This document discusses supplier selection and development. It emphasizes the strategic importance of selecting good suppliers and developing partnerships. Developing suppliers can help ensure they meet needs for quality, cost, and technical support. The document provides sources for finding supplier information and evaluating suppliers. It also discusses the benefits of partnerships with suppliers, including cost reductions, quality improvements, and flexibility. Supplier management involves ensuring suppliers perform as required and identifying options if they cannot meet future demands.

1. SUPPLIER
SELECTION AND
DEVELOPMENT
PRESENTED BY,
SREEPATHY R NAIK
IEM 2014-16
NIT CALICUT
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2. CONTENTS
• IMPORTANCE OF SOURCE SELECTION
• STRATEGIC IMPORTANCE OF SUPPLIER DEVELOPMENT
• IMPORTANCE
• SOURCES OF SUPPLIER INFORMATION
• SUPPLIER DEVELOPMENT
• IMPORTANCE OF SUPPLIER GOODWILL
• PARTNERSHIPS
• SUPPLIER MANAGEMENT
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3. IMPORTANCE OF SOURCE SELECTION
• GOOD SUPPLIER : INVALUABLE RESOURCE
• Good buyer seller relationship
Buyers gain superior performance
Extra services
Co-operation on cost reduction
Willingness to share process and procedures
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4. SIX important SUPPLIER ORIENTED ACTION inorder to obtain desired level of
quality, on time, at the right price, the necessary level of technical support and
desired level of service
• Develop and maintain a viable supplier base
• Address the strategic and tactical issues
• Evaluate the suppliers
• Decide whether to use competitive bidding or negotiation
• Select the appropriate source
• Manage the selected supplier
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5. STRATEGIC IMPORTANCE OF SUPPLIER
DEVELOPMENT
• As manufacturing firms outsource more materials,sub assemblies and even
complete products and services to focus on their own core competencies, they
increasingly expect their suppliers to deliver innovate and qualiy products on
time and at a competitive cost .When a supplier is incapable of meeting these
needs, a buyer has 3 alternatives:
1. Bring it in-house and produce internally
2. Re-source with a more capable supplier
3. Help improve existing supplier capabilities
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6. INTRODUCTION
• Adequate supplier base is needed for the well being of the firm
• High technology industries & industries where there is a scarcity of material
• They should meet existing & future demand
• Early supplier involvement
• Trend: down sizing the supplier base
• Parts sourced to one supplier for the life of the product
• Supply base : is a strategic issue
• Driven by quality, cost management, technology access, firms ability to
substitute the management of supplier
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7. SOURCES OF SUPPLIER INFORMATION
• SUPPLIER PURCHASING INFORMATION FILE
Information files on past and present suppliers: name, delivery history, quality
record, overall desirability .Used because many purchasing operations are repetitive
• SUPPLIER CATALOGUES
Purchasing and supply dept. maintain a catalogue library with/without
indexing system.
• TRADE REGISTERS AND DIRECTORIES
Contains address, no of branches, affiliations of all leading manufacturers,
financial standings.
They are indexed by commodity, manufacture, trade name and trade mark
Eg. Thomas register of American manufacturers, Kompass publications in
Europe
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8. • TRADE JOURNALS
Advertisements in trade journals, first contact with potential suppliers
general :NAPM insights, purchasing; aircraft :aviation week; steel industry: iron
age
• THE YELLOW PAGES
Classified yellow pages in telephone directories, size and capability are
difficult to determine; well indexed; starting point if other sources are fruitless
• FILING OF MAILING PIECES
Mail advertisements, brochures and booklets are given a file no, dated and
indexed;
some prospective suppliers are given forms showing their details
• SALES PERSONNEL
Excellent sources; wel informed about the capabilities and features of therir
products; familiar with similar competitive products; can suggest new
applications for their products
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9. • TRADE EXHIBITS
Regional and national trade shows; new products and modified products;
opportunity to compare concurrently similar products; new potential suppliers; new
ideas
• COMPANY PERSONNEL
Personnel from other dept. in buyers firm often provide information; scientific,
research, technical personnel always have valuable suggestions on sources of
supply; new methods, new manufacturers, new products
• OTHER PURCHASING AND SUPPLY MANAGEMENT DEPARTMENTS
Purchasing &supply management dept. in other firms can be helpful; mutually
beneficial; associations can be the media where members help other members to
locate and evaluate sources of supply
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10. SUPPLIER DEVELOPMENT
• Not all suppliers need development, but to reach status of world class
collaborative relationship, development is needed
• Even best of best require investment on the part of buying firm eg. sun
microsystems use of score cards
• If buying firm is unable to find a world class supplier that is willing to meet its
needs then it selects the most attractive supplier and develops it into one
capable of meeting its present and future needs
• Several leading customer firms provide training in project management, team
work, quality, production process and supply management
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11. THE IMPORTANCE OF SUPPLIER GOODWILL
• Customer goodwill is a valuable asset
• Company develop customer goodwill by selling acceptable products at fair
price, supported by good service with customer’s interests in mind
• Mutually profitable buyer-seller relationship; seller learns buyer’s business
problem- manufacturing, inventory, receiving and overall operational problem
• The end result is the meshing of the operations of both the companies
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12. ARGUMENTS FOR PARTNERSHIPS(VOLUNTARY
COLLABORATIONS)
• Every time new partner comes together a learning process is required
• Changing market conditions and technology
• Quality problems and late deliveries reduced
• Open relation can cushion bad times
• Reaction for behavior of buyer
• Less shocks due to supply problems
• More effective performance of supplier
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13. COST BASED ARGUMENTS
• Cost reductions in manufacturing operations ,through methods improvement
and innovations
• Productivity improvement through value analysis is possible,because the
relationship is long term not contract
• With accumulated experiences from continuous production ,supplier can achieve
improvements which can result in reduced costs
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14. PARTNERSHIPS
• Long term relationship between buying and supplying organizations
• It recognizes some degree of interdependence cooperation on a specific project
or for a specific purchase agreement
• Sharing of forecast demand and cost data
• Buying firm may have many partners but trend is towards single sourcing
• Properly priced life of products agreement benefits buyer in many ways
• Buyer must agree to protect the supplier partner from sudden changes
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15. • eg. Ford Motor Company (quality, cost reductions and flexibility)
• Intel corporation (formal supplier partnerships which feature written co-
objectives and regular meetings between senior executives of Intel &its
suppliers)
• downside: study by Bain &co.
out of 100 fortune 500 companies:
58%-partnering failed
34%-it met their needs
8%-it surpassed their expectation
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16. SIX DANGERS ASSOCIATED WITH PARTNERING
Partnering is a way to reduce purchasing staffs
Partnering can lead to complacency
Partnering can weaken leverage
Purchasing and audit control can be lost
Success can lead to excess
Every supplier wants to be your partner
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17. SUPPLIER MANAGEMENT
• It is buyers responsibility to ensure that suppliers perform as required or that
appropriate corrective action is taken to upgrade them or eliminate them
• On a periodic basis analyse suppliers abilities to meet firms need in long run
• Suppliers general growth plan
• Future design capability in relevant areas
• Suppliers strategic planning
• Potential for future production capacity
• Financial ability to support such growth
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18. If present supplier cant meet the future demands then firm has 3 options
1. It may assist the supplier with financing and technology
2. It may develop new sources
3. Develop required capability internally
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19. THANK
YOU
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