Intro Supply Chain Management Chap 6

Sourcing:

identifying a company that provides a needed good or service

Strategic Sourcing:

a comprehensive approach for locating and sourcing key suppliers to leverage its consolidated purchasing power to find the best possible values in the marketplace

• requires analyzing what an organization buys, from whom, what price

Sourcing Strategies:

analysis and ability to make adjustments based on price, suppliers performance evaluation, and the organization’s overall needs

Reasons for a Single Supplier:

• establish a good relationship

• less quality variability

• lower cost

• transformation economies

• proprietary products or process

• volume too small to split

Reasons for Multiple Suppliers:

• need more capacity

• spread risk of supply disruption

• create competition

• more sources of information

• dealing with special kinds of business

Functional Products:

MRO items and other commonly low-profit margin items with relatively stable demands and high levels of competition

Innovative Products:

characterized by short product life cycles, volatile demand, high-profit margins, and relatively less competition

Spend Analysis:

categorizing and analyzing expenditure data to decrease costs, improve efficiency, and monitor compliance

Key areas of a typical spend analysis are:

1. total historic expenditures and volume

2. future demand projections or budgets

3. expenditures categorized by commodity and sub-commodity

4. expenditures by devision, department, or user

5. expenditures by suppliers

Non-Critical (sourcing):

• low level supply risk

• low value to the company

Bottleneck (sourcing):

• high level supply risk

• low value to the company

Leverage (sourcing):

• low level supply risk

• high value to the company

Strategic (sourcing):

• high level supply risk

• high value to the company

Supply Base:

the group of suppliers from which a company acquires goods and services

Supply Base Rationalization:

reduction in the supply base to the lowest number of suppliers possible without significantly increasing risk

Supplier Selection is typically conducted by:

a cross-functional team

Preferred Suppliers:

those that best meet your company’s overall purchasing requirements

Strategic alliance in sourcing:

an agreement between a buyer and a supplier to pursue some agreed-upon objectives while remaining independent organizations

• companies agree to share information and resources to achieve a mutual benefit

Strategic Alliance Developement:

an extension of supplier development, which refers to increasing a critical or strategic supplier’s capabilities

• better market penetration, access to new technologies and knowledge, and a higher return on investment

• extends to a firm’s second-tier suppliers

Reverse Auctions:

a sourcing technique where pre-qualified suppliers enter a website at a designated time and date and try to underbid competitions to win the buyer’s business

Vendor Managed Inventory (VMI):

suppliers directly manage buyer inventories to reduce the buyer’s inventory carrying costs and avoid stockouts for the buyer

Co-Managed Inventory (CMI):

an arrangement where a specific quantity of an item is stored at the buyer’s location

Supplier Co-location:

is like VMI and CMI, except that a supplier representative is embedded in the buyer’s purchasing group to forecast demand, monitor inventory, and place order

Corporate Social Responsibility (CSR):

the practice of business ethics

Business Ethics:

the application of ethical principles to business

• utilitarianism

• rights and duties

Utilitarianism:

an ethical act that creates the greatest goods for the most significant number of people and should be the guiding principle of conduct

Rights and Dutities:

some actions are right in and of themselves, regardless of the consequences. (do the right thing)

Ethical Sourcing:

attempts to consider the public consequences of organizational buying or to bring about positive social change through organizational buying behavior

Sustainability:

the ability to meet the current needs of the supply chain without hindering the ability to meet future needs in terms of economic, social, and environment challenges

• companies must consider workers safety, wages, working conditions, etc.

Sustainable Sourcing Programs should try to:

• grow revenues

• reduce costs

• go “green”

• manage risks

• build intangible assets