service externally, which had been produced using a company's own internal resources previously

Bottleneck items

unique procurement problems. Supply risk is high and availability is low Small number of alternative suppliers

Pain

using a penalty or punishment is a negative outcome for poor performance, cost overturns, quality problems, etc Buyer could impose a financial penalty, reduce future business with supplier, or implement a bill-back amount equal to the costs

Gain

using a reward as a positive outcome from exceptional performance Buyer could award a financial bonus, more business, longer contracts, share a portion of cost reductions...

JIT 2

very similar to VMI and CMI, except a representative of the supplier is actually embedded in buyer's purchasing department to forecast demand, monitor inventory and place orders Employee is on the payroll of the supplier but works for the buyer benefits buyers and suppliers

Reasons for multiple suppliers

-need more capacity -spread risk of supply disruption -create competition -more sources of info -dealing with special kinds of business

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

The two main ethical approaches are

-utilitarianism -rights and duties

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

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

Spend Analysis

Collecting, cleansing, classifying, and analyzing expenditure data for the purpose of decreasing costs, improving efficiency, and monitoring compliance

Functional Products

MRO items and other commonly low profit margin items with relatively stable demands and high levels of competition Ex: office supplies, food staples, etc.

different

Successful sourcing strategies are almost always ___________ for functional products versus innovative products

cross functional team

Supplier selection is usually conducted by a ________________

Vendor Managed Inventory (VMI)

Suppliers directly manage buyer inventories to reduce the buyer's inventory carrying costs and avoid stockouts for the buyer

Rights and Duties

some actions are just right in and of themselves, regardless of the consequences Do the right thing!

Strategic items

strategic items and services that involve a high level of expenditure and are vital to the firm's success

Build intangible assets

such as social and environmental responsibility, increasing consumer awareness of sustainable sourcing and sustainability

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

Distributive Negotiations

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

Strategy for functional products

reliable, low cost suppliers. Multi-sourced

Sole Sourced

When there is only one supplier for an item not a sourcing strategy because it isn't actually a choice and there is very little opportunity for a company to negotiate price or service

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

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

Preferred Suppliers

achieved a specific and exceptional level of performance over time as measured by a set of criteria agreed upon by both buyer and supplier

Pain and gain share agreements

agreements negotiated to spell out in detail the gains (reward) and pains (penalty) that the supplier will realize for either exceptional or poor performance

Strategic Alliance

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

Utilitarianism

an ethical act is that which creates the greatest good for the greatest number of people, and should be the guiding principle of conduct

Supplier Certification

certification procedures verifying that a supplier operates, maintains, improves, and documents effective procedures that relate to the customer's requirements Ex: cost, quality, delivery, flexibility, maintenance, safety, etc.

Innovative Products

characterized by short product life cycles, volatile demand, high profit margins, and relatively less competition Ex: technology products such as the iPhone

Leverage items

commodity items where many alternatives of supply exist and supply risk is low Spend is high and there are potential procurement savings

Go "Green"

ensuring that the products or materials used meet environmental objectives for things like waste reduction, reuse, and recycling

Grow Revenues

growing the company through the launch of new sustainable products

Reduce costs

increasing resource efficiencies which also help to reduce costs

Strategy for Innovative products

innovative, high-tech, cuting edge, market leading supplier Sole-sourced

Non-critical items

items that involve a low percentage of the firm's total spend and involve very little supply risk

Manage Risk

link company brands to the social consciousness of consumers

How strategic sourcing differs from conventional purchasing

places emphasis on the entire life-cycle of a product, not just its initial purchase price

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 use this to create competition between suppliers in order to achieve higher quality and lower price

Supply Base Reconciliation

reduction in the supply base to the lowest number of suppliers possible without increasing risk