CH 16 - Global Sourcing

Question 1

What is outsourcing?

Answer 1

Moving some of a firm’s internal activities and decision responsibility to outside providers.

Outsourcing is so common nowadays as it might feel like the standard way of doing business, especially for larger firms. Back in the days though, it looked different, firms were more “closed” and traded at the national markets. Eg. 7-Eleven owned their own cows to sell milk.

Question 2

What is innovative and functional products?

Answer 2

F -Staples that people buy in a wide range of retail outlets, such as grocery stores and gas stations.

I - Products such as fashionable clothes and personal computers that typically have a life cycle of just a few months.

Question 3

Stable VS evolving supply process?

Answer 3

Stable:A process where the underlying technology is stable.

Evolving: A process where the underlying technology changes rapidly.

Question 4

Using the supply and demand characteristics discussed so far, four types of supply chain strategies emerge to tackle the issues:

Answer 4

• Efficient supply chains - high levels of cost efficency
• Risk-hedging supply chains - pooling and sharing resources
• Responsive supply chains - aiming to be responsive to demand changes
• Agile supply chains - responsive and flexible to customer needs, while the risks of supply shortages or disruptions are hedged by pooling inventory and other capacity resources. These supply chains essentially have strategies in place that combine the strengths of “hedged” and “responsive” supply chains.

Question 5

What is logistics?

Answer 5

Management functions that support the complete cycle of material flow: from the purchase and internal control of production materials; to the planning and control of work-inprocess; to the purchasing, shipping, and distribution of the finished product.

Question 6

A framwork for structering supply chain relationships; what are the factos a company should consider?

Answer 6

Companies usually outsource standard activities when they are not part of the “core competency” of the firm.

• Coordination characteristics
• Investment is strategic assets characteristics
• Intellectual property characteristics

Question 7

Green sourcing

Answer 7

Green sourcing is not just about finding new environmentally friendly technologies or increasing the use of recyclable materials. It can also help drive cost reductions in a variety of ways, including product content substitution, waste reduction, and lower usage.

Question 8

What is strategic sourcing?

Answer 8

Strategic sourcing is the development and management of supplier relationships to acquire goods and services in a way that aids in achieving the immediate needs of the business. In the past, the term sourcing was just another term for purchasing, a corporate function that financially was important but strategically was not the center of attention. Today, as a result of globalization and inexpensive communications technology, the basis for competition is changing. A firm is no longer constrained by the capabilities it owns; what matters is its ability to make the most of available capabilities, whether they are owned by the firm or not.

Sourcing: A process suitable for procuring products that are strategically important to the firm.

Specifity: Refers to how commonly available the material is and whether substitutes can be used.

Question 9

The following is an outline of a six-step process designed to transform a traditional process to a green sourcing process.

Answer 9

1. Assess the opportunity.
2. Engage internal supply chain sourcing agents.
3. Assess the supply base.
4. Develop the sourcing strategy.
5. Implement the sourcing strategy.
6. Institutionalize the sourcing strategy.

Question 10

The total cost of ownership

Answer 10

Estimate of the cost of an item that includes all the costs related to the procurement and use of the item, including disposing of the item after its useful life.

Question 11

Measuring sourcing performance

Answer 11

Inventory turnover: A measure of supply chain efficiency. (Inventory is the storage of the flow of material/products etc; inventory serve as a buffer)

Cost of goods sold: The annual cost for a company to produce the goods or services provided to customers.

Average aggregate inventory value: The average total value of all items held in inventory for the firm, valued at cost.