supply chain management

1. SUPPLY CHAIN MANAGEMENT
Group Members
I. Rizwan Ullah Shah
II. Zeeshan Sami Khan
III. Syed Abdul Hadi Shah
IV. Hazrat Umer
V. Muhammad Ali
VI. Gultayaz Khan

2. Sources And Vendor Management
Strategy
 Maruti Suzuki India Limited (MSIL)
“ Our suppliers make more than 70 percent of value of a Maruti Suzuki car. They have a very
critical role in ensuring that our customers get global quality and design, like customers in
the developed countries”
Mr. S. Maitra, Executive Officer, Supply Chain

3. Maruti Suzuki India Limited (MSIL)
 Started in 1982
 Formally known as Udyog Limited
 Joint venture
 Maruti Suzuki makes 1.5 m family cars in a year
 One car every 12 seconds
 True value car
 Delivered 14 cars with over 150 variants
 Sources internally 25-30 in 2500-3000

4. Maruti Suzuki India Limited (MSIL)
 Delivered 14 cars with over 150 variants
 Sources internally 25-30 in 2500-3000
 Contribution of vendor in value creation process
 Multiple supplies within a slot of 2 hours
 Strategic thinking and road map

5. Sourcing and Vendor Management
 MSIL sources 75-80 percent of its component from locally vendors
 Incentive
 Facilities
 Training
 Audits
 Line rejection
 Warranty cost

6. Sourcing and Vendor Management
 Yield improvement program ( Efficiency)
 Productivity
 Additional incentives
 Word-wide Purchase
 Value analysis
 Material receipt system
 Maruti Centre for Excellence

7. Vendor Quality Control
 ISO 9000/QS 9000
 Vendors certification
 ISO 9000
 Cluster Approach
 Help to attain QS 9000
 Vendor quality system Audit

8. Vendor Relationships and Rationalization
 Long term strategic relationship
 No formal tendering
 Win- win situation
 Real time information flow
 Confidential information
 Involves in strategic decision
 Internet based information network
 Reduced vendors to 220 from 370 and now 100

9. Vendor Location
 Supply chain Excellence
 Within 100 Km
 Two hourly basis
 Vendors Guarantee
 MSIL trust on vendors
End of MSIL case

10. Sources And Vendor Management
Strategy
 Introduction
 Competitive for survival
 Competition
 Reliable delivery, low cost, high quality, product
 Sourcing and vendor management system
 Management of supply side
 Sustained growth and competitive effectiveness

11. Nature and Scope
 Leveraging sourcing
 Vendor identification
 Vendor evaluation and selection
 Vendor development and improvement
 Vendor integration into process

12. Strategic issues in sourcing
a) Vendor classification/categories
 Approved vendor
 Qualified vendor
 Certified vendor
b) Vendor involvement in product development
e.g. Tata motors

13. Strategic issues in Sourcing
c) Vendor Base Rationalization
e.g. Xerox, Mahindra & Mahindra Ltd
i. Advantage
 Better relationship
 Better communication
 Decreased unit cost or price
 Improved service

14. Strategic issues in Sourcing
d) Single versus multiple sourcing
1) Advantage of single vendor
 Lower total costs from a much higher volume
 High degree of coordination
 High bargaining power and more influence on vendor

15. Strategic issues in Sourcing
2) Advantage of multiple sourcing
 Protect firms during shortages, strikes etc.
 Providing backup sources of supply
e.g. General Motors was reported to be the first US auto maker to close a
factory because of a short supply of a Japan-made part.
(Alternatives )

16. Strategic issues in Sourcing
e) Vendor location
 JIT
 Hyundai motor India limited
f) Quality sensitive vendor
 Supply of goods as per quality
 Quality inspection before delivery
 Small and continue supply
 Zero defect delivery
g) Creating and maintaining vendor relationship

17. Vendor Location
 Important for achievement of supply chain
 Management
 JIT VMI era
 JIT possible with three ways
 close location
 Responsive manufacturing system tight material
 transportation.

18. Major Advantage of Vendor Location
 Close coordination between vendor and firm
 because of close geographical location.
 Objectives of JIT can easily achieved.
 Lower cost of transportation.
 Shorter lead time lower inventory cost.
 Emergency order can fulfilled fastly
 Disputes are more easily resolved

19. Quality Sensitive Vendor
 Traditionally quality limited to blueprint and design
 Today focus on TQM
 Quality specification, correct document right quantity,
 right time, right amount, reliable manner.
 Quality inspection tools before delivery
 Continuous supply zero defects

20. Creating and Maintaining Vendor
Relationship
 Firm has increasingly sought more in supply relationship
 because of rapid change
 Benefit less production scheduling logistics and product
 modification.at
 VRM include long term contractual relation.
 Collaborative effort for productivity improvement
 Vendor selection on past performance and response

21. Creating and Maintaining Vendor
Relationship
 Managerial skill and technology transferring
 Continuous performance measurement of vendors
 Shared cost reduction drive

22. Vendor Risk Portfolio
 This strategic framework based on two factor
1) financial assessment
 It measure profit impact of contribution of given
 vendors(unit cost, quality inspection cost, inventory
 carrying cost etc.)

23. 2) Supply Risk Associated
 Measurement of risk supply associated with each
 vendors.
1) Strategic vendors
 (crucial and scarcity, balance power situation)
2) Bottleneck vendors
 (Acquired from one supplier otherwise unreliable)
 Supplier was dominated

24. 2) Supply Risk associated
3) leverage vendors
 Byer seller power situation (standardized
 quality)
4) routine vendors

25. Vender Selection Process
a) Play an important role in the firm success
b) Provide a competitive advantage in
c) marketplace
d) Potential vendor selection is important for
e) organization

26. Vendor Selection Process
Business Need Assessment
A need assessment is a systematic process for
determining and addressing needs or gap
between current condition and desired conditions
or wants.
Every business has its strength and weakness.
When you complete business need assessment
you able to identify areas for growth and
improvement, develop an action plan, and find
resources to help you take your business to the
next level.

27. Vendor Selection Process
 b Source Discovery
 After careful business need assessment next step
 is discovery or identification of potential vender
 who supply a particular product, items or
 services.
 Some information sources that helps supply chain.
 Vendor websites
 Vendor database
 Supplier catalogs
 Phone directories

28. Vendor Selection Process
Business Proposal Invitation
A business proposal is a written offer from a seller to a prospective buyer.
Business proposals are often a key step in the complex sales process—i.e.,
whenever a buyer considers more than price in a purchase. Thereafter, supply
chain professionals should send invitation to all shortlisted potential vender with
a request to submit their business proposal. Invitation for business offer letter of
the firm contain an
introduction of firm, along with future objectives

29. Vendor Selection Process
 and growth plan, apart from the commercial
 aspects and specification of requirement in
 terms of quality and quantity.

30. Vendor Selection Process
 d. Evaluation and Negotiation
 Comprehensive knowledge and understanding
 of the market
 Present Client base
 Present business volume
 Technological experience
 Production capacity and facility

31. Vendor Selection Process
 Financial position
 Quality sensitive
 Negotiation
 Goal and objective of negotiation
 Must have authority, expertise, and
 knowledge
 Availability of all information
 Sound preparation for success of negotiation

32. Vendor Selection Process
 e. Selection of vendor
 One or more potential vendor are selected
 through comprehensive evaluation and selection
 process.
 Before you begin to gather data or perform
 interviews, assemble a team of people who have a
 vested interest in this particular vendor
 selection process. The first task that the vendor
 selection team needs accomplish is to define, in
 writing, the product, material or service that you
 are searching for a vendor.

33. Vender Rating
 A vendor is any person or company that sells goods or
services to someone else in the economic production
chain.
 Vendor rating is the result of a formal vendor evaluation
system.
 Vendors are given standing, status, or title according to
their attainment of some level of performance, such as
delivery, lead time, quality, price, or some combination of
variables.

34. Vender Rating
 It may take the form of hierarchical ranking from poor to
excellent.
 For some firms, the vendor rating may come in the form
of some sort of award system or as some variation of
certification.
 Most firms want vendors that will produce all of the
products and services defect-free and deliver them just in
time.

35. Vender Rating
 Benefits of vendor rating
 Providing feedback from all areas in one package.
 Facilitating better communication with vendors.
 Providing overall evaluation of the vendor base as its
performance.
 Requiring specific action to correct identified performance
weakness.

36. Vender Rating
 Benefits of vendor rating
 Establishing continuous review standards for venders, thus
ensuring continuous improvement of vendor performance.
 Building vendor partnership, especially with vendors having
strategic links.
 Developing a performance based culture.

37. 7 C’s evaluation of vendors
 Comprehensive approach may consist of following 7 C’s
framework.
1) Competency
2) Capacity
3) Commitment

38. 7 C’s evaluation of vendors
4) Control
5) Cash resources
6) Cost
7) Consistency

39. How vendors are rated
 Vendors are rated on the basis of various
characteristics.
 Pricing,
 Quality,
 Timely delivery,
 Service, or
 Some combination of variables.

40. How vendors are rated
Pricing Factors
 Competitive pricing ,
 Price stability,
 Price accuracy,
 Advance notice of price changes, &
 Billing .

41. How vendors are rated
Quality Factors
 Compliance with purchase order,
 Reliability ,
 Support ,
 Warranty, &
 State of the art product or service.

42. How vendors are rated
Delivery Factors
 Time,
 Quantity,
 Lead time,
 Packaging,
 Documentation, &
 Emergency delivery .

43. How vendors are rated
Service Factors
 Information sharing ,
 Technical support services,
 Extending emerging support, &
 Providing problem resolution.

44. Methods of Vendor Rating
(a) Categorical Plan:
(b) Weighted Point Plan:
(c) Cost Ratio Method:

45. Categorical Plan
 Manager from concerned department prepare list of
factors important from their views.
 Each of major vendor is evaluated against each
evaluator’s list of factors evaluation is done in the term of
 Good
 Satisfactory
 Poor

46. Weighted Point Plan
 The buyer decides on
 Factor important for evaluation,
 Weightages for each factor,
 The vendor performance in respect of each factor.
 For example, of the attributes are as follows:
 Quality — 60%
 Delivery — 25%
 Price — 15%

47. Weighted Point Plan

48. Cost Ratio Method
 The cost ratios are ascertained for the different rating
variables such as quality, price, timely delivery etc.
 The cost ratio is calculated in percentage on the basis of
total individual cost and total value of purchase.
 Example
 The total delivery cost is Rs5000 and the total purchases
are Rs 1,00,000 then delivery cost ratio will be
 5,000 / 1,00,000 x 100 = 10%

49. Vendor Development
 Vendor assessing process
 High degree of commitment in term resources
 More worthy then company invest on development
 Proactive approach of development
 Knowledge sharing process
 Supplier can not only improve his capability but the supplier of supplier
 performance can be improved

50. Summary
 Cross functional process for procurement
 Success in the competitive market(develop supply chain)
 Integration of vendor capabilities with org process
 Vendor involvement in product development
 Long term relationship with strategic vendor

51. Summary
 Vendor base rationalization
 Vendor location (jit is possible with zero inventory cost)
 Vendor portfolio
 Vendor contribution on financial results
 Supply risk associated with each vendor

52. Summary
 Vendor selection process
 Vendor rating (excellent to poor)
 Seven C’s of vendor is evaluated
 Vendor development
 Managerial and professional skill of vendor is developed