Professional Documents
Culture Documents
Central to Sourcing:
Make or Buy Decision
Partnerships between purchasers & suppliers.
The rapid change in the technology landscape,
especially in information and communication
technology (ICT); external vendors are often in
position to provide more effective solutions
support in the new technology.
Globalization is a strong catalyst in outsourcing
enhancing the transparency in financial
reporting, wider choice of suppliers and more
competition.
1. High technology/high volume: these
products are suitable for own
manufacturing.
2. High technology/low volume: the
preferred strategy is to outsource.
3. Low technology/high volume: if the
volume is high then a supply partnership
can be considered with third party
supplier.
4. Low technology/low volume: if demand
is low partnerships are not very
important.
Subcontracting maybe distinguished from
outsourcing in that the latter involves the
total restructuring of an enterprise around
core competences and outside
relationships. Subcontracting is a tactical,
short-term approach.
Where the buyer’s organization is the
employer or client entrusting work to a
main contractor who in turn subcontracts
part of the work.
Subcontracting maybe done due to
overloading of machine or labor, to
ensure completion of work, lack of
specialist machine or know-how, to avoid
acquiring long term capacity when future
demand is uncertain.
Reciprocity– often referred to as ‘selling
through the order book’– is a policy of giving
preference to suppliers that are also
customers of the buying company.
Intra-company trading applies to large
enterprises and conglomerates where the
possibilty arises of buying certain materials
from a member of the group. This policy is
justified on the grounds that it ensures the
utilization and profitability of the supplying
undertaking and the profitability of the
group as a whole.
Purchasing Consortia: a collaborative
arrangement under which two or more
organizations combine their requirements for
a specified range of goods and services to
gain price, design, supply availability and
assurance benefits resulting from greater
volumes of purchase.
Economies of large-scale purchasing.
Members can utilize the relevant professional
purchasing skills of the consortia staff.
Saving of time in ordering standard items
Buying leverage through bulk purchases in
wide range of supplies.
Costs are clearly defined.
Big JIT: or lean production focusing on all sources
of waste.
Little JIT focusing more narrowly on scheduling
goods, inventories and providing resources
when needed.
The objectives of JIT:
Zero Defects
Zero set-up time
Zero Inventories
Zero handling
Zero lead times
Lot size one
Uniform master production schedules
‘Pull’ production systems
Good customer-supplier relationships
Short distance between customer & supplier.
Reliable delivery
Consistent quality with zero defects.
Kanban system is an essential aspect of JIT.
In Japanese, the word Kanban means
‘ticket’ or ‘signal’ and in JIT refers to an
information system in which instructions
relating to the type and quantity of items
to be withdrawn from the preceding
manufacturing process are conveyed by a
card that is attached to a shortage and
transport container.
Production Kanban or P Kanban signals the
need to produce more parts.