LOGI200 Purchasing Week 13 Chapter 19

The trend is to: Buy instead of make Outsource Improve quality Lower inventories Integrate supplier purchaser systems Create cooperative relationships such as partnerships Underline the importance for outstanding supplier performance Supplier Relations

The trend is to:

Buy instead of make

Outsource

Improve quality

Lower inventories

Integrate supplier purchaser systems

Create cooperative relationships such as partnerships

Underline the importance for outstanding supplier performance

Supply Chain Management Effectiveness driven primarily by the organization’s ability to manage the internal and external links of customers, the buying organization and suppliers

driven primarily by the organization’s ability to manage the internal and external links of customers, the buying organization and suppliers

Customer Satisfaction Depends on Supplier Performance Quality Cost Delivery Quantity Other Suppliers

Purchaser-Supplier Satisfaction Matrix Complete satisfaction Complete satisfaction Marginal satisfaction Total dissatisfaction Marginal satisfaction Supplier Purchaser Desired Zone

Supplier Ranking Relationship Investment Required - Reward Obtained + Exceptional supplier (alliance or partner) Preferred supplier Good supplier Acceptable supplier Product focus short term Product and service focus Process or system focus Continuous improvement focus Mutual breakthrough Mutual improvements New volume Premium price Loyalty Sale only Unacceptable supplier Extra costs because of poor quality, delivery, price, quantity 0 0

View of Buyer-Supplier Relationship lowest price specification-driven short-term, reacts to market trouble avoidance purchasing’s responsibility tactical little sharing of information total cost of ownership end-customer driven long-term opportunity maximization cross-functional teams and top management involvement strategic both supplier and buyer on both sides share short- and long-term plans shared risk and opportunity standardization joint ventures share data TRADITIONAL PARTNERSHIP

lowest price

specification-driven

short-term, reacts to market

trouble avoidance

purchasing’s responsibility

tactical

little sharing of information

total cost of ownership

end-customer driven

long-term

opportunity maximization

cross-functional teams and top management involvement

strategic

both supplier and buyer on both sides share short- and long-term plans

shared risk and opportunity

standardization

joint ventures

share data

Developmental Path to Partnership assessment improvement rationalization alignment partnership

Early Supplier Involvement (ESI)/Early Purchasing Involvement (EPI) pulls both the buyer and supplier into the need recognition and description stages of the acquisition process leads to improvements in processes, design, re-design or value analysis activities each partner might enhance its own competitive position through the knowledge and resources shared by the other

pulls both the buyer and supplier into the need recognition and description stages of the acquisition process

leads to improvements in processes, design, re-design or value analysis activities

each partner might enhance its own competitive position through the knowledge and resources shared by the other

Partner Selection cost safety quality delivery environment financial stability management stability continuing improvement technological accomplishment congruence of management values on issues like customer satisfaction concern for quality employee involvement supplier relationships personal compatibility between functional counterparts

cost

safety

quality

delivery

environment

financial stability

management stability

continuing improvement

technological accomplishment

congruence of management values on issues like customer satisfaction

concern for quality

employee involvement

supplier relationships

personal compatibility between functional counterparts

Some Indicators of a Successful Partnering Effort Formal communication processes Commitment to our suppliers’ success Mutual profitability Stable relationships, not dependent on a few personalities Consistent and specific feedback on supplier performance Realistic expectations Employee accountability for ethical business conduct Meaningful information sharing Guidance to supplier in defining improvement efforts Non-adversarial negotiations and decisions based on total cost of ownership

Formal communication processes

Commitment to our suppliers’ success

Mutual profitability

Stable relationships, not dependent on a few personalities

Consistent and specific feedback on supplier performance

Realistic expectations

Employee accountability for ethical business conduct

Meaningful information sharing

Guidance to supplier in defining improvement efforts

Non-adversarial negotiations and decisions based on total cost of ownership

Strategic Alliances both buyer and seller believe that it is in the best interest of both to formalize the relationship beyond the standard buying-selling mode

both buyer and seller believe that it is in the best interest of both to formalize the relationship beyond the standard buying-selling mode

Concerns about Partnerships one partner might take advantage of the preferred status in a single-source relationship, suppliers know that customers depend on them and they may abuse that relationship supplier relationship management is important: understand and identify value (ultimate long-term, life-cycle cost and benefit to the user)

one partner might take advantage of the preferred status

in a single-source relationship, suppliers know that customers depend on them and they may abuse that relationship

supplier relationship management is important: understand and identify value (ultimate long-term, life-cycle cost and benefit to the user)

Reverse Marketing/Supplier Development prospective supplier must be persuaded to accept an order purchaser is aware of benefits to both parties that the supplier may not be aware of purchaser pre-determines prices, terms and conditions purchaser must understand supplier’s capability to ensure win-win proposal assures future sources of supply

prospective supplier must be persuaded to accept an order

purchaser is aware of benefits to both parties that the supplier may not be aware of

purchaser pre-determines prices, terms and conditions

purchaser must understand supplier’s capability to ensure win-win proposal

assures future sources of supply

Supply Chain Management goal is to reduce UNCERTAINTY and RISK in the supply chain philosophy that stresses process and integration smaller supply based is desirable – difficult to coordinate across channels

goal is to reduce UNCERTAINTY and RISK in the supply chain

philosophy that stresses process and integration

smaller supply based is desirable – difficult to coordinate across channels