Chapter 1.2 - Differentiate between approaches to the sourcing of requirements from suppliers Flashcards
Single sourcing
An organisation buys its supplies for a specific product or service from one supplier
Sole sourcing
A non-competitive situation where there is only one supplier of goods or services who can fulfil the requirement of the buyer at a specific time
Dual sourcing
A situation where just two suppliers are chosen from multiple options in a marketplace with the view of maintaining a degree of competition during the contract term
Name 4 circumstances where the single sourcing approach is used
- There is no other practical choice for the buyer
- Economies of scale can be achieved
- Order quantities are very small
- One supplier offers outstanding value for money against the competition
Name 2 circumstances where dual sourcing is used
- There is a risk of one supplier not being able to supply
- A product or service is critical to an organisation
Multiple sourcing
Sourcing from many supplier
Name 3 circumstances where multiple sourcing is used?
- Supplier competition is vast
- The supplier relationship is non-critical
- Constant supply is critical
Name the 4 types of sourcing
- Sole
- Single
- Dual
- Multiple
Name 10 advantages of single sourcing
- Maximum leverage can be extracted by giving the whole volume to one supplier
- Strong relationship
- Strong commitment
- Good communication
- New product development
- Innovation
- Confidentiality
- High trust
- Economies of scale
- Cost effective
Name 4 disadvantages of single sourcing
- Risk of failure to supply
- Price may inflate if there is no competition
- Restricted options
- Over-reliance on supplier
Name 4 advantages of dual/multiple sourcing
- Easy to drive down cost
- switching between suppliers is easy
- Wide knowledge and expertise
- Low risk of failure to supply
Name 4 disadvantages of dual/multiple sourcing
- Transactional relationship
- Lack of supplier commitment
- Lack of economies of scale
- No supplier loyalty
Public sector
A sector of the economy that is owned, financed and run by the government or state owned enterprises
Name the 5 stages if the generic tendering process
- Planning
- Initiation (tender)
- Award
- Contract
- Implementation
Name 4 pieces of information tender documents usually contain
- Company information
- Specifications
- Contract requirements including the terms and conditions, buyer processes and policies
- Deadline, templates and timetables for submission
Will bids submitted after the deadline be considered by the buying organisation?
No
Name 6 approaches to tendering
- Open
- Restricted
- Negotiated
- Competitive dialogue
- Innovation partnership
- Competitive procedure with negotiation
Open tendering
The opportunity is widely advertised allowing any supplier to make a bid
Restricted tendering
A two stage tender process
Negotiated tendering
When only a single or a few suppliers are approached based on a previous relationship or track record
What is competitive tendering?
Where potential suppliers are invited to submit a bid for a package of work
Name 6 advantages of competitive tendering
- Competition should be fair
- May reduce the potential for the biased selection of a supplier
- It gives the stakeholders an opportunity to understand the capabilities of multiple suppliers
- Time, money and resource could be saved by carrying out one competitive tender
- Tendering encourages suppliers to be competitive to win the contract, which could result in a better deal for the buying organisation
- There is a greater likelihood of finding a suitable supplier if several are invited to tender
Name 4 disadvantages of competitive tendering
- Truly fair competition may prevent the quick selection of a preferred or current supplier, which could be restrictive when a procurement is required at short notice
- Competition may drive the wrong behaviours in suppliers, encouraging them to make unachievable low bids to attract the buyer to select them
- It may take more time to carry out the validation and assessment of multiple tenders than it would for just one
- Costs may outweigh the benefits in some small procurement projects
Win-win
The best solution to a negotiation; where both parties are satisfied
Name the 5 possible outcomes of negotiation
- The buyer wins and the supplier loses
- The supplier wins and the buyer loses
- The buyer wins and the supplier wins
- The buyer loses and the supplier loses
- Neither the buyer nor the supplier wins (a compromise)
What is theoretically the best outcome of a negotiation?
Win-win
Name the 5 styles of negotiation
- Competitive style
- Collaborative style
- Avoiding style
- Accommodating styles
- Compromising styles
What is a competitive style of negotiation?
Based on being assertive and achieving results
What is a collaborative style of negotiation?
Honest and open style where the negotiator is focused on finding a mutually beneficial outcome and fair solutions to any issues that may be presented
What is an avoiding style of negotiation?
One full of apprehension and often the negotiator does not pursue their requirements
What is a accommodating style of negotiation?
When the negotiator does not want to upset or offend the other party and so they often concede their requirements to ensure harmony
What is a compromising style of negotiation?
Where the negotiator is happy to meet in the middle on concessions rather than pushing for a win or backing down
Name the 4 stages of negotiation
- Preparation
- Informal exchange
- Bargaining
- Closing
When must the outcome be win-win
If the negotiation takes place with a single sourced supplier
