Lecture 8 - Supplier development Flashcards
Name some top supplier relations tips from the CIO Summit 2010
- Be open to change.
- Sign up for a particular timescale.
- Regard suppliers as partners.
- Establish a sense of team.
- Meet key figures before things go wrong.
- Know budgets before supplier negotiations.
- Be honest regarding your expectations.
- Consider offshoring and smart sourcing.
- Run analytics on supplier performance regularly.
- Contracts should be written so they never have to be rewritten again.
- Help suppliers make their margins where possible.
What are some recent supply chain trends?
Low cost country sourcing/outsouring Demand for transparency/visibility Lean supply (JIT) Risk management SSCM and CSR Supplier development
What is the complexity of supplier relations?
Not linear
Can exist in networks and chains
What is Bensaou’s model (1999)?
Shows the relationship between supplier’s specific investments and buyer’s specific investments.
Counters the belief that Japanese firms manage companies through strategic partnerships, rather they have a portfolio of relationships.
- Small number of strategic partnerships
- Large number of market exchange relationships
When are strategic partnerships created?
Supplier specific investments are HIGH
Buyer specific investments are HIGH
+ Create value
- Costly to develop, maintain and nurture
- Risky due to required specialised investment
When does a market exchange occur?
Supplier specific investments are LOW
Buyer specific investments are LOW
When does the situation arise when you have a captive supplier?
Supplier specific investments are HIGH
Buyer specific investments are LOW
When does the situation arise when you have a captive buyer?
Supplier specific investments are LOW
Buyer specific investments are HIGH
What is the Toyota model of developing suppliers?
Strong relations & Continual approach
- Understand how suppliers work
- Turn supplier rivalry into opportunity
- Supervise suppliers
- Develop compatible technical capabilities
- Share information intensively but selectively
- Joint improvement activities
How to design a relationship characterised by cooperation and trust?
Assess value of relationship
Identify operational roles and decisions right for each party
Create effective contracts
Design conflict management mechanisms
What is supplier development?
Any activity that a buying firm undertakes to improve a supplier’s performance and capabilities to meet the buying firm’s needs.
How can supplier performance be improved?
Assess supplier operations Provide incentives Instigate competition among suppliers Work directly with suppliers Root out non value adding activity
Why is supplier development important according to Chrysler Corporation?
“It is easier to work with a supplier we know has problems than a supplier we don’t know whose problems may we be worse”
How can supplier development increase potential value according to Krause?
Survey of 527 firms revealed:
- Reduce defects
- Reduce cycle time
- Increase on time delivery
- Increase number of orders complete
Which suppliers should be developed in reference to the Kraljic’s matrix?
Critical suppliers
- Those meeting the lowest minimum performance (largest performance gap)
Why should critical commodity suppliers be developed?
Provide innovation
Develop long term advantage to the buying firm
Maintain flexibility in meeting market demands
What is a performance gap?
Exists between what a supplier is capable of achieving and what they currently demonstrate through their cost controls, quality performance and customer responsiveness.
In what ways should development be proactive?
Focus on fixes with a lasting effect
Help supplier retain learning to continuously improve
What is the supplier development process?
1) Critical products and services
2) Identify critical suppliers
3) Form cross functional teams
4) Meet with suppliers’ top management
5) Identify key projects
6) Define details of an agreement
7) Monitor status and modify strategies
How could supplier reluctance to share information on costs/processes be remedied?
- Develop contracts based on cost savings which do not impact supplier margins
- Only when other cost improvement measures have been explored do you discuss margin deductions in confidentiality agreements
How could a lack of commitment from suppliers’ top management be remedied?
- Present vision and supplier benefits to supply organisation
- Set alignment objectives
How could suppliers’ failing to implement agreed proposals be remedied?
- Have suppliers sign a letter of support with objectives and timelines
- Seek alternative suppliers
How can confidentiality inhibiting information sharing be remedied?
- Improve relationship management skills of key liaison
- OR sign confidentiality and intellectual property agreements
How can the size of purchase not justifying development investment be remedied?
- Use major customer leverage to seek supplier improvements
- OR Consolidate volumes with commodity family and leverage with supplier
What are the supplier development best practises?
- Create dedicated supplier development teams
- Teach a supplier to develop itself after initial guidance
- Focus on wasteful activities in all supplier efforts
- Involve suppliers in product development
- Drive out fear a workforce may have towards supplier development eg: Nestle and Palm Oil
- Set stretch goals to encourage radical change and continuous improvement
What do good supplier relations have?
- High levels of trust
- Effective communication
- Collaboration
- Early conflict resolution
