CHAPTER 4 STRATEGIC SOURCING FOR SUCCESFUL
SUPPLY CHAIN MANAGEMENT
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1. Alliance development: An extension of supplier development
refers to increasing a key or strategic supplier's capabilities.
2. Benchmarking: Comparing what you do to other businesses
that do it best and implementing changes Normally looking at
statistics (TAT, cost, productivity measures
3. Benefit of VMI (buyers prospective): 1. Supplier tracks
inventories
2. Determines delivery schedules and order quantities
3. Buyer can take ownership at stocking location.
4. Benefit of VMI (supplier's perspective): 1. Avoids ill-advised
customer orders
2. Supplier decides inventory set up & shipments
3. Opportunity for supplier to educate customers about other
products.
5. Early Supplier Involvement: its a highly effective supply chain
integrative technique.
- Key suppliers become more involved in the internal
operations of the firm, particularly with respect to new
product & process design, concurrent engineering & design
for manufacturability techniques.
6. Ethical sourcing: Can be defined as "That which attempts to
take into account the public consequences of organizational
buying or bring about positive social change through
organizational buying behavior."5 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
7. Ethical sourcing policies should include: Determining where
all purchased goods comes from and how they are made;
Knowing if suppliers promote basic workplace principles
(such as the right to equal opportunity and to earn a decent
wage, the prohibition of bonded, prison or child labor, and the
right to join a union);
Use of ethical ratings for suppliers alongside the other
standard performance criteria;
Use of independent verification of vendor compliance;
Reporting of supplier compliance performance to
shareholders;
Providing detailed ethical sourcing expectations to vendors
8. Evaluating & Selecting Key Suppliers: purchase cost becomes
relatively less important.
Its conducted by a cross functional team selection approach
wherein purchasing staff, primary users, product designers,
and manufacturing personnel participate.
9. Fair trade products: A product manufactured or grown by a
disadvantaged producer in a developing country that receives
a fair price for their goods.
10. Green purchasing: A practice aimed at ensuring that purchased
products or materials meet environmental objectives of the
organization such as waste reduction, hazardous material
elimination, and recycling, remanufacturing and material reuse
11. Outsourcing Benefits: 1. Concentrate on core capabilities
2. Reduce staffing levels
3. Accelerate reengineering efforts
4. Reduce management problems
5. Improve manufacturing flexibility.
12. Outsourcing Risks: 1. Loss of control
2. Increased need for supplier management
3. Increased reliance on the supplier
13. Punishment to Suppliers: A negative reward may be to reduce
future business; or a bill-back amount equal to the incremental
costs resulting from a late delivery or poor quality
14. Rewarding Supplier Performance: An incentive to suppliers for
surpassing performance goals
15. Strategic Alliance and Supplier Certification Programs: These
programs are one way to identify strategic alliance candidates.
Firms often develop their own formal certification programs, &
most require ISO 9000 or similar certifications as one part of
the certification process.
A site audit using a cross-functional team to identify a
supplier's process capabilities, materials and methods monitors
base-line management practices.
16. Strategic supplier agreements can reward suppliers by
allowing:: 1. A share of the cost reductions
2. More business and/or longer contracts
3. Access to in-house training seminars & other resources
4. Company & public recognition
17. Successful Sourcing Strategies: 1. Functional products
Are maintenance, repair, and operating (MRO) materials and
other commonly purchased items and supplies. These items
are characterized by low profit margins, relatively stable
demands, and high levels of competition
2. Innovative products
They are characterized by short product life cycles, volatile
demand, high profit margins, and relatively less competition.
18. Supplier alliances: Results in better market penetration access
to new technologies & knowledge, & higher return on
investment. Alliance development eventually extends to a
firm's second-tier suppliers, as the firm's key suppliers begin to
form their own alliances
19. Supply Base Reduction Programs (Rationalizing Program): It
results in
1. Reduced purchase prices
2. Fewer supplier management problems
3. Closer and more frequent interaction between buyer and
supplier
4. Greater levels of quality and delivery reliability.
20. Supply Chain Strategy Framework: 1. Classify purchased items and their suppliers ( functional or Innovative)
2. Define supply chain goals
3. Identify capabilities and improvement opportunities.
4. Develop work plans
5. Execute plans
6. Monitor Progress
21. Sustainability or Sustainable Sourcing: As applied to supply chains, is a broad term that includes green purchasing as well as some
aspects of social responsibility and 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
22. Value engineering: Activities help the firm to reduce cost, improve quality & reduce new product development time
23. Vendor Managed Inventories (VMI): Suppliers manage buyer inventories to reduce inventory carrying costs & avoid stock-outs for
buyer.