Vendor management Out sourcing decision
Need to out-source
• The challenge of sourcing is to materialize the value that will meet customer needs . This requires decision on whether to make or buy . • Any retailer can either manufacture all goods in their manufacturing units or source the merchandise or service from some outside agency.
• The decision on whether to make or buy should be aimed to achieve a quality cost combination of value that maximizes both customer benefits and company profits.Need to out-source . cont .
• Dramatic changes in the business environment are demanding flexibility and innovativeness . cont ..Need to out-source . • Buyers are aiming towards maximizing quality and availability and maximizing cost . These often can be achieved more effectively through external network rather than internal arrangement .
Where to buy ???
• If a retailer plans to buy instead of make . the next question is from where to buy .
Criteria for Vendor Selection
• • • • • • • Product type Capacity Cost Country’s infrastructure Political conditions Compliance Financially sound
• Technically competent • Quality • Strong product development and design capabilities .Criteria for Vendor Selection . cont ..
. • Lead time .
• Vendor compliance rules help companies to streamline and standardize their internal procedures for dealing with vendors
. The rules are set up by the buyer .and vendor has to follow them.Vendor Compliance
• Are the rules by which vendors will conduct business with their customers .
• Ship from and ship to point . Content : • Which carrier to use . • Location of ship to point ( Distribution centre or store ) • Which stores are served by which distribution centre .Vendor compliance documents
• Routing guide This document explains how to ship merchandise to your buyer / trading partner .
. • Web site to be used for shipment scheduling .
.• EDI Mapping guidelines Directs how inbound and outbound transactions will be formatted .
tag . carton and pallet barcode lable specifications . o Item . o Value added network and mailbox information .• Vendor Guidelines
This document covers all aspects aside from routing and edi mapping
o General vendor performance guidelines . o Trading partner contact information .
. o Logistical requirements . o Set up and testing documentation and procedures . o Hanger . o Product quality specs . polybag specifications . o Service standards .
• The code requires vendor to act in accordance with all applicable laws and regulations when manufacturing products to be sold to the buyer .Vendor Code of Conduct
• In order for the vendors to understand the standards and expectations .
. • A companies code of conduct includes principles and policies of a buyer / company . every retailer creates its vendor code of conduct .
• Compliance with laws • Environment • Labour
a) Child labour b) Contract labour requirements c) Discrimination
.VCC Includes ..
Forced labour Humane treatment Wages and benefits Working hours
Working conditions Occupational health and safety
. e. f.
Cancellation of orders Termination of business relationship Legal action
..• In case vendor does not comply with the above . it can lead to .
• Need for vendor development : • Spread the risk • To ensure vendor is constantly upgraded as per the latest technology and know how .
• May provide some capital for equipment . • Guarantee a certain amount of business . • Making them understand the expectations . working capital etc .Ways of vendor development
• Providing technical expertise. • Provide education and training to agents . • Helps in establishing R&D cell .
. • Help in getting the vendor compliance as per requirement . vendors and factory management .
• Vendor evaluation can be defined as a permanent and objective monitoring and evaluation process of a vendor’s performance regarding specific criteria as quality or timeliness . • The main objective of any vendor evaluation is to ensure a company’s product and service quality is maintained at all times.
Constantly monitor the working of the vendor Keep taking feedback from the market .
.Vendor evaluation . Make visits to the vendors manufacturing units Do record checks Keep asking for new areas developed Check vendor rating Monitor compliance follow up ..
Confidential worker interview . De brief with factory management . Conduct interviews with factory management .• Audit suppliers to test compliance : Payroll and documentation review . Health and safety inspection . Conduct private interviews with factory workers .
• Vendor management is the process of constantly monitoring and working along with the vendor to ensure a smooth working relation between the buyer and vendor .
Points covered under vendor management
• Vendor Rating • Setting guidelines for vendor selection • Setting vendor code of conduct . • Setting vendor compliance • Vendor Selection • Vendor Development • Vendor Evaluation