OMSAN LOJİSTİK

Policies of Supplier Selection Procurement and Supplier Relationship Management Latin America Logistics Center Logistics Management Series

Suppliers Selection Evaluate Offers Make Visists Negotiate Contracts Place RFI/RFQ to Suppliers Identify Qualified Suppliers Objectives, Selection Criteria Needs Analysis Final Selection

Managing Suppliers… I. Needs Analysis II. Requests for Proposals III. Suppliers Evaluation and Selection IV. Negotiation of Proposals V. Contracts VI. Supply Control

I. Needs Analysis Contract Specifications Drawings Purchase Orders r Specifications r Sketches r Meetings r Inspection Instructions r Demand Forecast r Quality Standards r Tests

Needs Analysis - Suppliers Clasifitation Certified Suppliers Qualified Suppliers Approved Suppliers First Choice, Close Relationship Selected Group of Suppliers, Quality Audited, Growing Business Occasionally Used, Exclusive Items, Prototypes, Office Supplies No Inspection Inspections lower than Audits Guarantee, Total Inspection InspeccciónStatusClass

Optimising the Supply Function Minimise:- Total Supply Cost - Number of Suppliers Subject to:- Fill Rate - Product Quality

II. Information Requested RFI/RFQ Supplier’s Tenure in Providing the Service or Product Market Segments in which the Suppliers Operates Service Policies to Competitors Company Profile l Who are the Suppliers Customers l % of Sales that My Business Represents l Contact with other Customers of the Supplier Customers Portfolio l Fill Rate Offered l Technology Used in Developing the Product l Quality Standards Offered l Additional Services Offered l Returns Policies l Reverse Logistics Capacity

III. Supplier Segmentation Multiple Segmentation Criteria Segmentation Criteria based on: –Relevance to the Business –Easy to Quantify and Qualify Suppliers Define Weights for each Indicator

Supplier Segmentation Segmentation Criteria –Product Criticality –Product Sales Volume –Production Capacity –Integration Degree with the Corporation –Certification –Geographic Location

Segmentation Policies Green, Yellow, Red –System: Green, Yellow, Red –% Fill Rate –Supplier’s Certification Level –Number of Suppliers per Segment –Payment Schemes Supplier Segmentation

Suppliers Segmentation Policies Groups of SuppliersGroups of Customers Integration Suppliers Policy Customer Service Policy 12

Segmentation Policy GYR System Clearly state in the purchase order the Verification Scheme Supplier and Contractor should agree with the Verification Scheme Share Results with Suppliers and Contractors

Suppliers Selection Criteria Technical –Fit for Use Support –Project development –Inquiries Financial Logitics –Fill rate –Lead Time

Suppliers Key Performance Indicators The Objective of Appraisal is to Reduce Costs, Increase Productivity, Improve Quality and Reduce Lead Times In the Certification Process should be stated the Goals and Efficiency Objectives for Each KPI

Suppliers Key Performance Indicators EffectivityEffectivity, goes beyond efficiency. Efficiency is doing things right. Effectivity is doing the right things right ProductivityProductivity, typically is the ratio between Input and Output Productivity does not imply Efficiency or vice versa..

Suppliers Key Performance Indicators Competitiveness –The Company’s capability to deliver value beyond the valued delivered by their competitors at comparable costs –A “Unique” way of doing things that is appreciated by customers as superior

Suppliers Key Performance Indicators Financial –Product Price –Discounts Productivity –Supplier’s Inventory Turns Time –Lead Time –Lead Time Variance Quality –% without Damages –Lead Time Variance –Fill Rate Contract vs. Fill Rate Actual

Supplier Certification Purchase Order Fill Rate Comprehensive and Trustable Information –# PO, ID Lines, Boxes, Batch, Exp. Date Automatic Information –ASN´s, VMI, Status Reports Standard Packaging Coming Orders Identification Programming & Performance of On-time Deliveries

Technology and Infrastructure Product or Service Requirements Verification Economic and Financial Viability Production Capacity and Capability to fulfil delivery Schedule Finacial Analysis Efficacy of the Supplier Quality Assurance System Supplier Evaluation

Product of Service Requirements Verification Checking List Requested Characteristics Capacity to Maintain Quality Parameters Quality Control Raw Materials Sources, Reserves Similar Orders Attitude Toward Fulfillment of Promises

IV. Negotiation of Proposals Seven Elements of a Negotiation Alternatives Interests Options Legitimacy Compromises Communication Relationship What if there is NO agreement Outcome >BATN Better if Satisfies Interests of Both Parties Possibilities to attain and agreement Fair for Both Parties, Compared with an External Reference Whether Written or not, compromises specify what parties will and will not do Two Way Effective Communication The outcomes of a Relationships will be better if the parties improved their capacity to work together

Negotiation of Proposals Seven Elements of a Negotiation Determine and develop your Better Alternative to Avoid Bad Deals. Also helps to achieve better results Discuss Interests not Attitudes, it increases possitilities of good results Both parties benefit from seeking option of mutual satisfaction Fair deals las longer Do not make substantial compromises until the end of the negotiation is reached Both parties benefit from clear two-way communication Be unconditionally constructive in relationship issues Alternatives Interests Options Legitimacy Compromises Communication Relationship

IV. Rules for a Good Negotiation of Proposals Better than your alternative (BATN - Better Alternative To Negotiate) The Interests are satisfied –Our Interests, ok –Their Interests, Acceptable –Other’s Interests, tolerably NO Waste: A good option Legitimate: Nobody took advantage of your good faith An Intelligent compromise Efficient Process: A good communication The process improves relationships

V. Contracts Issues to Consider - ISO 9000 Customer’s right to inspect the purchased product Technical data of the inspection and testing equipment Non-conformance Quality Quality records

Contracts Issues to Consider - ISO 9000 Associate Services –Price/Sales –Lead Time –Documentation –Quantity –Transport Conditions –Place of Delivery –Packaging

Contracts Components Duration Expectations Rights Rules of the Game Evaluation Requirements Relationships Penalties & Rewards Costs Policies of Quality and Fulfilment Working Suppositions And do not forget the Exit Strategy!!

Contracts How they have to be Formals Written Registered Legal Prepared Are Not to affraid the supplier but should assure a proper relationship

Single Source

Benefits of a Single Source Maximises supplier volumes Reduction in paper work Less suppliers management Non-conformances are easier to track Individual delivers tracking Consolidated deliveries Quicker Replenishment Cycle

Single Source - Supplier View Advantages –Bigger Share of Business –Better Planning of Resources –Confidence in a Continuous Demand –Opportunities to Develop Product and Process Disadvantages –Single Customer Dependability –Need to Share Internal Information

Single Source – Strategies for Implementation Secure Supplier’s Profitability Secure that Demand is Important to the Supplier (Significative Turns) Strategic Alliances Relationship Performance Monitoring

To-Make or NOT To-Make? NOVELTY (Outsource/In-House) Technology Quality PROPRIETARY (In-House) Technology Quality Service COMMODITY (Outsource) Price UTILITY (Outsource) Co-Operation Service Importance of the Part in the Product LowHigh Low High Strategic Value Of the Individual Part

Forms of Alliances Traditional Contracts Arms-length Buy/Sell Contracts Franchising Licensing Cross-Licensing Non-Traditional Contracts Joint R&D Joint Product Development Long TermSourcing Joint Manufacturing Joint Marketing Shared Distribution Shared Service Standard Setting Research Consortia No New Entity Minority Equity Investments Equity Swaps Creation of New Entity Joint Venture Dissolution of Entity Mergers Acquisitions

What kind of Alliance? INVESTMENT LEVEL STRATEGICIMPORTANCE Acquisition Minority Interest Joint Venture Joint Marketing Joint Development of Products Licensing Agreements Alliance/Consortia Commercial Contracts Technological Test Low Average High LowHigh

Ten Rules of Outsourcing 1)Develop an Outsourcing Strategy 2)Establish a Rigorous Selection Process 3)Clearly Define Expectations 4)Unfold a “good” contract 5)Establish reazonable Policies and Procedures 6)Identify and avoid point of Conflict 7)Effectively communicate with your Logictics Partner 8)Assess Performance and communicate results 9)Motivate and Reward Suppliers 10)Be a good Partner! Logistics Outsourcing: A Management Guide