Supply Chain Management Chapter 6
Sustainability
Ability to meet current needs of supply chain without hindering ability to meet future needs in terms of economic, social, and environmental challenges (3 P's- people, planet, profit)
Strategic Alliance
An agreement between a buyer and supplier to pursue some agreed upon objectives, while remaining independent organizations
Business Ethics
Application of ethical principles to business
Co-Managed Inventory (CMI)
Arrangement where specific quantity of item is stored at buyer's location
Ethical Sourcing
Attempts to take into account the public consequences of organizational buying, or bring about positive social change through organizational buying behavior
Collaborative Negotiations
Both sides work together to max the outcome or create a win-win result
Innovative Product
Characterized by short product life cycles, volatile demand, high profit margins, & relatively less competition (higher demanded products like laptops, tvs)
Spend Analysis
Collecting, cleansing, classifying, and analyzing expenditure data for purpose of decreasing costs, improving efficiency, and monitoring compliance (using stats in the world of supply chain)
Leverage
Commodity items where many alternatives of supply exist and supply risk is low, spend is high and there's potential procurement savings (high value, low level) Ex. Transportation
Strategic Sourcing
Comprehensive approach for identifying and selecting key suppliers for org.'s critical supply needs
Corporate Social Responsibility (CSR)
Corporation's initiatives to assess and take responsibility for company's effects on environmental and social well being
Supplier Certification Programs
Differentiate strategic supplier alliance candidates from others
Strategic Alliance Development
Extension of supplier development which refers to increasing a key or strategic supplier's capabilities
Utilitarianism
Greatest good for greatest number of people
Supply Base
Group of suppliers that firm uses to acquire materials, finished goods, equipment, MRO supplies and services
Non-Critical
Items that involve low percentage of firms' total spend and involve very little supply risk (low value, low risk) Ex. office supplies
Functional Products
MRO items & other commonly low profit margins with relatively stable demands & high levels competition (every products like paper, pens)
Multiple Sourcing
Purchasing a good or service from more than one supplier to create competition between suppliers to achieve higher quality, lower price and reduce risk
Rights and Duties
Recognize rights of others and the duties those rights impose on your actions
Supply Base Rationalization
Reduction in supply base to consolidate the number of suppliers as low as possible without increasing risk
Distributive Negotiations
Refers to a process that leads to self- interested, one-sided outcome
Reverse Auctions
Sourcing technique where pre-qualified suppliers enter website and at pre-designated time and date, and try to underbid competitors to win buyer's business
Strategic
Strategic items and services that involve a high level of expenditure and are vital to firm's success (high value, high level) Ex. processors, chips
Single Sourcing
Strategy where there are multiple potential suppliers available for product or service, but, company decides to purchase from only one supplier Can increase supply risk depending on the stability of supplier
Vendor Managed Inventory (VMI)
Suppliers directly manage buyer inventories to reduce buyer's inventory carrying costs and avoid stock outs for buyer
Preferred Suppliers
Trusted partners, provide higher value, reliable, responsive, flexible, cost effective
Bottleneck
Unique procurement problems, supply risk is high and availability is low, small number of alternative suppliers (low value, high risk) Ex. better phone camera
Gain Provision
Using a reward as positive outcome from exceptional performance
Pain Provision
Using penalty/punishment is negative outcome for poor performance, cost overruns, quality problems, etc.
5 Key Areas of Typical Spend Analysis
1. Total historic expenditure and volumes 2. Future demand projections or budgets 3. Expenditure categorized by commodity and sub-commodity 4. Expenditure by division, department, or user 5. Expenditure by supplier