Strategic Supplier Selection: The Trend of E-Manufacturing

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This paper gives an insight of different theories that can be applied in order to achieve a rational supplier evaluation and selection. Such theories, in combination with an extensive analysis of the possible alternatives that a company may have, can lead to high revenues and significant advantage over competitors. In this case, the reader can acquire a basic understanding of the different criteria, methods and models, which are used by the businesses during the supplier evaluation and selection process.

Moreover, the paper identifies critical changes in the sector of e-manufacturing, regarding the decision-making of the top management while selecting the appropriate supplier. Emphasis is given to the technological changes that create new opportunities and consequently new criteria for the vendors‟ evaluation by comparing the existing criteria that have been used in traditional manufacturing and the affect of the e-manufacturing trend on the existing criteria.

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Strategic Supplier Selection: The Trend of E-Manufacturing

  1. 1. TAMPERE UNIVERSITY OF TECHNOLOGYTampere School of Business and TechnologySTRATEGIC SUPPLIER SELECTION: The Trend of E-ManufacturingSeminar Report Onur Tamur Aznar Eduardo Moncayo Pinzon Georgios Karakonstantis
  2. 2. iiABSTRACTDuring the past few decades, globalization did not only affect the lifestyle ofhuman beings, but also the work processes in the business world. The markets grewdramatically and new business opportunities appeared, raising the need of differentapproaches in the procurement processes. The buyer-supplier relations have alwaysbeen a critical task for the success of a business. Now, more than ever before, thistask becomes very complicated in some cases. Multi-criteria approaches are neededin order to have rational and profitable results.This paper gives an insight of different theories that can be applied in order toachieve a rational supplier evaluation and selection. Such theories, in combinationwith an extensive analysis of the possible alternatives that a company may have,can lead to high revenues and significant advantage over competitors. In this case,the reader can acquire a basic understanding of the different criteria, methods andmodels, which are used by the businesses during the supplier evaluation andselection process.Moreover, the paper identifies critical changes in the sector of e-manufacturing,regarding the decision-making of the top management while selecting theappropriate supplier. Emphasis is given to the technological changes that createnew opportunities and consequently new criteria for the vendors‟ evaluation bycomparing the existing criteria that have been used in traditional manufacturing andthe affect of the e-manufacturing trend on the existing criteria. Tamur, O. Moncayo, A. Karakonstantis, G.
  3. 3. iiiPREFACEGlobal business operations have become a very important part of the businessenvironment nowadays. One of the most interesting aspects of the global businessoperations is the supplier evaluation and selection. As all the members of our groupare pursuing an International Master‟s program in TUT, related to sourcing, we feltmotivated to study, identify and analyze the field of supplier selection, emphasizingon e-manufacturing that lately evolves very fast. More specifically, in this paper weillustrate and analyze the buyer-supplier relations, the supplier evaluation andselection criteria, processes, methods and models, and finally we attempt to applythe acquired knowledge to the sector of e-manufacturing. It has not been an easytask to conduct this report, and thus we would like to thank the assistant of thecourse LIKU-8306 Logistics strategies and outsourcing, Ms. Erika Kallionpää forher help and guidance during this process.The group,Aznar MoncayoGeorgios KarakonstantisOnur TamurTampere, April 2011 Tamur, O. Moncayo, A. Karakonstantis, G.
  4. 4. ivTABLE OF CONTENTSABSTRACT ______________________________________________________ iiPREFACE _______________________________________________________ iii1 INTRODUCTION ____________________________________________ 1 1.1 Background __________________________________________________ 1 1.2 Objective of the Paper __________________________________________ 12 MANUFACTURER – SUPPLIER RELATIONS IN B2B ____________ 3 2.1 The Challenges of B2B Markets __________________________________ 3 2.2 The Dynamics of Buyer – Supplier Relations _______________________ 4 2.3 Long Term Relations in B2B Environment _________________________ 43 STRATEGIC SUPPLIER SELECTION __________________________ 7 3.1 Supplier Evaluation and Selection Criteria _________________________ 7 3.2 The Process ___________________________________________________ 9 3.3 Supplier Evaluation and Selection Methods _______________________ 104 SUPPLIER SELECTION IN E-MANUFACTURING ______________ 13 4.1 What Is E-Manufacturing? _____________________________________ 13 4.2 Why E-Manufacturing? _______________________________________ 15 4.3 Evolution of Supplier Selection in E-Manufacturing ________________ 165 CONCLUSION ______________________________________________ 19REFERENCES __________________________________________________ 20 Tamur, O. Moncayo, A. Karakonstantis, G.
  5. 5. 11 INTRODUCTION1.1 BACKGROUNDAccording to Lee and Carter (2005), globalization is an inevitable and irreversibleprocess fundamental to the future of world economic development. The growingintegration of national economies around the world will lead to rapid economicgrowth and poverty reduction in developed and developing countries. Howeverthere are also some arguments supporting that globalization exacerbates povertyand inequality between rich and poor, cultural convergence and spread of deadlydiseases (Lee and Carter 2005).Whether it is good or not, it is a fact that globalization led to structural changes ofbusiness operations. Successful business operations provide significant profits andbenefits to companies. Though, the modern business environment demandscomplex operations that sometimes are difficult to manage. Daskalakis (2010)argues that one of the most important operations for modern businesses is theprocurement, and consequently the supplier evaluation and selection process. Thedecision-making related to the supplier selection results directly to the totaloperation costs, final costs and quality of the goods, and finally to thecompetitiveness of the company. Thus, managers have to take into account manyfactors in order to proceed to a reliable decision. Qualitative and quantitativecriteria contribute to the final decision and since the 60‟s many studies have beenconducted in order to create methods that can help managers to select the bestalternative.As every aspect is very dynamic in business, supplier selection methods are alsoaffected by the changes in environment. After e-manufacturing concept started togain popularity and be used by many large organizations, companies tried to findalternative ways to optimize their supplier selection criteria to be able to get betterresults in long-term. E-Manufacturing is still an evolving process and changingrapidly with the technological improvements in IT sector. Thus, it is hard to deducewhat is right or wrong in the supplier selection process and how it matches with thecurrent situation but it is possible to analyze the trends and optimize the selectionsin the same way.1.2 OBJECTIVE OF THE PAPERAfter the rise of e-manufacturing, the supplier selection criteria started to evolveaccordingly. Companies started to search for alternative ways to evaluate their Tamur, O. Moncayo, A. Karakonstantis, G.
  6. 6. 2suppliers according to their manufacturing structure that they follow in theirbusiness. The objective of the paper is to... ...highlight the importance of selecting a good supplier for business continuity and how e-manufacturing trend affected the supplier selection in current business environment.The paper consists of five chapters. First, the background information aboutglobalization and supplier selection with a short explanation about the e-manufacturing trend and its impact on supplier selection will be defined. Second,the challenges of B2B markets, the importance of buyer-supplier relations and howthe relations affect the business and the long term relations between peers and itsimpact on negotiations will be examined. Then, supplier selection criteria andmethods will be introduced and compared. Next, e-manufacturing trend and theevolution of supplier selection related to the e-manufacturing trend will behighlighted. Finally, key results and the conclusion will be stated. Tamur, O. Moncayo, A. Karakonstantis, G.
  7. 7. 32 MANUFACTURER – SUPPLIER RELATIONS IN B2B2.1 THE CHALLENGES OF B2B MARKETSThe intention to make profit is the most important characteristic when buyingproducts in B2B markets (Lyly-Yrjänäinen et al. 2010). Thus, purchasing process ismuch formal and takes longer time because of long price negotiations. Manycompanies tend to build long-term relationship to be able to derive their demandwhen needed. This long term relationship results in close personal relationshipswhich are difficult for competitors to break (Lyly-Yrjänäinen et al. 2010).According to Calhoun et al. (2007), segmentation is far more challenging in B2Bthan in consumer markets. Sales cycles are long, and offerings are complex.Moreover, many customers care less about initial product costs and more about thetotal costs of ownership, including service, maintenance, upgrades, and otherfactors. Competitors‟ offerings and strategies shift so quickly that managers cannotreliably compare the impact of changes in a given marketing lever over more thanone quarter of business. In addition, customer relationship management systemscannot easily capture the decisions and actions that led to success or failure withany particular account, because such information is largely anecdotal, notquantitative (Calhoun et al. 2007).Matthyssens et al. (2008) has examined the challenges in B2B marketing in termsof globalization. First challenge is delocalization of the customers. Asmultinational companies are moving their production and assembly units to low-labour cost countries, industrial suppliers and subcontractors see their home marketshrinking. Secondly, purchasing function is globalizing as the purchasers frommultinational companies seek global purchasing synergies (Quintens et al. 2006).Next, the importance of global networks is increasing. Lastly, the fourth challengefaced by B2B companies is the transition to electronic forms of exchange. E-internationalization is still challenging for companies because they may lose theirintellectual property on the web and B2B relationships are more difficult to managein the electronic highway (Samiee 2008).Despite the above-mentioned challenges, more and more B2B companies expandtheir operations internationally since international activities are fundamental totheir performance (Katsiekas 2006). Tamur, O. Moncayo, A. Karakonstantis, G.
  8. 8. 42.2 THE DYNAMICS OF BUYER – SUPPLIER RELATIONSIt is important to understand the buyer-supplier relations in B2B environment to beable to understand about B2B pricing where the prices are highly interrelated withthe costs of the supplied materials. According to Johnson and Tellis (2008),manufacturer price reduction pressure on suppliers is an important contributor tohelping a manufacturer maintain a strong competitive position by keeping costslow. However, manufacturer price reduction pressure and trusting workingrelations with the pressured suppliers, are not mutually exclusive, they can co-exist(Johnson and Tellis 2008).According to Das and Teng (1998), there are three critical elements that comprise asuccessful co-operative relationship between manufacturers and suppliers:  Trust  Communication and information sharing  CommitmentFirst, trust is an essential component of most business-to-business relationshipmodels. Thus, the greater the manufacturer price reduction pressure on suppliers, thelower will be the pressured suppliers‟ trust of the manufacturer (Johnson and Tellis2008). Second, communication and information sharing is an important conceptwhere each party can set the priorities and co-ordinate the activities necessary toachieve each other‟s objectives (Mohr et al. 1996). Thus, The greater themanufacturer price reduction pressure on suppliers, the less likely will thepressured suppliers perceive their manufacturer customers are communicatingtimely and adequate information to them in an open and honest manner (Johnsonand Tellis 2008). Third, commitment to the relationship by each partner isnecessary if the relationship is to work and each party is to realize positiveoutcomes (Anderson and Narus 1990). Thus, the greater the manufacturer pricereduction pressure on suppliers, the less likely will the pressured suppliers perceivethe manufacturer is acting in a manner that reinforces their commitment to theirsuppliers (Johnson and Tellis 2008).2.3 LONG TERM RELATIONS IN B2B ENVIRONMENTThe customer-supplier relationship has different levels of closeness according tothe number of transactions and longevity of the relationship. Figure 1 showsdifferent kinds of partnerships in the B2B context, separated by their duration. Therange of marketing relationships has been adapted from Webster, 1992. Tamur, O. Moncayo, A. Karakonstantis, G.
  9. 9. 5 Figure 1. Customer relationships in B2B marketsAdditionally, Goffin et al. categorize long term relationships into three differenttypes: short term partnerships, long term partnerships and long term relationshipswith no end. The definition of each marketing relationship mentioned is presentedin Table 1.Table 1. Customer Relationships Marketing Relationship Definition Considered an arm‟s length relationship. The required information is available in the price and the Transactions only thing necessary for the company is to find buyers. Still an arm‟s length relationship. In industrial Repeated Transactions markets it is important to develop trust and credibility as part of the marketing strategy. Long term relationships begin by short term partnerships and can develop up to long term relationships with no end. Usually vendors and Long term relationships buyers are no longer in an arm‟s length relationship, but it takes some time for them to adjust to the new relationship. These partnerships are based on the concept of reciprocity. There is a total interdependence between Buyer-seller partnerships buyer and seller, which are committed to their long- term relationship. Usually provides an outcome of stability. Strategic alliances and joint ventures are categorized in the same manner since they serve a similar purpose. In strategic alliances, both partners Strategic alliances (Joint ventures) collaborate and give capital and resources to enhance their competitive place in the market. On the other hand, joint ventures are started by the partners with the objective of having one entity. The network develops and manages alliances, relationships with customers, core competence and Network organizations strategy and coordinates the financial resources. Composed of multiple strategic alliances. Vertical integration Either supplier or customer owns the other part. Tamur, O. Moncayo, A. Karakonstantis, G.
  10. 10. 6Among the previously mentioned customer relationships it is possible to find thelong term relationships. When shifting from single transactions to long termrelationships, the highest level that can be achieved is a partnership-likerelationship, which brings advantages like better quality, lower costs and accuratedelivery but at the same time demands resources and commitment from both parts.Trust is also a necessary condition for the development of any long term orientedbusiness relationships (Ryu et al., 2007).Long term customer relationships tend to provide more value to the company, sincethey can focus on those customers that will provide more profit and opportunities,and at the same time, to the customer, since the company will be taking care ofproviding services and support in order to guarantee the customer‟s satisfaction.The closeness in long term customer relationships is related to geographical,technological, cultural and social factors, as well as the current length of therelationship. (Goffin et al., 2006) Furthermore, in some technological markets, thecustomer is required to adjust to the provider‟s technological platform thereforecreates a high level of commitment between the customer and the provider. Sincethese contracts are usually very expensive, this creates a long-term relationship bydefault.Long term customer relationships are relevant for suppliers in two main cases:when buyers have other product alternatives (highly competitive ambiance) andwhen buyers constantly or periodically require a service or product. Under thesame conditions, buyers obtain benefits such as better prices than the otheralternatives in the market and priority sourcing in cases where there is a lowavailability of a good or service. (Berry 1983) The development of long termcustomer relationships is good when it is mutually beneficial, therefore, bothsupplier and buyer must benefit from the development of the relationship. Tamur, O. Moncayo, A. Karakonstantis, G.
  11. 11. 73 STRATEGIC SUPPLIER SELECTION3.1 SUPPLIER EVALUATION AND SELECTION CRITERIASuppliers are a very important part of businesses nowadays. Their importance lieson the fact that the right evaluation and selection of a supplier can generatesignificant profits and ensure the efficiency of business processes. Some suppliersare able to approach their potential customers, but most of the times the companieshave to search, find, evaluate and select their suppliers. This process usuallyfollows the paths of professional fairs, B2B magazines and other companies.The process of evaluation and selection of suppliers is very complex. Thus, manystudies have been conducted since the 60‟s in order to identify a pattern that canpropose the best possible solution. As a result, nowadays businesses use differentmethods that are based on some specific criteria. Though, according toPapagiannakis (2009) the number of those criteria makes the evaluation andselection system unwieldy regarding its content and time consuming regarding itsmanagement.Thus, more recent studies addressed their focus on minimizing and mixing thosecriteria, without affecting the quality of the evaluation process. Dickson (1966)argues that there are 23 criteria that businesses should take into account whenselecting a vendor. Table 2 shows the findings of Dickson‟s study, including theimportance and main rating for each of them.Table 2. Supplier Partnership Selection Criteria (Ellram 1990)Rank Criteria Main Rating Evaluation1 Quality 3,5082 Delivery 3,417 Extreme Importance3 Performance History 2,9984 Warranties & Claims Policies 2,8495 Production Facilities & Capacity 2,7756 Price 2,7587 Technical Capability 2,545 Considerable8 Financial Position 2,514 Importance9 Procedural Compliance 2,48810 Communication System 2,42611 Reputation & Position 2,412 Tamur, O. Moncayo, A. Karakonstantis, G.
  12. 12. 812 Desire for Business 2,25613 Management & Organization 2,21614 Operating controls 2,21115 Repair Service 2,18716 Attitude 2,12017 Impression 2,05418 Packaging Capability 2,009 Average Importance19 Labor Relations Record 2,00320 Geographical Location 1,87221 Amount of Past Business 1,59722 Training Aids 1,53723 Reciprocal Arrangements 0,610 Slight ImportanceAlthough Dickson‟s study was very useful for few decades, the industries emergedand created a need for different approach. Some criteria became more importantthan they were before. Ellram (1990) presented her own framework, in which sheincluded 12 criteria. Table 3 shows Ellram‟s findings.Table 3. Supplier Evaluation and Selection Methodologies (Papagiannakis 2009).Rank Supplier Partnership Selection Criteria1 Economic Performance2 Financial Stability3 Trust4 Management Attitude5 Strategic Fit6 Top Management7 Compatibility8 Organizational Structure Manufacturing Current and Future9 Capabilities10 Design Capabilities11 Development Speed12 Safety RecordEllram did not ignore the importance of Dickson‟s quality criteria, but she focusedon finding complementary criteria that would support the supplier-buyer long-termrelationships. Tamur, O. Moncayo, A. Karakonstantis, G.
  13. 13. 9There is not a general rule to evaluate an approach as right or wrong. Thus, some ofthe criteria might be applicable in a specific case and some not. The importance ofthe studies lies on the fact that those criteria help and support the supplierevaluation process, which is analyzed next.3.2 THE PROCESSAccording to Papagiannakis (2009), there is not an absolute best way to evaluateand select suppliers. Every case is different and most of the times it is required acombination of different approaches to achieve the best solution. The objective ofthis process is to minimize risks and maximize the perceived value for the buyer.Long-term relationships usually help businesses to achieve this objective.Supplier evaluation methods usually follow a strict, structured approach throughthe use of research methods. A supplier selection research, in order to besuccessful, has to be complete, objective, reliable, flexible and finallymathematically simple. Hence, businesses have to follow specific steps to ensurethat their supplier selection research will be successful.According to Monczka et al. (2002), a supplier evaluation and selection processshould include seven steps, as the following figure illustrates: Figure 2. Supplier Evaluation and Selection Process (Monczka et al. 2002) Tamur, O. Moncayo, A. Karakonstantis, G.
  14. 14. 10The framework of Monczka et al. includes more parameters in every of the sevensteps. Though, this paper will avoid to explore deeper the framework, so that it canintroduce some interesting supplier selection methods in the subchapter 3.3.3.3 SUPPLIER EVALUATION AND SELECTION METHODSAccording to Daskalakis (2010), each method covers some aspects of the suppliers‟characteristics that are under investigation. Consequently there is no method thatcan replace some other. Of course in some cases a method can includecharacteristics of many other methods, but it is not possible to cover all thecharacteristics of a candidate supplier.Talluri and Narasimhan (2002) identified three basic methodologies to approachthe problem of supplier evaluation and selection. First, the conceptual approachesthat emphasize the strategic importance and influence of the supplier selection tothe buying process. Price, quality and delivery regulations are very important partsof the conceptual approaches. Second, the empirical approaches, such as the one ofChao and Hartley (1996) for the automotive industry, which proposed that there areonly slight differences regarding the importance of the selection criteria, betweenthe different levels of the buyer‟s supply chain. Finally, the most widespreadapproach lies on the use of models to solve the supplier evaluation and selectionproblem. These methodologies are greatly used nowadays, and hence some of themare presented in Table 4.Table 4. Supplier Evaluation and Selection Methodologies (Papagiannakis 2009).Models ResearchersLinear Weighting Models Timmerman (1986), Monczka & Trecha (1988)Statistical Model (Principal Petroni & Braglia (2000)Components Analysis) Barbarosoglu & Yazgac (1997), Bhutta & HuqAnalytic Hierarchic Processes (2002), Narasimhan (1983), Nydick & Hill (1992) Ellram (1993), Degraeve et al. (2000), Bhutta &Total Cost Models Huq (2002),Economic Model Tagaras & Lee (1996) Weber et al. (1998), Narasimhan et al. (2001),Data Envelopment Analysis Talluri (2003) Dahel (2003), Karpak et al. (1999), Weber &Multi-objective Programming Ellram (1993)Game Model Zhu (2004), Talluri (2002) Kwong (2002), Kuma et al. (2004), Lau et al.Fuzzy Theory (2002)Dimensional Analysis Li et al. (1997), Willis (1993) Tamur, O. Moncayo, A. Karakonstantis, G.
  15. 15. 11MACBETH Models Bana e Costa & Vansnick (2008)Some of the methodologies are able to improve significantly the decision-making,and thus it is important to mention the models that are greatly in use. AsPapagiannakis (2009) identifies, the most important are:  Linear Weighting Models: o Categorical Method (Timmerman, 1986) o Weighted Method (Timmerman, 1986)  Total Cost Models: o Total Cost of Ownership (Ellram, 2005) o Cost Ratio (Timmerman, 1986)  Principal Components Analysis (Petroni & Braglia, 2000)  Analytic Hierarchic Processes (Nydick & Hill, 1992)  MACBETH Models (Bana e Costa & Vansnick, 2008)In the Linear Weighting Models the evaluation is based on a pointing systemaccording to various criteria. The final points indicate the most suitable supplier.The Total Cost Models are cost oriented and focus on financial aspects. On theother hand, the AHP Models are based on a framework that prioritizes thealternative choices and includes intuitive, logical, qualitative and quantitativefactors. Finally, the MACBETH Models attempt to improve the method of the AHPmodels. The comparison of the models is shown in Table 5.Table 5. Advantages and disadvantages of supplier selection methods (Papagiannakis 2009)Methods Advantages Disadvantages  The same weight for all  Clear and systematic the criteriaCategorical evaluation  Subjective pointing  Cheap implementation system  Not very reliable  Subjective pointing  Different weight for systemWeighted Point criteria respectively to  Difficult to take into their importance account qualitative criteria  FlexibilityCost Ratio  Decreases the  Complexity subjectivityTotal Cost of Ownership  Cost reduction  Complexity  Reliable  Knowledge of advancedPrincipal Component  Manages the statistical methods isAnalysis characteristics without required weights Tamur, O. Moncayo, A. Karakonstantis, G.
  16. 16. 12  SimpleAnalytic Hierarchical  Quantitative as well as  UnstableProcess (AHP) qualitative criteria  Use of software isMACBETH  Improvement of AHP requiredAs seen in the table above, the linear weighting models are easy to implement andsimple to use. They are not very expensive but they are not very reliable as well.On the contrary, the total cost models are flexible and very objective, but verycomplex and difficult to implement. The principal components analysis is able tomanage multiple conflicting criteria. The AHP are simple to use and take intoaccount quantitative as well as qualitative criteria. Finally, the MACBETH is a newmethod that improves the AHP. Tamur, O. Moncayo, A. Karakonstantis, G.
  17. 17. 134 SUPPLIER SELECTION IN E-MANUFACTURING4.1 WHAT IS E-MANUFACTURING?E-Manufacturing term first introduced to business by a firm in semiconductorindustry to enable large production quantities in different locations in the world(Sridhar CNV et al. 2010). With emerging applications of Internet and tether-freecommunication technologies, companies are forced to change their traditional factoryintegration philosophy to an e-factory philosophy where every step is controlled andoptimized by using an e-Manufacturing system (Koc et al. 2005). The main reasonsbehind this shift are:  the threat posed by competitors  controlling costs  finding new opportunities  improving responsiveness  better customer focus and serviceAfter the acceptance period in business, e-manufacturing started to get morepopular in the market. Many companies realized it is importance and the benefits itprovides in a short period of time. By using e-manufacturing systems, companiesstarted to fill the gaps existing in their traditional manufacturing systems. E-Manufacturing enabled real time information sharing between the peers aboutcapabilities, costs and resources, synchronization with suppliers and vendors andlinkage with ERP systems in every step of the production. Moreover, it assuredreliability and maintainability and maximized the availability. As a result,companies managed the increase their performance and decrease their costs at thesame time by benefiting from the power of e-manufacturing systems. The conceptof e-manufacturing is illustrated in figure 3. Tamur, O. Moncayo, A. Karakonstantis, G.
  18. 18. 14 Figure 3. E-ManufacturingAccording to Sridhar CNV et al. (2010), the benefits provided by a wellimplemented e-manufacturing system are:  E-Manufacturing is to achieve predictive near-zero downtime performance through the use of web-enabled technologies.  The real-time production information should be made available to the entire organization.  E-Manufacturing gives agility to react quickly to the changes in market, technology, and clients.  Total asset management that aims in improving the utilization of plant floor assets using a holistic approach.  Sensitive communication between the clients and the server  Transparent, seamless, information exchange process between clients and manufacturing firm.  It enables to meet the increasing demands through tightly coupled supply chains.  Status of equipments, orders, products, changes in the processes across the enterprise can be monitored.  There should not be any block holes in the real time flow of information, including outsourcing suppliers, customers  The entire system is flexible enough to change with the varying market demand conditions in a short lead-time.  The ability to quickly and accurately communicate technical information throughout suppliers and manufacturers leads to pooling the best ideas and faster decision-making. Tamur, O. Moncayo, A. Karakonstantis, G.
  19. 19. 15The benefits mentioned in the bullet list above provide endless opportunities tocompanies against their competitors. The companies can optimize their inventoriesand production capabilities by using just-in-time manufacturing and on-timeshipment so that they can control their costs and create a wider profit opportunityfor their organization. Now, e-manufacturing is seen as a core competency in whichcompanies can integrate all elements of their business in one solid framework.4.2 WHY E-MANUFACTURING?The main focus of a company for introducing an e-manufacturing strategy relies onthe competitive advantage it can gain. Specifically, manufacturers aim to improvetheir efficiency in quality control, operations management and of resources, supplychain management and visibility. By improving these aspects, companies will beable to tailor their offerings of services and products to the requirements of thecustomer, and will excel in performance. The following table shows the ongoingproblems in today‟s companies using the best manufacturing practices, and it alsoshows the improvements with e-manufacturing.Table 6. Comparison of traditional manufacturing and e-manufacturing. Traditional Manufacturing E-ManufacturingParts with defects Less parts with defectsHigh downtime Low downtimeHigh energy use and cost Controlled energy use, reduced costLong changeover and ramp up time Shorter changeover and ramp up timeLong lead time for new product Short lead time for new productrealization realizationSlow decision making Fast decision makingSupply chain visibility Increased supply chain visibilityAmong the important aspects of implementing e-manufacturing there are severalissues that are very important for a successful strategy. For example, having e-manufacturing as part of the company‟s processes form an instant increase in theexchange of all sort of information between the company and suppliers orcustomers, specifically in the speed of the communication. This allows avoidingproblems at any kind of level with the customer, supplier, or anywhere along thesupply chain. Additionally, it is also important for companies that have outsourcedlarge parts of their operations, since it can communicate vital information in justinstants, therefore enhancing the decision making process. On a similar level, thelead times for new product realization should be reduced to a minimum in order tohave the capability to react to the changing demand of different customers andregions. Tamur, O. Moncayo, A. Karakonstantis, G.
  20. 20. 16There are seven main benefits achieved by implementing the e-manufacturingstrategy to a company or enterprise. (Shivanand et al. 2008) These are:  Synchronization of the production processes with the business processes  Improving and consolidating the upstream information, material and work flow  Automation of business processes inside the company  Increasing manager control providing more plant information and new analysis tools  Integration of the design process among different units or companies collaborating  Leveraging the bi-directional downstream information  Enhancing and enabling the collaborative maintenance and support for manufacturing4.3 EVOLUTION OF SUPPLIER SELECTION IN E-MANUFACTURINGMany authors have identified several criteria for supplier selection as these criteriaare vital in supplier evaluation and selection process since it helps to measure theperformance of supplier. However, the researched criteria mainly focus on traditionmanufacturing concept and e-manufacturing trend was not taken into considerationduring these researches. Nowadays, it is believed that e-manufacturingdistinguishes itself from traditional manufacturing by its characteristics andcapabilities. Thus, selection criteria must vary (Sridhar CNV et al. 2010).The idea behind traditional manufacturing is to have a high level throughputproduced with a minimum amount of inventory. Usually, the fact of having a lowamount of inventory brings savings in warehousing costs. In order to guarantee asuccessful strategy, several criteria should be satisfied. Quality is one of the mostimportant criteria of traditional management. Traditional manufacturing aims toprovide a high quality product by inspecting each part after it has beenmanufactured. In case there is a defect, the production line is stopped to detect theproblem before it becomes bigger. The quality of the raw materials is alsothoroughly inspected in order to achieve a better product. Delivery times inmanufacturing depend from the just in time concept applied to purchasing,manufacturing and distribution. In each of these stages, the raw materials, products,and output are expected at a certain moment in order to avoid storage costs withinthe company. As a result of saving on warehousing costs, the company will thenfocus on the price of the product and try to eliminate any unnecessary costs toreduce the production costs, and be able to reduce the customer price; for a bettercompetition in the market. The reputation and position of the company are animportant part of manufacturing since they help create a brand name and establish a Tamur, O. Moncayo, A. Karakonstantis, G.
  21. 21. 17domain over the market. It is always important to maintain a manufacturingposition since it can provide benefits when competing for the market. Additionally,before globalization and the increase in global communication means, geographiclocation was important for manufacturing since communicating and sharinginformation with a supplier or customer was easier if they were physically close.Transport costs were also cheaper, therefore, companies had the tendency to hire orwork with close suppliers and customers. Also, the manufacturing capabilities wereof great importance, since companies used to work with huge amounts of stocksand products, thus making it very important to have the resources to manage thesestocks. Without these, the company loses productivity and competitive advantageagainst rivals. Figure 4. Evolution of supplier selection criteria in e-manufacturing environment.E-Manufacturing is a business strategy for companies to be able to stay competitivein current business environment. The main focus of e-manufacturing is to integrateof all the elements of a business including suppliers, customer service network,manufacturing enterprise, and plant floor assets with connectivity and intelligencebrought by the web-enabled and tether-free technologies which gained momentumin the last decade. Tamur, O. Moncayo, A. Karakonstantis, G.
  22. 22. 18As seen in Figure 4, e-manufacturing forms a new perspective in supplier selectioncriteria. The most important selection criteria in e-manufacturing are quality,delivery time, price, reputation & position, lead time management and IT &Communication systems. When compared to traditional manufacturing criteria, it isseen that manufacturing capabilities and geographical location lost their importancein the scale. The reason behind this argument is that e-manufacturing improved theinformation sharing and internal communications of the organizations so that theycan work with less stock and be braver to pursue international opportunities byrelying on their business network. These trends increased the importance of leadtime management and IT & Communication systems. Lead time managementbecame more important in supplier selection because the business environment isvery dynamic and reacting to emerging trends is a key success factor nowadays. IT& Communication systems also increased their popularity in supplier selectionsince it is very critical in e-manufacturing concept to be able to share informationfast and efficiently. However quality, delivery time, price and reputation & positionare still keeping their position to be an important decisive factor in supplierevolution because they have direct effect in cost and performance management ofan organization.Currently many companies are basing their operations on traditionalmanufacturing. However, when the company is very large enough and has the needto increase supply chain visibility, as well as communication with suppliers andcustomers, it fulfils the criteria to implement e-manufacturing. By implementingthis manufacturing, it can expect a drastic reduction of warehousing costs,communication expenses, avoiding the excess of inventory and increasing theproduction speed. All of these settings provide an increase in the productivity, adecrease in the production cost and reduction of the sales cost for the customer.Therefore, the company will offer a better product at a better price and this will bereflected in the profitability of the company. Tamur, O. Moncayo, A. Karakonstantis, G.
  23. 23. 195 CONCLUSIONGlobalization trend has enabled new business opportunities for all companiesaround the world. Many companies started to make business with suppliers fromabroad so that they can lower their costs and increase product quality. However,this situation formed some challenges to companies as well in evaluating the bestsupplier so that they can improve their performance. The supplier evaluation andselection has always been one of the most important problems that companies needto solve. The multi-criteria analysis methods can adapt to the needs of eachcompany and offer a reliable solution for this problem. Hence, these methods areable to contribute significantly and improve the profitability of the buyer, if theyare used properly.The objective of this paper was to highlight how efficient supplier selection canprovide business success and how the e-manufacturing trend affects the supplierselection in current business environment. E-Manufacturing trend has plenty ofunique characteristics compared to traditional manufacturing so these aspectsshould be taken into consideration before selecting a supplier to be able to get thebest performance and results.Based on this research, this paper examines the concept of buyer-supplier relationsand how these relations affect the company‟s operations. Furthermore, theevaluation and selection process has also become a very complex task for managersin the modern business environment. Thus, the paper analyzes different criteria,methods and models which are used in order to decide the most suitable supplierfor the company‟s operations. Multi-criteria methods are very popular and usuallyprovide the best results. Hence, they are also introduced and discussed in order toacquire the basic knowledge regarding the supplier selection, so that the researchcan proceed and analyze the case of e-manufacturing.Finally this paper supports that e-manufacturing is a great opportunity forcompanies in business nowadays. With the development in information technology,it will keep on increasing its power and start to dominant the manufacturingpractices that are currently in use. Thus, companies should adapt to this trend andalter their supplier selection criteria accordingly. Tamur, O. Moncayo, A. Karakonstantis, G.
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