Chapter 6

Supply Base Rationalization

(also known as, Supply Base Reduction, Supply Base Optimization). Reduction in the supply base to the lowest number of suppliers possible without significantly increasing risk

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.

Out-sourcing

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

Pain

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

The concept of Supplier Co-location is very similar to VMI and CMI, except that a representative of the supplier is actually ......................... to forecast demand, monitor inventory, and place orders.

embedded in the buyer's purchasing group

Strategic Sourcing

A comprehensive approach for locating and sourcing key suppliers, so that an organization can leverage its consolidated purchasing power to find the best possible values in the marketplace.

Single-Source

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.

Collaborative Negotiations:

Both sides work together to maximize the outcome or create a win-win result. Requires open discussions and a free-flow of information between parties

Insourcing:

Producing goods or services using a company's own internal resources.

Multi-Source:

Purchasing a good or service from more than one supplier. Companies may use multi-sourcing to create competition between suppliers in order to achieve higher quality and lower price.

Distributive Negotiations:

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

Most companies today have some type of Corporate Social Responsibility program. Frequently these programs also require suppliers to agree to abide by a ......................... in order to be considered an approved supplier.

Supplier Code of Conduct

Vendor Managed Inventory (VMI) -

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

Supply Base -

The group of suppliers from which a company acquires goods and services.

Sourcing

The process of identifying a company that provides a needed good or service.

Gain

Using a reward as a positive outcome from exceptional performance:

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.

An extension of supplier development which refers to increasing a key or strategic supplier's ......................

capabilities.

Leverage -

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

Successful sourcing strategies are almost always different for ......... products versus ............... products.

functional innovative

Provides a ................... than their competitors and are characterized as reliable, responsive, flexible, and cost effective.

higher value

Potential to .................... for both parties.

increase revenue and profits

Co-Managed Inventory (CMI)

is an arrangement where a specific quantity of an item is stored at a buyer's location.

Ethical Sourcing

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

Sustainability

is 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.

Achieved a specific and exceptional .................. over time as measured by a set of criteria agreed upon by both buyer and supplier.

level of performance

Rewarding suppliers for outstanding performance ........... and ................... them to continue to strive for excellence in their products, services, and operations

motivates encourages

Supplier Selection is typically conducted by a cross functional team. The process of selecting suppliers is complex and should be based on ...................... using evaluation forms or scorecards.

multiple criteria

Non-critical_ -

routine items that involve a low percentage of the firms' total spend and involve very little supply risk.

Companies agree to ...................... to achieve a mutual benefit.

share information and resources

Rights and Duties:

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

Strategic -

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

Verification

that a supplier operates, maintains, improves, and documents effective procedures that relate to the buyer's requirements

Typically .................. who know the buyers organization, processes, procedures, and requirements.

trusted partners

Bottleneck -

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