Session 8 - Establishing Supplier Relationships
8.1 Factors determining Supply relationship
Mutual Business Value Principles:
a. Supply relationships can be divided into 2 general categories:
-Arm's length: lower value-added relationships
-Collaborative: higher value-added relationships
For higher value-added relationships, such as partnerships and alliances, additional principles are critical:
Openness: willingness to share information on topics such as a cost, processes, market analysis, and future products.
Trust: mutual respect and confidence in the reliability and integrity of the other party.
b. Supply relationships are based mainly on the following principles:
Compatibility of interests: volumes, pricing, market segments, quality expectations, growth, technological capability consistent with each firm, time to market for new products.
Mutual need: the degree to which firms need each other to further their goals.
8.1.1 Describe the cost that are avoided by deciding to buy rather than make a product.
8.1.2 Supplier capabilities to consider in a make-or-buy analysis.
In-House Manufacturing Capability
Supplier Capability
Cost analysis
International Procurement Implications/Issues
Purchasing Strategy
Analysis of Supply Risk and Profit Impact
It is useful framework for understanding and developing corporate purchasing strategies:
Strategic items: high impact on Profit and High Risk
Leverage Items: high impact on Profit and Low Supply Risk
Bottleneck Items: low impact on Profit and high Supply Risk
Noncritical items: low impact on Profit and low Supply Risk
Strategic Sourcing
Objectives:
Increase the reliability of sources, quality, and delivery of materials and services.
Reduce supply risks such as those
Activities:
8.1.3 Explain why supplier partnerships are best suited to items w high supply risk and high impact on profit:
A supplier partnership is the establishment of a working relationship that requires both companies to make a long term commitment to the partnership. It is a typical pre-requisite to a successful supplier partnership.
8.1.4 Summarise the scope of strategic sourcing activities
8.1.5 Difference bw tactical buying and strategic sourcing:
Def. Tactical buying is a purchasing process focusing on products with stable, defined specs that are not critical to production, have no delivery issues, and deliveries are highly reliable.
8.2 Collaborative relationships
Strategic alliances and supplier partnership are high value-added relationships
8.2.1 - Strategic alliances involves two or more organizations that share information, participate in joint investments, and develop linked and common processes.
8.2.2 - 6 value propositions for supplier partnerships:
Product development
Operational integration and efficiencies
Quality Management
Investment risk
Flexibility
Market Access
8.3 supply alternatives and techniques
Difference bw sole, single and multiple sourcing:
Sole source: the supplier is the only source of supply as a result of having a unique technology, distribution arrangement, or government regulation.
Single sourcing: there is more than one source, and the company chooses to reduce the supplier base to a single supplier. Suppliers are generally more willing to enter into a long-term relationship if they are going to be the single supplier. They also will be more likely to make additional investments in tooling and technology in order to become more responsive to the customer.
Multiple sources: there is a desire to maintain a backup source or to meet differing local content requirements, or when a single supplier cannot supply the required volume.
Disadvantages of single sourcing in a Lean/JIT
Managed Inventories:
Consignment, or vendor-owned, inventory
Vendor-managed Inventory (VMI)
On-site Representation
Role of cross-functional teams in supplier relationships.
8.4 communicating with suppliers
Role of the planner/buyer in communicating with suppliers
8.4.1 Strategic Communication
8.4.2 Operational Communication (lean/JIT)
areas of operational communication bw supply chain partners:
Technology
Planner/buyer Approach
Technical and quality specs
Scheduling
Delivery
Engineering drawings/changes
Packaging
Transportation
Session 9 - Supplier Partnership
9.1 Product and process development
9.2 Purchasing
9.3 Supply Chain Acceleration
9.1 Product and process development
They are important value chain processes:
-Product development designs consistent with the firm's marketing strategy and what customers want.
-Process development uses product design specs to design processes for making good-quality products cost-effectively.
-Time-to-market is critical to developing an early advantage for new products during the introduction stage and growth stage of the product life cycle.
Traditional vs Concurrent Engineering
The traditional approach to product and process development has been a Serial approach:
-Different departments review and make inputs to the design process once management has approved the product proposal, and then pass it on.
-Conflicts bw departments
Concurrent engineering:
-the inputs of different functions are considered simultaneously.
Simultaneous input is made possible by a cross-functional team approach.
Supplier Involvement
There are two important advantages to involving suppliers in the concurrent engineering process early on:
Faster time-to-market
Ability to tap the supplier's expertise in product and process design.
9.2 Purchasing
Purchasing approaches:
Purchase order
Blanket PO
Lean/JIT purchasing system
Consignment inventory
Vendor-managed inventory
Types of Contracts/Contract approaches to manage risk
Buy-back contracts
Revenue-sharing contracts
Pay-back contracts
Cost-sharing contracts
Pricing agreements
Capacity reservation contracts
Strategic sourcing to International procurement:
Cost and non-cost advantages
Supply chain management challenges
Importance of strategic sourcing
9.3 supply chain acceleration:
Total cost of ownership (TCO)
Partnership goals and benefits
Training
The role of engineering
Supplier relationship management
Delivery approaches
Supplier rating systems
TCO in purchasing decision:
-Acquisition costs: sale price of a product, service, or capital equipment.
-Usage costs: inventory carrying cost (+ opportunity cost), transformation from raw mat to FGs, scrap, return and/or disposal of packaging mat, training, installation, warranty.
-End-of-life Costs: obsolescence, disposal, other termination costs.
8 goals and benefits of supplier partnerships:
LT reduction
Inventory and stockout reduction
Better customer service
Better demand visibility and forecasting
Cost reductions
Elimination of redundant assets and processes
Customer and marketplace insight
New market penetration
Faster time to market
Damage and loss prevention
5 key areas of training to support supplier partnership goals:
-Product design
-Quality reqs
-Related technologies
-Delivery processes
-Accounting processes
Engineering's role in supplier partnership:
-Managing engineering changes
-Coordinating supplier design input
3 main functions of SRM systems:
SRM is a comprehensive approach to managing an enterprise's interactions with the organizations that supply goods and services to it. The goal of SRM is to streamline and make more effective the processes bw an enterprise and it's suppliers.
Delivery techniques that accelerate the supply chain:
a. Quick response:
It is a highly integrated point of sale-to factory-to store logistics system introduced as an apparel industry initiative in 1980.
Quick response relies on apparel suppliers' ability to see point-of-sale data at retail stores on a daily or even more frequent basis. 2 data items are of major importance:
-inventory levels of stockkeeping units, or individual items of apparel
-information on which SKUs are selling well and which are not.
The above factors allows the manufacturer to:
-Signal factories to replenish fast-moving items more quickly.
-Replace slow-selling items quickly with new models before the fashion season is over.
-Reduce FGs inventory levels (speed is a substitute for inventory).
b. Batch size
Smaller batch size are advantageous in Lean/JIT environments. Raw materials and work in process are generally not allowed to accumulate, and Frequency of delivery is determined to be economical from a cost standpoint.
c. Packaging
Insufficient packaging can lead to damage during shipping and handling
Excessively sized packaging can lead to additional costs, such as those associated with break-bulking, storage, material handling equipment requirements, and incompatibility from a size standpoint with efficient packing of shipping containers.
d. 3rd party logistics
The use of a third party by a supplier and a buyer to provide product delivery services. Such an arrangement has the advantages of ownership without the associated costs. The third party may also bring added expertise to the supply chain.
3PL is widely used by individual companies to manage delivery and other functions.
3PL companies provide warehousing, material handling, and post-manufacturing services as well as transportation.
e. Lean/JIT triggers
A trigger is a physical alert or an electronic signaling system that notifies the supplier that the buffer is low and replenishment is required.
f. Cross-docking
Use of scheduled time slots for inbound and outbound conveyances
Minimum break-bulking
Heavy use of technology such as traffic controls, bar codes, and radio frequency id (RFID) tag systems.
g. Delivery to Point-of-use and point-of-fit
-"Delivery of point of use" is a lean/JIT practice in which components bypass the traditional shipping/receiving area and are delivered to the plant floor near to the operations.
-"Delivery to point of fit" is a refined version of point of use. Components are delivered to the point of installation just when they are needed.
Purpose of supplier rating:
It is important to establishing a rating system that monitors and measures performance while providing timely feedback to supply partners.
A performance measuring system should meet the following requirements:
-Influences behaviour in a positive manner
-Provides quantitative data
-Leads to process and performance improvement
-Uses metrics that meet the needs of the customer, such as these:
>On time delivery
>Process capability
>Product quality
>Performance to specifications
>Inventory turnover
-Helps eliminate root causes of problems
In summary, the rating system needs to:
-Enable continual improvement of service to the customer.
-Provide managers with data that enable them to identify problems and eliminate their root causes.
Rating System Example:
Certification level
Product quality: zero defects / meets specs
Delivery performance: on time delivery and LT
Cost performance: return cost, pricing, freight, other
Cooperation: response time, quality of relations with partner
Quantity: accuracy / % delivered to order.
Lean/JIT-oriented rating system:
Delivery frequency per supplier
Lead time from receipt of order by supplier to delivery yo plant line side
On time delivery by supplier
Lot size by supplier
Trailer, tractor, and driver utilization
Space requirements for raw materials
Overall inventory in the supply chain
Raw material sleep time at plant trailer yard
Order fill rate by supplier
No comments:
Post a Comment