OMIS 2010 - Week 4 : Sourcing & Procurement

What are the supply chain manufacturer internal functions?

• process

• purchase

• plan / control

• quality

• ship

What is the purchasing department role?

• select & monitor & develop & maintain supplier

• negotiate / administer long-term contract

• place order

What is procurement?

• plan purchase

• negotiate price

• handle storage

What is sourcing?

stage before purchase

• vet / select / manage supplier

• create / execute strategy

• define quality / quantity metric

What do companies purchase?

• OEM

• MRO

• corporate service

What is OEM?

|:| original equipment manufacturer

direct production product

What are some OEM examples?

• part

• fabrication

• component

What is MRO?

|:| maintenance, repair, operation

indirect production product

What are some MRO examples?

• supply

• furniture

• ticket

• janitor

What is a corporate service?

supply chain service

What are some corporate service examples?

• distribution

• warehouse

• info system

What are some sourcing service options?

• repair firm

• retirement provider

• employment agency

• info system provider

• 3rd party logistic firm

• engineer & health service

What does global sourcing seek to do?

balance economic factor & delivery performance / quantity requirement

What are the procurement concepts?

• on-demand delivery

• continuous replenishment

What is on-demand delivery?

// direct-response delivery

supplier delivers when customer demands

What is continuous replenishment?

supply to sched in short time

What explains why purchasing’s role has increased importance?

material costs = 50% - 60% COGS

What characterizes traditional purchase?

• order

• price / availability

• requisition request

• incoming inspection

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1. paper requisition →

2. authorize → request buyer

3. phone supplier

4. detail → PO number

5. print / distribute PO number

6. copy to receive

7. product receipt

8. copy to A/P

9. match invoice

10. pay

What characterizes e-purchase?

• electronic info / comms use → enhance purchase

• source strategy

---

1. request

2. authorize ↔ supplier site

3. product receipt

4. manage by exception ↔ consolidate invoice

5. pay

What are the e-purchase key features?

• e-mail using e-signature

• web-based order approval

• recipient receipt notification

• auto order requiring recipient authorization

• e-archive facilitating supplier evaluation & trend analysis

What are the e-purchase advantages?

• decreased order process cost / cycle time

• decreased order process error & time

  • decreased & consolidated data entry → purchase / supplier analysis

• decreased buyer research time

  • catalog / marketplace

• increased info distribution

• shared performance data → increased supplier performance → decreased inventory

What is e-procurement?

direct supplier purchase by software package / e-hub / trading exchange

What is an e-hub?

// e-marketplace

firm & supplier B2B site

What is a reverse auction?

firm e-hub order for supplier to bid on

What is an e-distributor?

independent marketplace representing thousands of suppliers for spot purchase

What is an e-purchase firm?

MRO supplier & firm connector paying to join market for long-term contract purchase

What is an exchange marketplace?

large firm’s spot requirement

What is an industry consortium?

industry-owned market for buyer to directly purchase from limited suppliers

What are some government e-commerce value chain examples?

• credit card

  • food stamp

• tax file / direct deposit

• studen loan application

What are the B2B e-commerce advantages?

• decreased procurement admin & global supplier cost

• decreased inventory cost

  • price transparency

  • decreased reply time

• increased quality

  • buyer / seller design / development cooperation

What are the B2C e-commerce models?

• transaction fee model

• sales revenue model

• affiliate revenue model

• advertising revenue model

• subscription revenue model

What is the transaction fee model?

firm receives fee for executing transaction

What is the sales revenue model?

firm directly sells product / info

What is the affiliate revenue model?

firm receives referral fee for directing business to affiliate

What is the advertising revenue model?

firm provides product info for supplier to advertise

What is the subscription fee model?

firm charges fee for site access

What is blockchain?

data network making event tamper-resistant

• record every transaction

• distribute over multiple computers

What is a blockchain advantage?

no 1 firm has total control

What are blockchain goals?

• intelligent

• collaborative

• transparent

• secure

& max customer service at min cost

What is the sourcing decision?

product to produce in-house / provide by other

What is vertical integration?

measure of how much supply chain’s owned / operated by manufacturer

What are the vertical integration types?

• backward integration

• forward integration

What is backward integration?

own / operate raw material / component inventory

What is forward integration?

own / operate distribution channel

What are the contract manufacturing advantages?

• advanced manufacture tech

• regional market customization

• decreased product time-to-market & cost

  • economies of scale

What is offshoring?

build / acquire / move operation to foreign location maintaining ownership / control

What is reshoring?

build / acquire / move operation back to domestic location

What is the outsourcing cost formula?

TC_{B}=FC_{B}+\left(V_{B}\cdot Q\right)

What is the insourcing cost formula?

TC_{M}=FC_{M}+\left(V_{M}\cdot Q\right)

What is the make-or-buy analysis indifference point formula?

TC_{B}=TC_{M}

What are the top supplier criteria?

• price

• quality

• delivery

What are one supplier reasons?

• prerequisite

• small order

• increased reply & relation

• quantity discount

• outstanding supplier

• easily scheduled delivery

• EDI / JIT support

• exclusive essential patent / process owner

• order split & duplicate prohibition

What are multiple supplier reasons?

• regulation

• risk spread

• supplier dependence elimination

• competition → service / price

• increased volume flexibility & capability

• new supplier test without jeopardizing material flow

What is a certified supplier?

high-quality supply → unnecessary routine test

• continuously improve

• attract business

What characterizes partnerships?

• strategic

• long-term

• end customer expectation

• share info & vision & risk / opportunity

What are partnership advantages?

• design process ESI

• decreased time-to-market

What is ESI?

|:| early supplier involvement

use supplier expertise to develop / share cost improvement