Lecture Purchasing and supply chain management (3rd/e): Chapter 8 - W. C. Benton

Chapter 8 - Supplier selection and evaluation. Supplier selection is addressed in Chapter 8. The selection of suppliers is a complex and demanding question that has no real correct answer. Each firm must weigh the benefits and risks of single and multiple sourcing.

Chapter8: SupplierSelection andEvaluation PurchasingandSupplyChainManagement 3rdedition PurchasingandSupplyChainManagement,3rdedition,Copyrightâ2013,W.C.BentonJr.,Allrightsreserved. PurchasingandSupplyChainManagement,3rdedition,Copyright2013,W. CurrentGlobalTrends Producequalityproductsatreasonableprices Buyingorganizationsarereducingthesupplierbase Increasinglyimportantroleforthepurchasingand professionalpurchasingmanagers PurchasingandSupplyChainManagement,3rdedition,Copyrightâ2013,W.C.BentonJr.,Allrightsreserved. StrategicMakevs.Buy Decision • • The Process: Determine what product or service is under consideration.  Consider the in­house capability Key Make­or­Buy Mistakes • Not being proficient at identifying own core capabilities  • Waiting too long to assess the value of consultants or strategic  partners • Not recognizing that the product or service is approaching  maturity • Not recognizing that there are always new competitors with  new technology PurchasingandSupplyChainManagement,3rdedition,Copyrightâ2013,W.C.BentonJr.,Allrightsreserved. BenefitsofOutsourcing Verticalintegration Expandingintoareasthatareatdifferentpointsonthesame productionpath Morecontrolvs.Greatercompetencerequirementineachofthe areas Outsourcing Adelegationofproductioncapabilities Concentrateontruecorecapabilitiesvs.lossofcontrolandnonư corecapabilities PurchasingandSupplyChainManagement,3rdedition,Copyrightâ2013,W.C.BentonJr.,Allrightsreserved. OutsourcingandSupplierSelection • The selection of the correct supplier is the most  important purchasing activity • The buying firm must spend extensive time analyzing  and carefully selecting the correct supplier • Periodic supplier evaluations are needed to ensure  continuous supplier performance achievement PurchasingandSupplyChainManagement,3rdedition,Copyrightâ2013,W.C.BentonJr.,Allrightsreserved. SupplierRelationshipManagement(SRM) Factorsforstrongersupplychainrelationship management: Businessespurchaselargerpercentageofproductvalue Theshrinkingsupplierbases Increasingshortagesofskilledsuppliercapabilitiesandresources PurchasingandSupplyChainManagement,3rdedition,Copyrightâ2013,W.C.BentonJr.,Allrightsreserved. The4PureSupplyManagement Relationships Counterưproductiverelationships LoseưLose Transactionalorcompetitiverelationships • Win­Lose Cooperative relationships • Win­Win Collaborative relationships • WinưWin PurchasingandSupplyChainManagement,3rdedition,Copyrightâ2013,W.C.BentonJr.,Allrightsreserved. SRMand3SupplierCategories Strategicsuppliers Supplydifficulttoreplaceessentialmaterialsandcapabilities Maintainingandstrengtheningtheserelationshipsareamajor concern Preferred suppliers  • Important but replaceable with alternative suppliers Transactional suppliers  • Provide easily to replace non­critical resource Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved.            The 3 Common Supplier Evaluation Systems The categorical method The cost­ratio method The linear averaging method Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved.            Strategic Supplier Relationship Management • For each strategic supplier, a key contact within the  buying firm must be established • • Owner of a specific strategic supplier relationship  Management Methods: • Supplier profiles • Strategic Supplier Performance Review Process • Supplier development 10 Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved.            The Strategic Supplier Performance Review  Process • • A process for managing performance and giving  feedback to the strategic suppliers Requirements: • Consistent measurements for evaluating current performance of  existing strategic suppliers • Must have a standard template for a customized review process • The template should include a personal meeting with the  functionalmanager Thegeneralreviewprocessshouldtakeapproximatelytwo workdaystocomplete 11 PurchasingandSupplyChainManagement,3rdedition,Copyrightâ2013,W.C.BentonJr.,Allrightsreserved. SupplierDevelopment Providethesupplierwithopportunityto: • Take advantage of the learning opportunities  • Improve its overall performance with the buying firm and with its  other customers Steps of supplier development program (SDP): Supplier evaluations Communicate the problem and motivate the supplier to  changeitsresults Supplierevaluationreportcard ImplementSDP 12 PurchasingandSupplyChainManagement,3rdedition,Copyrightâ2013,W.C.BentonJr.,Allrightsreserved. SupplierReduction Itisrecommendedtoreducetheoverallsupplybase • Guides to supplier reduction analysis: • Grade methods • • Based on a score or grade given to the supplier by the buyer for some  attribute Hurdle • • Suppliers are required to “jump” over higher and higher hurdles to win  the buyer’s business E.g., certification 13 Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved.            Questions? 14 Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved.            ... continuoussupplierperformanceachievement PurchasingandSupplyChainManagement,3rdedition,Copyrightâ2013,W.C.BentonJr.,Allrightsreserved. SupplierRelationshipManagement(SRM) Factorsforstrongersupplychainrelationship management: ... Suppliersarerequiredtojumpoverhigherandhigherhurdlestowin thebuyersbusiness E.g.,certification 13 PurchasingandSupplyChainManagement,3rdedition,Copyrightâ2013,W.C.BentonJr.,Allrightsreserved. Questions? 14 Purchasing and Supply Chain Management,  3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved.           ... Increasingshortagesofskilledsuppliercapabilitiesandresources PurchasingandSupplyChainManagement,3rdedition,Copyrightâ2013,W.C.BentonJr.,Allrightsreserved. The4PureSupplyManagement Relationships Counterưproductiverelationships