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purchasing chapter 11- sourcing

Terms in this set (52)

strategic sourcing plan
details how supply management will discover, evaluate, select, develop, and mange a viable supply base; driven by the recognition that tactical sourcing will not succeed in developing a supply base that will yield the benefits of collaborative relationships and alliances
what to do before creation a strategic sourcing plan
support and financial backing from executive management is necessary and determine if the product or service can be outsourced at all
strategic sourcing plan stages
discovery
evaluation
selection
development
management
demand analysis
what do you start with in a strategic sourcing model where you discover the past and future needs for the products and services sourced/ challenge whats been purchased in the past for its continuance and consider changes that can happen in the future during the proposed life of any agreement you are sourcing and beyond
failure to start with a demand analysis
may result in selecting not the best supplier for the future needs for the firm
discovery
Ariba discovery network- creating a marketplace for locating suppliers or for suppliers to locate you as a potential customer
social media
trade journals
supplier catalogs
trade registers
supplier information files
supplier websites
sales personnel
professional orgs
trade shows
evaluating potential suppliers
supplier surveys
financial condition analysis
third party evaluations
evaluations conference
facility visits
quality capability analysis
capacity capability analysis
management capability analysis
service capability analysis
flexibility analysis
IT capability analysis
when should you consider conducting an evaluation of potential suppliers
1. if the supplier is strategically important. if there product is strategically important you should take time
2. if the product or service is strategically important
3. there are other short term alternatives available
(included in RFIs)
which two steps should be done first before going any further when evaluating potential suppliers
RFI and financial condition analysis
-if the supplier doesn't look to provide the capability from the survey or their financial condition is poor you may wish to eliminate them from consideration to save your firm and the supplier from using additional resources when there is no plan to do business
selecting suppliers
bidding vs. negotiation
reverse auctions
two step bidding negotiations
the solicitation
weighted factor analysis
responsibility for source selection
what should we be concerned about when selecting a supplier
1. size of spend
2. number of potential suppliers
3. Specifications of the items
is there time to do sourcing tasks
bidding vs. negotiations
should be directed using a total cost perspective and sound supply management logic
request for bid: asks supplier to quote the price at which they will perform w terms and conditions of the resulting contract if they become the successful bidder
prerequisites to bidding
dollar value must be large
specs must be clear
market must consist of adequate number of sellers
sellers must be qualified and want contract
time must be available and sufficient
conditions demanding negotiation
impossible to estimate costs with a high degree of certainty
price is not only the important variable
purchasing firm anticipates a need to make change to their spec
special tooling of setup costs are major factors
leads to a complete understanding of all issues of the procurement
negotiation
results in sacrifice in product quality, development efforts and other services
competitive bidding
reverse auctions
real time interaction
not appropriate for all situation
can have an adverse affect on long term relationships
1. impact LT relationships
2. suppliers can bid below costs
3. assumes suppliers all all identical - risky
key requirement for reverse auctions
suppliers must be prequalifies
two step bidding/ negotiation
used in situations where inadequate specs preclude the initial use of traditional competitive bidding
1. technical proposals
-IFBS for step 2 are send out only to those sellers who submitted acceptable technical proposals
2. price bidding (negotiation of solicitation)
the solicitation
IFB- invitation for bid
RFP- request for proposal
(quantities, purchase description, delivery schedule, special terms and conditions, standard terms and conditions)
item description
info on quantities
delivery schedule
special terms and conditions
standard terms and conditions
weighted factor analysis
steps to developing:
develop factors to serve as criteria
sub factors or performance factors
scoring factor
score or evaluate the supplier
what does the weighted factor analysis provide
some areas of the response are more important than others, by weighting them on the final scoring will compare the results based on the most important factors to help determine which response more closely aligns to the need of business
developing suppliers
greatest untapped frontiers of the supply chain
investment of the buying firm to realize the full benefit of the collaborative relationship
help with project management supply management, teamwork, quality, production process supply management
use scorecards
managing the suppliers
managers must ensure the suppliers perform as requires
suppliers must meet the firms long term needs
firm can help assist with
financing and technology
developing new sources
required to develop the capability internally
additional strategic issues
early supplier involvement
supply base recognition \single vs multiple sourcing
share of suppliers capacity
local, national and international sourcing
manufacture or distributor
green supply management
minority owned and women owned business enterprises
ethical considerations
reciprocity
early supplier involvement
looking for win win opportunities
approach to bring the expertise and collaborative syngery into the design process
help establish trust and communication tangible cost savings
ESI opportunities
materials
services
technology
spec and tolerances
standards
order quantities
lead time
processes
packaging
transportation
redesigns
assembly changes
design cycle time
inventory reduction
reasons for using ESI
get supplier inputs before design is frozen
capitalize on latest technology
save time since design cycles are getting shorter
let the supplier know it is part of the team
supply based reduction
achieved through both reducing variety and increasing consolidation
increased leverage with suppliers due to the increased involvement with suppliers which builds goodwill and trust
better focus and supplier integration in product development
considerations for single sourcing
lower total cost results from higher volumes
quality considerations dictate
buyer obtains more influence from supplier
lower costs to source, process, expedite and inspect
JIT requirements
lower freight costs may result
special tooling required
total system inventory decreased
supplier will have an improved commitment
improved interdependency and risk sharing
time to market is crucial
dual sourcing using the 70-30 approach
70% of volume to one supplier
30% to second supplier
economies of scale from big supplier
little supplier provides competition
big supplier fails to perform the percentages may be reversed
minimize supply risk (more than 1 supplier capable)
considerations for multiple sourcing
Protect the buyer during bad times
Maintain competition
Provide a back-up source
Meet local content requirements
Meet customer's volume requirements
When the customer is a small player in the market for a specific item
Avoid complacency on the part of a supplier
When the technology path is uncertain
Suppliers tend to "leapfrog" in technology
share of suppliers capacity
Many firms try to not exceed more than 15 to 25 percent of any one supplier's capacity
local source
Firm's headquarters and all facilities are located in the city or region where the materials or services will be used
national source
The source is headquartered within the country and has facilities in multiple regions throughout the country
international source
firm is headquartered outside of the buying firm's country, but this does not define the location of operations
what are advantages of local sourcing
closer cooperation, delivery dates, lower total costs due to freight (JIT)
what are advantages of national sourcing
more efficient, superior technical assistance, greater production capacity, shortages less likely
what are advantages of international sourcing
give superior quality and lower costs, more advanced technology, broader supply base and new customer market
local buying advantages
Closer cooperation between buyer and seller is possible
Delivery dates are more certain
Lower prices can result from consolidated transportation and insurance
Shorter lead times reduce inventory
Rush orders are filled faster
Disputes are usually more easily resolved
Implied social responsibilities to the community are fulfilled
national buying advantages
Economies of scale
Superior technical assistance
Better handling of fluctuating demand
Shortages are less likely
potential benefits of a distributor over buying direct from manufacturer
Economy of scale
benefit of distributors buying power if you don't buy much
Reduction of orders
combine orders from different manufactures reducing PO and invoice processing
Reduction of paperwork
Special services
tube cutting, bending, maintain inventory for customers
Technical advice
trained staff with product expertise
Credit
holding inventory
distributors
stock many manufactures products/ buy there if you don't have significant volume to buy direct
what types of things might you buy from distributors
tools, office products, pro, LTL quantity
green supply management
Recycled materials
Environmental issues
Liability issues
minority and women owned business enterprises
Many forces motivate a buying firm to ensure that these businesses receive a share of the firm's business, such as:
Federal and state legislation
Set-aside quotas in government appropriations
Actions of regulatory bodies
Firm's "corporate social consciousness"
Customer base includes MWBE businesses and their employees
Bottom-line profitability
Good business sense
minority and women owned business enterprises certifier
national minority supplier development council
ethical considerations
Conflicts of interest
Exists when supply managers must divide their loyalty between the firm which employs them and another firm
Such conflicts always should be avoided in all source selection decisions
-disclose relationships w interested parties in a agreement
reciprocity
-when supply managers give preference to suppliers that are also customers
-legal to buy from one's customers at fair market prices, without economic threat, and without the intent of restricting competition
-can become illegal when the activity restricts competition and trade
reasons not to engage in reciprocity
doesn't follow sound principles of buying and selling
Companies may relax their competitive efforts as a result of reduced competition
Sales departments may develop a false sense of security
New customers may be hard to find because of pre-established relationships with competitors
Company reputations may be impaired because of bad publicity
Conspiracy and restraint-of-trade situations can develop, with their attendant legal dangers
increase in long-term collaborative relationships is highlighting the need to
develop strategic sourcing plans
the plan should:
-be developed in a collaborative environment that includes all relevant functional area representatives and supply chain members
-aids in source selection by detailing how suppliers will be discovered, evaluated, selected, developed and managed
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