Supply Chain Chapter 7

critical top management modify

The typical approach to supplier development is based on the following process steps: 1.Identify _______ products and services 2.Identify critical suppliers of those products and services 3.Form a cross-functional team internally to work with the supplier 4.Meet with the ______________ at the supplier to get their support and involvement 5.Identify key development needs and projects 6.Define details of the agreement and the action plan 7.Monitor the status of the projects / action plan and _______ strategies as necessary

information Training

Two of the most important functions of a supplier development program are: Providing ____________ about products, expected sales growth, etc. Suppliers need to become extensions of their customers. __________ suppliers in the application of lean and six sigma / quality tools.

Systems Approach to Management

A quality management principle on which the ISO 9000 series standards are based managing interrelated processes

Involvement of People

A quality management principle on which the ISO 9000 series standards are based people are the essence of an organization

Continual Improvement

A quality management principle on which the ISO 9000 series standards are based performance improvement is a permanent objective

Focus on Cross Functional Engagement

A trend in SRM A best practice for strategic supplier relationships involves SRM teams at both the company and at the supplier, each led by a relationship manager, who form a steering committee to lead the process.

Focus on Innovation

A trend in SRM Companies that engage in more innovation with suppliers, report higher ROI.

Close Alignment of Sourcing with SRM

A trend in SRM Many companies are determining their negotiation strategies by tying them to their category management strategy, and to their supplier relationship goals.

Investment in People and Soft Skills

A trend in SRM Treat suppliers with courtesy and respect. Be candid, and able to disagree without being disagreeable. Hold both sides to the same standards.

ISO 14000

An external certification A family of standards for environmental management. The benefits include reduced energy consumption, environmental liability, waste and pollution, and improved community goodwill.

ISO 9000

An external certification A series of management and quality standards in design, development, production, installation, and service. Companies wanting to sell in the global market seek this certification.

Supplier Development

the technical and financial assistance given to existing and potential suppliers to improve quality and/or delivery performance. a buyer's activities to improve a supplier's capabilities.

Mutually beneficial supplier relationship

A quality management principle on which the ISO 9000 series standards are based interdependent benefits create value for both an organization and its suppliers.

Preferred Supplier

A classification based on the weighted criteria evaluation system Overall point score of 90-100 work with these suppliers in maintaining a competitive position and on new product development

Motivate Suppliers

A Benefit of Supplier Recognition Programs Can motivate suppliers to excel in terms of their quality, pricing and delivery commitments.

Suppliers Adapt to Company's Culture

A Benefit of Supplier Recognition Programs If the company treats its suppliers as a part of the family and engages in supplier recognition programs periodically, it can help to bring the suppliers closer to the corporate values, ethics and principles of the company.

Creates Entry Barriers for Competitors

A Benefit of Supplier Recognition Programs If the suppliers trust the company, they may be more inclined to sign deals of exclusivity with the company for certain crucial components.

Encourages Supplier Participation in Product Innovation

A Benefit of Supplier Recognition Programs Recognition to suppliers also brings about their enthusiasm to work closely with the company on new product development.

Improve Supplier Loyalty

A Benefit of Supplier Recognition Programs Supplier support is important to ensure that customer delivery commitments are maintained.

Certified Supplier

A ________________ is a source that through prior experience and qualification can provide material of such quality that it needs little if any receiving inspection or testing before going into approved stock or into the product process.

Developmental Supplier

A classification based on the weighted criteria evaluation system Overall point score of 0-69 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.

Acceptable Supplier

A classification based on the weighted criteria evaluation system Overall point score of 70-89 require a plan from these suppliers outlining how they will achieve preferred status

Information Sharing and Lines of Communication

A key to successful strategic partnerships. Both formal and informal lines of communication should be set up to facilitate the free flow of information. Confidentiality of sensitive information must be maintained

Shared Vision and Objectives

A key to successful strategic partnerships. Both partners must share the same vision and have objectives that are not only clear but mutually agreeable. The focus must move beyond tactical issues and toward a more strategic path to corporate success.

Commitment and Top Management Support

A key to successful strategic partnerships. Commitment must start at the highest management level. Partnerships tend to be successful when top executives are actively supporting the partnership

Change Management

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

Capabilities

A key to successful strategic partnerships. Key suppliers must have the right technology and __________ to meet cost, quality, and delivery requirements in a timely manner (current and future)

Continuous Improvement

A key to successful strategic partnerships. 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 Recognition Programs

A program to recognize suppliers who achieve the high performance standards necessary to meet customer expectations.

product rejections late deliveries negative quality

Example of Criteria used for an internal Certification Program Supplier has no incoming _____________ for a specified time period. Supplier has no incoming ____________ for a specified time period Supplier has no significant _______________ related incidents for a specified time period Supplier is ISO 9000 certified or has successfully passed a recent on-site quality system evaluation Supplier consistently meets a mutually agreed-upon set of clearly specified quality performance measures Supplier has a fully documented process and quality system with cost controls and continuous improvement capabilities Supplier's processes is determined to be stable and in control

Qualify Audit

ISO certified suppliers are easier for procurement to initially ________and periodically _______

Strong Supplier Partnerships

Important to achieving win-win competitive performance for the buyer and supplier -These require a strategic perspective as opposed to a tactical perspective (thinking long-term, the big picture, rather than short-term is a strategic 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"

Supplier Evaluation: Performance

It is important to actively monitor a supplier's performance and provide visibility and feedback on supplier performance at each stage of the evaluation process. Some relevant metrics include: Supplier price and cost performance Product receipt quality Delivery performance Financial stability Contractual and standard compliance Participation in product development Cooperativeness in third-party production management Support of both ethics and sustainable practices

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. Strategic Suppliers are asked to add their knowledge and expertise to the company's new product development process.

need want

Most supply professionals view SRM as an organized approach to defining what they _______ and ______ from a supplier.

Plan

Part of the PLAN DO CHECK ACT Model Identify an opportunity and ______ for change.

Act

Part of the PLAN DO CHECK ACT Model If the change was successful, implement it on a wider scale and continuously assess your results. If the change did not work, begin the cycle again.

Do

Part of the PLAN DO CHECK ACT Model Implement the change on a small scale (testing it out).

Check

Part of the PLAN DO CHECK ACT Model Use data to analyze the results of the change and determine whether it made a difference.

Strategic Sourcing High Lesser

SRM is often a part of the rollout of __________________ and is typically applied with suppliers (not all): Providing _____volumes of a product/service Providing _________ quantities of a crucial product/service That serve many business units of a company or organization Where intensive engineering, manufacturing and/or logistics interaction is essential.

need to be successful

Supplier development is all about providing suppliers with what they ______________________ in the supply chain.

True

T/F: "Squeezing" suppliers to generate a lower annual purchasing spend hurts strategic relationships! . . . but it is very often still done! [Profit Leverage Effect]

False (ISO certified firms have to be re-certified every 3 years)

T/F: ISO certified firms have to be re-certified every 5 years

True

T/F: ISO certified suppliers are usually more open to sharing supply chain information

True

T/F: ISO certified suppliers have formal processes in place for continuous improvement of their products, services, and processes

False (These require a strategic perspective as opposed to a tactical perspective)

T/F: Strong strategic partnerships require a tactical perspective as opposed to a strategic perspective.

True (The assumption is that excellent suppliers will be able to drive costs out)

T/F: When evaluating key suppliers for developing a collaborative relationship, purchase cost becomes relatively less important.

Supplier Evaluation: Weighted Criteria

The Weighted-Criteria Evaluation System (not all criteria are equal, some can be weighted more than others)

Supplier Relationship Management (SRM)

The discipline of strategically planning for, and managing, all interactions with the third party organizations that supply goods and/or services to an organization in order to maximize the value of those interactions. Identifying and measuring key strategic suppliers

Plan Do Check Act

The process commonly utilized in continuous improvement is...

Buyer Supplier Weights Suppliers

The weighted criteria evaluation system framework: 1.Select the key dimensions of performance mutually acceptable to both ______ and __________. 2.Monitor and collect performance data. 3.Assign _______ to each of the dimensions. 4.Evaluate performance measures between 0 and 100. 5.Multiply dimension rating by weight and sum of overall score. 6.Classify __________ based on their overall score, e.g., Certified, Preferred, Acceptable, Conditional, Developmental, Unacceptable, etc. 7.Audit and perform ongoing certification review

recognize celebrate partnerships role models

Three Attributes of Supplier Recognition Programs: 1.Companies should _________ and __________ the achievements of their best suppliers. 2.Award winners exemplify true ______________, continuous improvement, organizational commitment, and excellence. 3.Award-winning suppliers serve as _____________ for other suppliers.

Supplier Relationship Management System

When considering a SRM program there are several technologies available to support development. provides a more comprehensive and objective view of a supplier(s) performance system can only be implemented in line with the associated business process changes. is part of the process, not the whole process by itself.

Value Engineering

activities help the buyer's company to reduce cost, improve quality and reduce new product development time beginning with the initial design

Customer Focus

A quality management principle on which the ISO 9000 series standards are based understand current and future customer needs

Leadership

A quality management principle on which the ISO 9000 series standards are based establish unity of purpose and direction of the organization

Mutual Benefits and Needs

A key to successful strategic partnerships. Partnership should result in a win-win situation, which can only be achieved if both companies have compatible needs. An alliance is much like a marriage, and if only one party is happy, then the marriage (i.e., alliance) is not likely to last

personal relationships

A key to successful strategic partnerships. Strategic Partnerships begin with the development of ________________ between key people at each company It is people who communicate and make things happen

Building Trust

A key to successful strategic partnerships. With trust, partners are more willing to work together , find compromise solutions to problems, work toward achieving long-term benefits for both parties, and go the extra mile.

Performance Metrics

A key to successful strategic partnerships. You can't improve what you can't (or don't) measure Measures related to quality, cost, delivery, and flexibility are used to evaluate suppliers. Metrics should be: 1) understandable, 2) easy to measure, and 3) focused on real value-added results [S.M.A.R.T. objectives] A multi-criteria approach is best [i.e., a SCORECARD] Total Cost of Ownership, is made up of all costs associated with the acquisition, use, and maintenance of a good or service

Supplier Evaluation

A process to identify the best and most reliable suppliers Sourcing decisions are made on FACTS and not on PERCEPTION (through the use of defined criteria) Frequent feedback can help avoid surprises and maintain good relationships. (Hold regular review meetings) Suppliers should be allowed to provide constructive feedback to the customer

Process Approach

A quality management principle on which the ISO 9000 series standards are based a desired result is achieved through a managed process A formal and robust step wise process a company goes through to ensure they have the highest quality product

Factual Approach to Decision Making

A quality management principle on which the ISO 9000 series standards are based decision are based on facts and data

Suppliers

Benefits of Strategic Partnerships with Suppliers for ________: Greater visibility into buyer's purchasing plans Increased operating efficiencies Longer term buyer commitments; greater predictability of future business Increased scope of business and revenue Lower cost of sales; increased margins Opportunities to develop, pilot, and showcase innovative solutions Sustainable competitive advantage

Buyers

Benefits of Strategic Partnerships with Suppliers for ________: Preferred access to the supplier's best people Increased operating efficiencies Lower costs Improved quality Enhanced service Influence over supplier investments and technology Preferred access to supplier ideas Increased innovation from and with suppliers, leading to lower costs and incremental revenue Sustainable competitive advantage

Reducing Inspections Long Term Decreasing

Benefits of Supplier Certification Programs: ________ the amount of time and resources necessary for the buyer to conduct incoming ______________ of products and materials from certified suppliers. Building ___________ relationships _________ the supplier base Recognizing excellence

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.

Automation Integration Visibility Collaboration Optimization

The following are five (5) key points to consider in the development and implementation of an SRM system: 1. ____________ is meant to handle routine transactions 2. ____________ spans multiple departments, processes, and software applications 3. ___________ of information and clear and concise process flows 4. ___________ through information sharing 5. ___________ of processes and decision making