Supply Chain Management

Project 4
Supply Chain Partner
Selection

Lecturer: Li Zhe
 learning target

social competence method ability

Professional ability
• Establishmen • According to
t and Accurate and
the timely
maintenance
professional discovery,
of supply
chain
standards of collection,
partnership logistics sorting and
engineers analysis of
• Coping
and supply problems
Strategies for
chain and put
Principal-
Agent
managers forward
Problems in • Communicat reasonable
Supply Chain e and plan. solutions
 Task decomposition
The connotation of supply
task one
chain partnership
Supply chain partnership
Establishment of supply chain
awareness
partnership
Supply Chain Partner Selection
for
task two Factors
ans Supply chain partner selection
wer Selection of supply chain
partners method
chai Supply Chain Partner Selection
n Steps
com Cognition of principal-agent
bine relationship in supply chain
do task three
Adverse Selection and Its
Part Dealing with principal-
Weakening Measures
ner agent problems in supply Moral hazard and its control
com chain measures
pani practice one Supplier relationship
on improvement
sele Practice two Team trust ability training
ct
ay something

• What are friends?

• How to choose friends?
• How to get along with
friends?
• What do you do if you
have a conflict with a
friend?
Task 1 Supply Chain Partnership
Building Awareness

one The connotation of

supply chain
partnership

Establishment of two
supply chain
partnership
 1. The connotation of supply
chain partnership
1 evolution of business relationships
The

2
Implications of Supply Chain Partnerships

Supply3Chain Partnerships and Traditional Sup

difference in relationship

4 Importance of Supply Chain Partner

The
 1.1 The evolution of
business relationships
Historically, it has roughly gone through three
stages of development, as shown in the figure
below.
cooperate
tightness
Partnerships
Manufacturing strategic
Innovation and collaboration
Technology R&D
( AM )
Logistics relationship
Technology and Combining production
Management and logistics
Innovation
traditional(buying
JIT/TQM )
and selling
relationship
production-centric
1960-1970 1970-1980 1980- _ _ _

The evolution of corporate partnership

 1.2 The meaning of supply
chain partnership
Supply Chain Partnership ( SCP )
It refers to a coordination relationship formed between two or
more independent members within the supply chain to ensure the
realization of a specific goal or benefit. / An agreement
relationship between suppliers and manufacturers to share
information, share risks, and share profits within a certain period
of time.

Establishing strategic partnership is the focus of supply chain

strategic management and the core of integrated supply chain
management .
 Key Points in Supply
Chain Partnerships
( 1 ) The supplier understands
the production procedures and
production capacity of the
enterprise, and clearly knows
the duration, quality and
quantity of the products or raw
materials required by the
enterprise.

( 2 ) The enterprise provides

its own business plan, business
strategy and corresponding
measures to the supplier, so
that the supplier can clarify
the expectations of the
 1.3 The difference between
SCP and traditional supplier
relationship
Elements of Comparison Traditional Supplier
Relationships Supply Chain Partnerships
The main materials, services, technologies and other core
resources exchanged with each other
Supplier selection standard price, bid multi-criteria evaluation
(delivery quality, punctuality, reliability, service)
Stability changes frequently Long-term, stable, mutual trust
single contract Open long-term
cooperation
Supply lot size
how many suppliers
the supplier
Information exchange Information dedicated and strictly
confidential Information Sharing
Quality Control Input Inspection Control Manufacturer Standard
Management and Supplier Total Quality Management
 1.4 Importance of supply
chain partnership
• 1. Reduce uncertainties • 3. Strengthen the core
and reduce inventory competitiveness of
• Uncertainties in the enterprises
supply and demand • Supply chain management
relationship faced can based on strategic
be eliminated through partnership can give
mutual cooperation full play to the core
• Through cooperation and competitive advantage
sharing of demand and • of an enterprise
4. Increased user and
• 2. Respond quickly to
supply information, many gain a competitive
the market satisfaction
uncertainties can be
• Concentrating on its own • position.
Product design; product
made clear
core competitive manufacturing process;
advantages , it can give after-sales service.
full play to the • Manufacturers help
advantages of all suppliers update
parties, and can quickly production and
carry out the design and distribution equipment,
manufacture of new increase investment in
1.4 Importance of supply
chain partnership
 Knowledge1. link:
Extra long1+1>2
complementary
theory 2. Complementary
technology
3. Complementary roles
4. Complementary
individual, personality types
team 5. Business
complementarity
6. Relational
complementarity
7. Risk-based
1. Complementary
complementarity
8. Robustcooperation
complementarity
2. Strong cooperation
inter- 3. Market cooperation
enterprise 4. Brand cooperation
5. Resource cooperation
6. Competitive cooperation
 2. Establishment of supply
chain partnership
1 Types of Supply Chain Partnerships

2
Establishment of supply chain partnership

3 on the Formation of Supply Chain Par

Constraints

Facilitate the development of supply chain p

4 main factor
 strategic partnership
• Technology Diffusion and Service
Collaboration in Strategic Partnership
Enterprise Model
 2.1 Types of Supply Chain
Partnerships
Partnership Type
medi
um long
term
val influential strategic
ue one's business Partner
ad Patner shor medi
t um
de
d ordinaryterm Competitive /term
eff Partner Technical
ect Partner
Competiti
veness
Partner classification
 2.2 Establishment of supply
chain partnership
Steps to establish a supply chain partnership:

( 1 ) Demand analysis for establishing supply

chain strategic partnership (clarification of
necessity and risk assessment)

( 2 ) Determine the standard, select the

supplier, select the partner

( 3 ) Formal establishment of cooperative

relationship

( 4 ) Implement and strengthen strategic

partnership (or dissolve unhelpful partnership)
2.3 Restrictions on the
formation of supply chain
partnership
high
level
manner

Corpora
Partner
te
capacity restrict
Strategy
compati factor and
bility
culture

trust
2.4 Factors that promote the
development of supply chain
partnerships
Long term
mutual
benefit

strategic
Change Promot cooperati
on
income e Guideline
structure
factor s and
Skills

Equity in
strategic
decisions
 Task 2: Selection of Supply
Chain Partners

one Supply Chain Partner

Selection Factors

How supply chain partners two

are selected

thr Steps to choose a supply

ee chain partner
 1. The principal-agent problem
in supply chain management

1 principles for selection of supply chain p

General

2 enterprises should consider when choosing

t Chinese
 1.1 General principles for selection of
supply chain partners
General principles for supply chain partner
selection:

( 1 ) The principle of core competence.

( 2 ) The principle of total cost accounting.

( 3 ) The principle of agility.

( 4 ) The principle of risk minimization.

 enterprises should
consider when choosing
150
 product supply chain partners
quality 98.5 Percent (%)
92.4
 price 100
69.7
 Delivery
lead time 45.5
50 30.3
 Product twenty
flexibilit one
y
0
 Leadtime quality price Delivery lead
Variety lead time andlead time and
time flexibility
selection criteria price discountdelivery date
and price
98.5 92.4 69.7 45.5 30.3 twenty
discounts Percent (%)
one
 lead time Choose a standard chart
and
Think:
deliveryWhat's
 Comprehensive evaluation index system
structure

cost, delivery quality,

A. shipping quality,
PerformanceCorporate reputation and
: development prospects personnel
Technical cooperation,
status, financial status,
B. Equipment status, production
Production Quality
status System, R&D Quality, Supply
capacity: Quality
Production quality, inspection and
Politicalquality
testing, and legal
data and personnel
C. Quality environment, economic and
System: technological environment,
Natural geographical
 2. How to select supply chain partners

 ( 1 ) Intuitive judgment method

A method of analyzing and evaluating
partners based on information from
consultations and surveys, combined with
personal judgment . It is mainly to adopt
the opinions of experienced purchasing
personnel, or directly make judgments by
purchasing personnel based on experience.
It is often used to select partners for
non-primary raw materials of enterprises.
 2. How to select supply chain partners

 ( 2 ) Bidding Law
The bidding conditions are proposed by
the enterprise , and each bidding partner
conducts bidding , and then the enterprise
decides the bid and signs a contract with
the partner who proposes the most favorable
conditions.
There can be an open tender (with no
restrictions on the qualifications of
bidders), or a designated tender (pre-
selection of several possible partners).
It is often used when the order quantity
 2. How to select supply chain partners

 ( 3 ) Negotiation selection method

The enterprise first selects several
partners with more favorable supply
conditions , negotiates with them
separately , and then determines the
appropriate partner.
It can be fully negotiated and
guaranteed in terms of product quality,
delivery time and after-sales service, but
it is not necessarily the most reasonable
price and the most favorable supply
conditions.
 2. How to select supply chain partners

 ( 4 ) Procurement cost comparison

method
Compare and analyze the procurement
cost (selling price + procurement fee +
transportation fee … ), and select a
partner with a lower procurement cost .
It is often used when the partner can
meet the requirements of quality and
delivery time.
 2. How to select supply chain partners

 ( 5 ) Analytic Hierarchy Process

Combining qualitative analysis and
quantitative analysis , digitizing goals,
constraints, etc. , making a judgment
matrix , and comparing the weights in
pairs.
It is often used when the target factor
structure is complex and the necessary data
is lacking . High reliability and small
errors, but problems are prone to occur
when there are many factors and large
scales.
 3. Selection steps for
supply chain partners
1: Analyze the market competition
environment (demand, necessity )
2: Establish a partner to Compare old
choose a target and new
partners
3: Establish partner
evaluation criteria
Modify
4: Set up an evaluation evaluation
team criteria
feedba feedba
ck 5: Partner Engagement ck

6: Evaluate Partners

tool
choose technol
ogy
7: Implement supply chain
partnerships
 Summary and Improvement:
Experience Accumulation
• Lesson 1: Not all clients can be partners
• Lesson 2: Partnerships don’t have to be built on existing good
relationships
• Lesson 3: Don’t overemphasize contribution maximization
• Lesson 4: Intimacy does not equal trust
• Lesson 5: Focus on the future, not the present

• Lesson 6: Trading frequency is more important than trading

volume
principal-agent problem of the
supply chain

one Cognition of principal-

agent relationship in
supply chain
Adverse Selection two
and Its Weakening
Measures
thr Moral hazard and its
ee control measures
 principal-agent
relationship in the supply
chain
1 and meaning of the principal-agent relati
background

2
The principal-agent problem in supply chain manage

3 my country's Enterprise Cooperation Model a

sting in
 1.1 The background and meaning of
the principal-agent relationship
 background:
Great Development of Productivity:
Refinement of Division of Labor and
Decentralization of Rights
Large-scale production: the division of labor
is specialized, and the agent can do the
entrusted work well

 meaning:
According to the contract, one or more
actors ( principal ) designate and employ
another or more actors ( agents ) for their
services, and at the same time grant the agent
certain decision-making power, and pay
 1.2 The principal-agent
problem in supply chain
• In
management
a principal - agent relationship, there
are two agency problems that must be faced:
( 1 ) Adverse selection caused by information
asymmetry:
The principal has private
information that is difficult for the agent to
grasp, resulting in a conflict of interest.
( 2 ) Moral behavior, immoral behavior:
The interests of the agent and the interests of the
principal are not completely consistent, and the
principal cannot know exactly how hard the agent is and
whether it really serves the requirements of the
contract.
1.3 Problems existing in China's
enterprise cooperation model at this
stage
( 1 ) Lack of motivation and enthusiasm to take the initiative to
attack the market
( 2 ) There is no scientific consultation decision-making and
research on cooperative countermeasures, and lack of scientific
awareness of market competition
( 3 ) The "virtuous behavior" in the agency problem is quite
serious
( 4 ) Short-term behaviors are common in corporate
partnerships
( 5 ) The "ratchet effect" makes enterprises less active and
proactive in cooperative competition
( 6 ) The supply chain model based on Internet/Intranet is
developing slowly
( 7 ) Dual identities and dual roles of state-owned enterprise
 Knowledge Link: Ratchet
Effect and Whiplash
Consumers are easy to
increase consumption with
the increase of income,
but not easy to reduce
ratchet consumption with the
effect decrease of income,
resulting in a short-term
consumption function with
a positive intercept.
If you do a good job, you
will be criticized. If you
don't have passion for
whipping your work, you will be
fast cows praised by people who
don't have performance.
This is a failure of
management work.
 2. Adverse selection and its
weakening measures

1 Adverse selection and its dangers

2
Strategies to Eliminate Adverse Selectio
 2.1 Adverse selection
and its harm
 meaning:
The party with more personal information
tries to reach a contract, and the value of the
other party decreases. Also known as rebellious
selection, unfavorable selection.

For example: sometimes, if the price of a commodity is

lowered, the quantity purchased by consumers will not increase;
if the price is raised, the quantity supplied will not be increased
by the producer. (Antique Market)
 Knowledge Link: Lemon
Market Effect

"Lemon" means "defective" in

American slang, and the lemon market
is also called the defective market.
The lemon market effect means that
in the case of information
lemon asymmetry, good products are often
market effect eliminated, and inferior products
will gradually occupy the market,
thereby replacing good products,
resulting in inferior products in
the market.
 2.1 Adverse selection and
its harm
 harm:
( 1 ) Suppliers use inferior products to make short
promises for their own interests, which lacks fairness
and opportunities for high-quality suppliers.
( 2 ) It is difficult for the core enterprises of the
supply chain to identify high-quality suppliers, and
there are problems such as quality problems , lack of
materials, reduction of market opportunities, inability
to respond quickly to customer needs and damage to
corporate reputation.
 2.2 Strategies to
Eliminate Adverse
Selection
( 1 ) Inspect the supplier's past performance and goodwill
( 2 ) Investigate the supplier's third-party certification

( 3 ) Establish long-term strategic partnership

( 4 ) Change of business philosophy

( 5 ) The government actively participates in and creates a

favorable economic environment
( 6 ) Conduct adequate and effective communication
 3. Moral hazard and its
control measures

1 Moral Hazard and Its Harm

2 How to Control Moral Hazard

 3.1 Moral hazard and
its harm
 The meaning of moral hazard:
When the behavior of one party to the contract
cannot be fully observed, or the cost of
understanding its behavior is high, that party
may change its behavior to the detriment of the
other party to pursue its own interests. Also
known as immoral behavior .

 harm:
Each member of the supply chain has a low level
of effort, which damages the interests of
manufacturers, increases management costs, and
reduces product quality.
 3.2 How to control
moral hazard

( 1 ) Adequate information communication and

information sharing

( 2 ) the opportunity cost of raising moral hazard

( 3 ) Establish a perfect incentive - restraint
mechanism
Case: Shanghai Qiancun
Department Store
" childcare convenience
service " of Shanghai
Qiancun Department
Store has encountered
moral hazard for
customers. Shortly
after the Shanghai
Qiancun Department
Store opened, it
launched a convenience
measure to take care of
children for customers
who come to the mall to
shop.
 Project
evaluation

self- Summ
extracu
test arize
rricular
Evalua improv
expand
te e