Supply Chain: Ch. 6, Exam 2
sourcing strategies
analysis and ability to make adjustments based on price, evaluation of supplier performance, and the overall needs of the organization
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
sustainability
the ability to meet current needs of the supply chain without hindering the ability to meet the future needs in terms of economic, social, and environmental challenges
supply base
the group of suppliers from which a co. acquires goods and services
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 co's own internal resources previously
bottleneck (sourcing categories)
unique procurement problems. supply risk is high and availability is low. small # of alternative suppliers
Pain
using a penalty or punishment is a negative outcome for poor performance, cost overruns, quality problems
Gain
using a reward as a positive outcome from exceptional performance
Sustainable Sourcing Programs Should Try To
(1) Grow Revenues (2) Reduce Costs (3) Go "Green" (4) Manage Risks (5) Build Intangible Assets
SOURCING STRATEGIES BY CATEGORY
**fill in
functional products
-def: MRO items and other commonly low profit margin items with relatively stable demand and high levels of competition (ie: office supplies, food staples) -potential strategy: reliable, low cost suppliers -multi-sourced
strategic sourcing
-def: 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 -strategic sourcing requires analysis of what an organization buys, from whom, at what price, and at what volume -emphasis is placed on the entire life-cycle of a product, not just its initial purchase price
strategic alliance development
-def: 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 a higher return on invetsment -eventually extends to a firm's second-tier suppliers as the firm's key suppliers begin to form their own alliances
innovative products
-def: characterized by short product life cycles, volatile demand, high profit margins, and relatively less competition (ie: technology products) -potential strategy: innovative, high-tech, cutting edge, market leading supplier -long term supplier single-sourced
business ethics
-def: the application of ethical principles to business; 2 main approaches: (1) utilitarianism: greatest good for greatest # of people (2) rights and duties: actions that are right regardless of their consequences
Reasons for Multiple Suppliers
-need more capacity -spread risk of supply disruption -create competition -more sources of information -dealing with special kinds of business
Reasons for Single Supplier
-to est. a good relationship -less quality variability -lower cost -transportation economies -proprietary product or process -volume too small to split
Drivers of Strategic Sourcing
1) improve long-term financial performance 2) increase customer focus 3) improve product quality 4) reduce the cost of materials 5) reduce delivery lead times 6) optimize the number of global suppliers 7) deliver more innovative products, in less time, and less expensively than competitors
Objectives of Strategic Sourcing
1) improve the value-to-price relationship 2) understand the category buying and management process 3) examine supplier relationships across the entire organization 4) develop and implement multi-year contracts 5) leverage the entire organization's spend
strategic (sourcing strategies)
strategic items and services that involve a high level expenditure and are vital to the firm's success
Vendor Managed Inventory (VMI)
suppliers directly manage buyer inventories to reduce the buyer's inventory carrying costs and avoid stockouts from the buyer
Non-critical (sourcing categories)
routine items that involve a low % of the firms' total spend and involved very little supply risk
single-source
a sourcing strategy where there are multiple potential suppliers available for a product or service; however, the co. decides to purchase from only one supplier **RISKY!!
reverse auctions
a sourcing technique where pre-qualified suppliers enter a website at a pre-designated time and date, and try to underbid competitors to win the buyer's business
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
leverage (sourcing categories)
commodity items where many alternatives of supply exist and supply risk is low. Spend is high and there are potential procurement savings.
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 behaviors
corporate social responsibility (CSR)
practice of business ethics
insourcing
producing goods or services using a co's own internal resources
multi-source
purchasing a good or service from more than one supplier. Co's may use multi-sourcing to create competition between suppliers in order to achieve higher quality and lower price
supply base rationalization
reducation in the supply base to the lowest # of suppliers possible without significantly increasing risk
distributive negotiations
refers to a process that leads to a self-interested, one-sided outcome