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STRATEGIC SOURCING PLAN

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STRATEGIC SOURCING PLAN Discovery Evaluation Selection Development Management DISCOVERY Supplier websites Supplier information s files Supplier catalogues Trade ... – PowerPoint PPT presentation

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Title: STRATEGIC SOURCING PLAN


1
STRATEGIC SOURCING PLAN
  • Discovery
  • Evaluation
  • Selection
  • Development
  • Management

2
DISCOVERY
  • Supplier websites
  • Supplier informations files
  • Supplier catalogues
  • Trade Registers Directories
  • Trade Journals

3
  • Phone Directories
  • Filing mailing pieces
  • Professional organisations
  • Internal intelligence

4
EVALUATION
  • Supplier surveys
  • Financial condition analysis
  • Third party evaluators
  • Evaluation conference
  • Facility visits
  • Quality capability analysis

5
  • Capacity capability analysis
  • Management capability analysis
  • Service capability analysis
  • Flexibility capability analysis
  • Information technology capability analysis

6
SELECTION
  • Bidding
  • Negotiation
  • Combination

7
PRE REQUISITES TO BIDDING
  • The Proper use of competitive bidding is
    dictated by five criteria. When all five criteria
    prevail, competitive bidding is an efficient
    method of source selection and pricing. The
    criteria are
  • The dollar value of the specific purchase must be
    large enough to justify the expense, to both
    buying and selling firms, that accompanies this
    method of source selection and pricing.

8
  1. The specifications of the item or service to be
    purchased must be explicitly clear to both the
    buying and selling firms. In addition, the seller
    must know from actual previous experience, or be
    able to estimate accurately from similar past
    experience, the cost of producing the item or
    rendering the service.
  2. The market must consist of an adequate number of
    sellers.

9
  • The sellers that make up the market must be
    technically qualified and actively want the
    contract-and, therefore, be willing to price
    competitively to get it.
  • 5. The time available must be sufficient for
    using this method of pricing suppliers competing
    for large contracts must be allowed time to
    obtain and evaluate bids from their
    subcontractors before they can calculate their
    best price. Thirty days is not an uncommon time
    however, the increasing use of online bidding
    using the worldwide Web is forcing compression of
    bid preparation time.

10
CONDITIONS DEMANDING NEGOTIATION
  • In addition to satisfying the preceding five
    prerequisites, four other conditions should not
    be present when employing competitive bidding as
    the means of source selection
  • 1. Situations in which it is impossible to
    estimate costs with a high degree of certainty.
    Such situations frequently are present with
    high-technology requirements, with items
    requiring a long time to develop and produce, and
    under conditions of economic uncertainty.

11
  • 2. Situations in which the buying firm
    anticipates a need to make changes in the
    specification or some other aspect of the
    purchase contract.
  • 3. Situations in which special tooling or setup
    costs are major factors. The allocation of such
    costs and title to the special tooling are issues
    best resolved through negotiation.

12
DEVELOPMENT
  • Investment requirement
  • Two way effort
  • Training in project management
  • Team work
  • Quality
  • Production processes
  • Supply management

13
MANAGEMENT
  • Ensure performance
  • Monitoring
  • Periodic analysis
  • Focus key areas

14
SINGLE VERSUS MULTIPLE SOURCING
  • The major argument for placing all of a
    firms business with one supplier is that in
    times of shortage, this supplier will give
    priority to the needs of a special customer.
    Additionally, single sources may be justified
    when
  • Lower total cost results from a much higher
    volume (economies of scale).
  • Quality buying firm obtains more
    influence-clout-with the supplier.
  • Lower costs are incurred to source, process,
    expedite, and inspect.
  • The quality, control, and coordination required
    with just-in-time manufacturing re-quire a single
    source.

15
  • Significantly lower freight costs may result.
  • Special tooling sis required, and the use of more
    than one supplier is impractical or excessively
    costly.
  • Total system inventory will be reduced
  • An improved commitment on the suppliers part
    results.
  • Improved interdependency and risk sharing result.
  • More reliable, shorter lead times are required
  • Time to market is critical

16
  • Although the 70-30 strategy is reported to
    have started in Japan in the 1970s with
    just-in-time firms, the strategy is firmly
    established in many world-class companies. For
    example, visits in 2001 by one of the authors of
    this book verified that Solectron, Applied
    Materials, and Cisco Systems all cognitively use
    the 70-30 approach in sourcing selected
    materials. Dual or multiple sourcing may be
    appropriate
  • To protect the buying firm during times of
    shortages, strikes, and other emergencies.

17
  • To maintain competition and provide a backup
    source. To meet local content requirements for
    international manufacturing locations.
  • To meet customers volume requirements.
  • To avoid lethargy or complacency on the part of a
    single-source supplier.
  • When the customer is a small player in the market
    for a specific item.
  • When the technology path is uncertain.
  • In areas where suppliers tend to leapfrog each
    other technologically.

18
ISO 9000 REGISTRATION
  • A process gaining rapid acceptance throughout
    the world is the ISO 9000 registration process.
    Developed in Europe in 1987, ISO 9000 consists of
    a series of process quality standards- not
    product quality standards- that recognize that
    product quality is a result of a process.

19
ISO CERTIFICATION
  • ISO 9003 is the least restrictive of the
    three primary standards, requiring conformance
    only to final inspection and test standards
    within a production environment. ISO 9002, while
    requiring the same standards as ISO 9003, also
    includes standard requirements for purchasing,
    production, and installation capabilities, ISO
    9001, which requires everything that ISO 9003 and
    9002 require, also includes standard requirements
    to ensure conformance in design and servicing a
    full range of manufacturing and support
    activities.

20
  • Perhaps the best sway to recognize the
    character of the ISO 9000 is to relate it to the
    concept of total quality management (TQM). ISO
    9000 describes and defines the fundamental nature
    of work processes necessary for an organization
    to achieve the objectives of TQM. Therefore, ISO
    9000 is a critical first step in implementing a
    TQM system.

21
MAKING CERTIFICATION
  • Making Certification Part of the Customers
    Requirements
  • For years the Big Three carmakers (Ford, GM, and
    now Daimler Chrysler) have required suppliers to
    meet stringent quality standards and
    requirements. Unfortunately, the standards were
    unique to each company. The result? Suppliers
    spent too much time trying to conform to varying
    and sometimes conflicting requirements.

22
  • Now, suppliers are trying to meet one
    agreed-upon standard QS 9000, an expanded
    version of the ISO 9000 group of standards
    adopted by firms world wide. What sets this
    standard apart from the individual certification
    programs is that QS 9000 requires periodic
    reviews to verify that a supplier still conforms
    and that any shortcomings have been corrected.
    With mandatory audits every six months, you
    cant drift too far, or you will lose your
    certification, says the director of quality at
    Peterson Spring.

23
  • A manager at Laser Specialist maintains, I
    m a strong advocate of QS 9000 as a management
    tool Forget that the Big Three are shoving it
    down your throat, because it creates objective
    standards to follow and makes everything
    traceable. At least now suppliers to the
    automotive industry have a consistent set of
    requirements provided by their customers the Big
    Three.
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