Single Sourcing

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  • you did very very well in your presentation
    but i would had loved your presentation to be comparative of single and multiple sourcing in material procurement
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Single Sourcing

  1. 1. Approach and implementation of single sourcing Group 6: Abhirup Das (09BM8002) Debesh Majumdar (09BM8016) Devdut Saha (09BM8083) Sujeeth Ungratwar (09BM8097)
  2. 2. Contents <ul><li>Sourcing </li></ul><ul><li>Single Sourcing </li></ul><ul><li>Identification of materials </li></ul><ul><li>Selection criteria for single source </li></ul><ul><li>Hindrances </li></ul><ul><li>Characteristics of single source </li></ul><ul><li>From multiple to single source </li></ul><ul><li>Risk Benefit Assessment </li></ul>
  3. 3. Sourcing <ul><li>Sole Sourcing </li></ul><ul><li>Single Sourcing </li></ul><ul><li>Multiple Sourcing </li></ul><ul><li>4 th point of Deming’s 14 points for management: Single sourcing </li></ul><ul><li>India: Default Risk </li></ul>
  4. 4. Single Sourcing <ul><li>Advantages </li></ul><ul><li>Better pricing through higher volumes </li></ul><ul><li>Better quality through continuous improvements </li></ul><ul><li>Build stronger and long-term relationship </li></ul><ul><li>Inventory and Scheduling </li></ul><ul><li>Disadvantages </li></ul><ul><li>Price Escalation </li></ul><ul><li>Default Risk </li></ul>
  5. 5. Identification of materials: Product Portfolios <ul><ul><li>Portfolio analysis is used to develop sourcing strategy </li></ul></ul><ul><ul><li>Considerations: Product complexity, supply market economic factors, </li></ul></ul><ul><ul><li>image factors such as brand and safety </li></ul></ul>
  6. 6. Analysis of Portfolios Purchase Category Features Routine Items <ul><li>More number of suppliers available </li></ul><ul><li>Very short term supplier relationship </li></ul><ul><li>Supplier Monitoring </li></ul><ul><li>Simplification and automation of purchasing procedure </li></ul><ul><li>Delegation of decision making power to lower level of management </li></ul>Bottleneck Items <ul><li>Monopolistic supplier market </li></ul><ul><li>Long term supplier relationship </li></ul><ul><li>Security of inventories </li></ul><ul><li>Internally develop alternatives </li></ul><ul><li>Contingency planning </li></ul><ul><li>Delegation of decision making power to higher level of management </li></ul>Leverage Items <ul><li>More number of suppliers available </li></ul><ul><li>Short term supplier relationship </li></ul><ul><li>Exploitation of full purchasing power </li></ul><ul><li>Delegation of decision making power to medium level of management </li></ul>Strategic Items <ul><li>Few suppliers are available </li></ul><ul><li>Medium/ long term supplier relationship </li></ul><ul><li>Detailed evaluation of suppliers </li></ul><ul><li>Supplier development efforts </li></ul><ul><li>Delegation of decision making power to top level of management </li></ul>
  7. 7. Selection Criteria for Single Sourcing Not-so-significant attributes: Product : Ease of operation Impact on energy utilization Cost of service contract Availability: Breadth of product line Geographic proximity Warranties Dependability: Ability to keep delivery promise Price : Low price *Adopted from “Preferences for Single Sourcing and Supplier Selection Criteria” by Cathy Owens Swift, GEORGIA SOUTHERN UNIVERSITY
  8. 8. Selection Criteria for Single Sourcing <ul><li>Selection criteria must fulfill objective business decisions (e.g. leveraged volume purchase contracts, standardization programs/systems, parts/service provided by an &quot;original equipment manufacturer&quot;, consistency of quality/batch control, &quot;just in time&quot; delivery requirements etc). </li></ul><ul><li>Another objective can be developing a &quot;co-maker&quot; relationship, or one in which the supplier is considered an upstream extension of the customer's business. </li></ul><ul><li>Quality aspect(Deming’s 4 th point): &quot;End the practice of awarding business on price tag alone. Instead, minimize total cost by working with a single supplier.” </li></ul><ul><li>Single source selection based purely on personal preference or subjective rationale will not be sanctioned. </li></ul>
  9. 9. Hindrances <ul><li>May lead to corruption </li></ul><ul><li>Requires large purchase volume </li></ul><ul><li>High skill requirement of supplier </li></ul><ul><li>Long time required for vendor development </li></ul><ul><li>Total reliance on the supplier. Supplier setbacks can affect the purchaser </li></ul>
  10. 10. Characteristics of single source <ul><li>Motivated & committed </li></ul><ul><li>Flexibility in production </li></ul><ul><li>Innovation capabilities </li></ul><ul><li>Should be capable of taking the manufacturing of other parts </li></ul><ul><li>Should be able to reduce the cost of production continuously over time </li></ul>
  11. 11. From multiple source to single source <ul><li>Identification of materials to single source </li></ul><ul><li>Identification of the vendors </li></ul><ul><ul><li>Present capability </li></ul></ul><ul><ul><li>Future potential </li></ul></ul><ul><li>Vendor development </li></ul><ul><ul><li>Technical </li></ul></ul><ul><ul><li>competitiveness </li></ul></ul><ul><li>Support to the vendor </li></ul><ul><ul><li>Emotional/handholding </li></ul></ul><ul><ul><li>Information/know how </li></ul></ul><ul><ul><li>Financial </li></ul></ul><ul><ul><li>Technical </li></ul></ul><ul><ul><li>Market </li></ul></ul>
  12. 12. Matrix of dependency Importance to buying company High Low Importance to supplier Low High One-sided Mutual Low One-sided
  13. 13. Risk/Benefit Categories <ul><li>Disruption of supply </li></ul><ul><li>Price escalation </li></ul><ul><li>Inventory and scheduling </li></ul><ul><li>Technology access </li></ul><ul><li>Quality </li></ul>
  14. 14. Risk Benefit Assessment Model <ul><li>I T = P ds I ds + P pe I pe + P is I is + P ta I ta + P q I q </li></ul><ul><li>I T = Total impact of sourcing strategy </li></ul><ul><li>P i = Probability of impact I being realized </li></ul><ul><li>I i = Impact of the factors in category i </li></ul><ul><li>P i I i = expected value of the impact of category i </li></ul><ul><li>ds = disruption of supply </li></ul><ul><li>pe = price escalation </li></ul><ul><li>is = inventory and scheduling </li></ul><ul><li>ta = technology access </li></ul><ul><li>q = quality </li></ul>
  15. 15. References <ul><li>Wilson, Scott and Pyman, “The extent of single sourcing and attendant corruption risk in defense procurement” </li></ul><ul><li>http://www.purchasing-procurement-center.com/single-source-procurement.html </li></ul><ul><li>http:// www.defenceagainstcorruption.org /diagnosis/single-source </li></ul><ul><li>Constantine Blome, Michael Henke, “Single sourcing vs multiple sourcing” </li></ul><ul><li>Mark Treleven, Sharon Bergman, “A risk/benefit analysis of sourcing strategies” </li></ul>
  16. 16. Thank You

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