Sourcing and the Management of Suppliers Purchasing and Supply Chain Management Sourcing and the Management of Suppliers

1 7 2 8 3 9 10 4 11 5 6 Sourcing and the Management of Suppliers The Sourcing Progress Sourcing is the progress of identifying, selecting and developing suppliers The Eleven Stages of the Sourcing Process 1 7 Identify needs Pre-screen possible sources 2 8 Define requirements Evaluate remaining supply base 3 9 Decide to make or buy Choose supplier 10 4 Identify type of purchase Deliver product/perform service 11 5 Post purchase performance evaluation Conduct market analysis 6 Identify possible suppliers

Sourcing and the Management of Suppliers Sourcing Information EU directives Central, local government directives Company directives Sourcing Information Analysis of market conditions Directives E-sourcing Locating supplier sources Supplier assessment Supplier performance rating Finance Production capacity and facilities Human resources Quality Performance Environmental and ethic aspects, IT Organisational structure Primary data Secondary data International sources Government agencies Non-government agencies – chambers of commerce Salespeople Exhibitions Trade journals Trade association Exchange between other professionals

Supplier Performance – Possible Factors to Evaluate Sourcing and the Management of Suppliers Supplier Performance – Possible Factors to Evaluate Quality Dealing with problems Continuous improvement Provision of spares Responsiveness Cost and price management Communication On-time delivery IT systems Provision of clarification Management of contract change Performance indicator Weight + rating Adjusted score Price 20 x 4 80 Quality 40 x 3 120 Delivery Customer service 20 x 3 60 XXX 340 1 – unsatisfactory 2 – marginal 3 – satisfactory 4 – very good 5 - outstanding

Policy Issues in Sourcing Sourcing and the Management of Suppliers Policy Issues in Sourcing Supplier base optimatisation Risks of a reduced supplier base Sub-contracting vs outsourcing Tactical, short-term approach – company retain core capabilities Sourcing Policies The supplier base Outsourcing or make-or-buy Sub-contracting Partnering Reciprocity Intra-company trading Local suppliers Purchasing consortia Advantages/disadvantages Larger-scale purchasing „Single supplier“ Cost savings??? Economic climate (recession) Type of product Develop product and service quality Price-competitive source Outsourcing – specified inputs, costs, outputs. Partnering - trust

Factors in industrial buying decisions Sourcing and the Management of Suppliers Factors in Deciding Where to Buy Factors in industrial buying decisions Environmental Organisational Interpersonal Individual These are normally outside the buyer’s control and include: the level of demand the economic outlook interest rates technological change political factors government regulations competitive development Buying decisions are affected by the organisation’s system of reward, authority, status and communication, including organisational: objectives policies procedures structures Involving the interaction of several persons of different status, authority, empathy and persuasiveness who comprise the buying centre Buying decisions are related to how individual participants in the buying process form their preferences for products and suppliers, involving the person’s age, professional identification, personality and attitude towards the risks involved in their buying behaviour

Attributes of a good supplier While a definition of a good supplier which would be acceptable to everybody would be difficult to write, there are a number of attributes which might be regarded as desirable for a typical relationship. The following list is given by way of suggestion only: Delivers on time. Provides consistent quality. Gives a good price. Has a stable background. Provides good service back-up. Is responsive to our needs. Keeps promises. Provides technical support. Keeps the buyer informed on progress.

  Supplier evaluation

  Supplier evaluation (Continued)

Supplier evaluation (Continued)

Supplier associations: known in Japan as ‘Kyoryoku Kai’ Supplier were assisted in getting together by the customer... Suppliers and their customers participate together Supplier associations: known in Japan as ‘Kyoryoku Kai’

The principal characteristics of partnership sourcing Source: Courtesy Partnership Sourcing

The principle of tiering suppliers

The shift in pattern of supply in high volume manufacturing

Outsourcing? The shift in pattern of supply in high volume manufacturing (Continued)