Supply Chain Chapter 3
What makes supplier alliances fail? How can firms reduce the failure rate?
Failures can be caused by lack of trust, different expectations, changes in products, lack of perceived benefits to one side, and changes in technology that cause changes in supplier requirements. Failure rates can be reduced by making joint decisions, committing to successful relationships, invest in communication tools, and providing educational programs.
What is sourcing's role in value engineering, and what benefits does this give to the firm?
Value engineering occurs during the product design phase. Thus, buyers can be helpful in identifying suppliers that can work with the design team, they can identify available parts to substitute for custom-designed parts, and they can keep designers appraised of new products that are being developed by suppliers.
Five key points of an SRM system
(1) Automation handles routine transactions, (2) Integration spans multiple departments, processes, & software applications, (3) Visibility of information & process flows, (4) Collaboration through information sharing, (5) Optimization of processes & decision making.
supplier development
1. Identify critical products & services 2.Identify critical suppliers not meeting 3.performance requirements 4.Form a cross-functional team Meet with top management of supplier Rank supplier development projects Define details of Agreement Monitor status & modify strategies
The Weighted-Criteria Evaluation System
1. Select the key dimensions 2. Monitor & collect data. 3. Assign weights to each of the dimensions. 4. Evaluate performance measures between 0 & 100. 5. Multiply dimension rating by weight & sum of overall score. 6. Classify vendors based on their overall score: Unacceptable, Conditional, Certified, & Preferred 7. Audit & perform ongoing certification review.
ISO 14000
A family of standards for environmental management. The benefits include reduced energy consumption, environmental liability, waste & pollution, & improved community goodwill.
what is benchmarking? What are some different ways you could use benchmarking to improve your performance at school?
Benchmarking is the practice of copying what other businesses do best, and is a very effective way to quickly improve sourcing practices and supply chain performance. Students can go ask top students how they study or do homework; ask the teacher for some good study tips.
Supplier recognition programs 3 attributes
Companies should recognize & celebrate the achievements of their best suppliers. Award winners exemplify true partnerships continuous improvement, organizational commitment, & excellence. Award-winning suppliers serve as role models for other suppliers.
ISO 9000
Developed by International Organization for Standardization (ISO) - series of management & quality standards in design, development, production, installation, & service. Companies wanting to sell in the global market seek ISO 9000 certification.
SRM software suppliers
EcVision JDA software group inc Oracle SAP
What are some common practices or activities of ethical sourcing?
Ethical sourcing practices include promoting diversity by intentionally buying from small firms, ethnic minority businesses and women-owned enterprises; discontinuing purchases from firms that use child labor or other unacceptable labor practices; or sourcing from firms with good labor treatment or environmental protection credentials.
What is supply base rationalization, and what are its advantages and disadvantages?
Getting rid of poor or marginally-performing suppliers in order to give that business to the firm's best suppliers
Describe the differences between integrative and distributive negotiations, and when each should be used
Integrative negotiations--both sides work together to maximize the joint outcome, or to create a win-win result. The belief is that there is more to gain from collaborating, rather than trying to seek an outcome that favors primarily one side's interests (referred to as distributive negotiations). For collaborative negotiations to succeed, members from both parties must trust each other, believe in the validity of each other's perspective, and be committed to working together.
Why would a firm want to monitor its purchasing performance?
It may be preferable to periodically monitor the purchasing or sourcing function's performance against set standards, goals, and/or industry benchmarks. Thus, as the firm strives to continuously improve its products and processes, purchasing can also gauge its success in improving its own value-enhancing contributions to the firm and its varied supply chains.
Criteria Used in Certification Programs
No incoming product lot rejections (e.g., less than 0.5 percent defective) for a specified time period. No incoming non-product rejections (e.g., late delivery) for a specified time period No significant supplier production-related negative incidents for a specified time period ISO 9000/Q9000/14001 certified or successfully passing a recent, on-site quality system evaluation Mutually agreed-upon set of clearly specified quality performance measures Fully documented process & quality system with cost controls & continuous improvement capabilities Supplier's processes stable & in control
What is outsourcing? How is it different from plain ol' purchasing? Would a firm ever want to outsource a core product or process? Why or why not?
Outsourcing means to purchase instead of making a product. A firm must already be making the product, then decide to buy some or all their needs. This is how it differs from purchasing. Outsourcing to highly capable and reliable suppliers can lead to improved quality in addition to lower prices, particularly when the outsourced product or service is a core product of the supplier. While it can be very risky to outsource a core product, if this can be justified based on cost, quality, or customer service grounds, it may make some sense.
Supplier Relationship Management (SRM)
Refers to streamlining the processes and communication between buyer and supplier using software applications manage processes more efficiently and effectively
Why are second- and third-tier suppliers important to the focal firm?
Second and third tier suppliers eventually impact the focal firm's supply prices, quality, and service, which in turn impacts the products and services sold to customers.
When would firms want to insource a product or process?
Some firms do not adequately study the decision to outsource, and experience problems with product quality, late deliveries, or services not living up to expectations. In these cases, the outsourcing arrangement is unsuccessful and can result in insourcing, also referred to as backsourcing.
What are the three P's? What do they have to do with sustainability?
Some have begun referring to sustainability in terms of supporting the three P's, which refers to people, planet, and profit. The objectives then are not only to sustain the world we live in, but to sustain employees and the balance sheet as well.
Discuss the advantages and risks of supplier co-location.
Supplier co-location is an extension of the vendor managed inventory concept. The concept refers to a situation wherein a supplier's employee is permanently located in the purchasing department of the buyer's organization, acting as both buyer and supplier representative. This person is given all the rights and duties of an employee for the purchasing organization—they forecast demand, monitor inventory levels, and place purchase orders, and they have access to all of the files and records of the firm.
What is ethical sourcing and why do firms do it?
That which attempts to take into account the public consequences of organizational buying or bring about positive social change through organizational buying behavior. Firms' managers and customers want to do the right thing, the just and legal thing, to promote social responsibility.
Monitoring Supplier Relationships
The organization should have a firm grasp of the key issues surrounding supplier relationships which may include • Creativity • Stability • Communication • Reliability • Value
What is sustainable sourcing and how does it differ from ethical sourcing? From green purchasing?
The term sustainability as applied to supply chains is a broad term that includes green purchasing as well as some aspects of social responsibility as well as financial performance. It can be defined as: the ability to meet the needs of current supply chain members without hindering the ability to meet the needs of future generations in terms of economic, environmental and social challenges.
Describe the differences between vendor managed inventories and co-managed inventories, and when it might be advisable to do either of them.
VMI-- allowing their supplier to track inventories and determine delivery schedules and order quantities. Co-managed inventories--the buyer and supplier reach an agreement regarding the buyer's periodic demand forecasts, how information is shared, the order quantity, when an order is generated, and the delivery timing and location. This type of controlled VMI may be preferable for very high value, strategic item purchases, where the customer desires more input into the day-to-day supply activities, or perhaps as a precursor to a sole-source VMI where the buyer is still assessing the supplier's ability to take full responsibility for the order fulfillment process.
Analytic SRM
allows the company to analyze the complete supplier base
Benefits in supplier relationship management
benefits derived from automating procurement activities Significant cost savings as buyers move toward managing processes by exception Greater procurement visibility from using SRM software also translates into smoother processes, reduced product development, faster cycle times, streamlined purchasing, improved time to market, reduced inventory costs
supplier overall rating
delivery 40% Quality 40% SCSS 20% # of SCARS 50% PPM 50%
Transactional SRM
is used to track supplier interactions such as order planning, order payment and returns
What is the difference between supplier management and strategic alliance development?
supplier management is getting suppliers to do what you want them to do, whereas alliance development is increasing a key supplier's capabilities.
: If your firm had 500 suppliers and they each had 100 suppliers, how many second-tier suppliers would your firm have? What if your firm reduced its supply base to twenty?
500 X 100 = 50,000 second-tier suppliers. Alternately, 20 X 100 = 2,000 second-tier suppliers.
What is a common method for developing second-tier suppliers?
As first-tier supplier alliances are created, these suppliers tend to develop supplier alliances of their own.
Keys to Successful Partnerships
Building Trust Shared Vision & Objectives Personal Relationships Mutual Benefits & Needs Commitment & Top Management Support Change Management Information Sharing & Lines of Communication Capabilities Performance Metrics Continuous Improvement
What advantages do company-designed supplier certification programs have over industry certifications like ISO 9000?
Company-designed certification programs can be better customized to suit specific requirements of the users.
What is the difference between purchasing and strategic sourcing?
Sourcing refers to the many strategic activities beyond the mere purchase of services and materials undertaken by purchasing departments, supply management departments, or sourcing departments. Sourcing is thus defined here as all of the activities involved in managing the firm's external resources.
The challenges in any SRM software implementation is
assembling all the data needed for an SRM application to work and employee training. For example, analysis of supplier information requires access to applications containing data about suppliers, as well as enterprise resource planning (ERP) and accounting and existing supplier information databases. Before SRM implementation, buyers typically spend 10 percent of their time on supplier relationship development, 40 percent on expediting, and 50 percent on order processing/tracking. After SRM implementation, the buyer's time allocation is estimated to be 50 percent on collaborative planning, 30 percent on supplier relationship development, 10 percent on expediting, and 10 percent on exception management.