Module 4 - Section E: Suppliers & Purchasing Flashcards
Supplier segmentation
-involves developing categories of suppliers so that each category can have a different strategy and tactics
-key tool to move an organization toward having a responsive supply chain
-increases responsiveness without significantly increasing costs b/c it helps orgs with complex networks of suppliers manage their risks and responses
forms:
1) ideal relationship type - involves analyzing what a supplier would bring to some form of strategic parternship if one were to be pursued
2) supplier capabilities - helps orgs that compete on a focus or differentiation basis by segmenting suppliers based on their ability to deliver on key business objectives at core of these strategies
3) customization vs. standardization - some suppliers will specialize in being responsive and able to provide custom solutions, while other will specialize in providing standardized solutions at economies of scale
4) level of innovation - some suppliers are better partners when working to develop innovation in a product’s design
5) lead times - grouping suppliers by similar lead times might helps orgs when scheduling orders for goods, possibly by allowing certain shipments to be grouped together
Customer-supplier relationship
-a long-term relationship between a buyer and a supplier characterized by teamwork and mutual confidence
-supplier is considered an extension of the buyer’s organization
-partnership is based on several commitments
-buyer provides long-terms contracts and uses fewer suppliers
-suppliers implements quality assurance processes so that incoming inspection can be minimized
-supplier also helps buyer reduce costs and improe product/process designs
Strategic Sourcing
comprehensive approach for locating and sourcing key materials suppliers, which often includes busines process of analyzing total-spend-for-material spend categories
-includes focus on development of long-term relationships w/ trading partners who can help the purchaser meet profitability and customer satisfaction goals
Tactial Buying
purchasing process focused on transactions and nonstrategic material buying
-closely aligned with the ordering portion of executing the purchasing transaction process
-its characteristics include stable, limited fluctuations, defined standard specifications noncritical to production, no delivery issues, and high reliability concerning quality-standard material with very little concern for rejects
Strategic Alliance
-relationship formed by two or more organizations that share information (proprietary), participate in joints investments, and develop linked and common processes to increase the performance of both companies
-many orgs form strategic alliances to increase the performance of their common supply chain
Virtual Organization
-short-term alliances between independent orgs in a potentially long-term relationship to design, produce, and distribute a product
-orgs cooperate based on mutual values and act as a single entity to 3rd parties
Strategic Partnership
-alliance with top supplier and buyer performers to enhance a firm’s performance
Joint Venture
agreement between 2 or more firms to risk equity capital to attempt a specific business objective
generally result of this agreement is a 3rd organization that is owned jointly by the two or more investors
example: NBC and Disney ABC created a joint venture in 2008 called Hulu for video streaming with commercials
Concurent Engineering or Participative Design/Engineering
-simultaneous participation of all functional areas of the firm in the product design activity
-suppliers and customers are also often included
-intent is to enhance the design with the inputs of all the key stakeholders
-such a process should ensure that the final design meets all the needs of the stakeholders and should ensure a product that can be quickly brought to the marketplace while maximizing quality and minimizing costs
Cross-docking
-concept of packing products on incoming shipments so they can be easily sorted at intermediate warehouses or for outgoing shipments based on final destination
-items are carried from the incoming vehicle docking point to the outgoing vehicle docking point without being stored in inventory at the warehouse
-reduces inventory investment and storage space requirements
Third-party logistics (3PL)
-arrangement in which a buyer and a supplier team with a third party that provides product delivery services
Critical characteristics
-attributes of a product that must function properly to avoid failure of the product
Critical-to-quality characteristics (CTQ)
-important and measurable traits of a product or process whose performance targets must be met to satisfy the customer
-they adjust improvement efforts to meet consumer requirements
-CTQs represent customer expectations for a product
First pass yield
-ratio of products that conform to specifications without rework or modification to total input
First-article inspection
-a quality check on the first component run after a new setup has been completed
Supplier Audit
-auditing supplier processes as part of a supplier development system
Supplier certification
-certification procedures verifying that a supplier operates, maintains, improves, and documents effective procedures that relate to the customer’s requirements
-requirements can include cost, quality, delivery, flexibility, maintenance, safety, and ISO quality and environmental standards
Lean Metric
-metric that permits a balanced evaluation and response - quality without sacrificing quantity objectives
-these types of metrics are financial, behavioral, and core-process performance
Terms and Conditions
-all the provisions and agreements of a contract
Purchase Requisition
-authorization to purchasing department to purchase specified materials in specified quantities within a specified time
Purchase Order
-purchaser’s authorization used to formalize a purchase transaction with a supplier
-PO when given to a supplier, should contain statements of the name, part number, quantity, description, and price of the goods or services ordered
-agree-to terms as to payment, discounts, date of performance, and transportation
-all other agreements pertinent to the purchase and its execution by the supplier
-considered an open order until end of purchasing cycle
Reverse Auction
-an internet auction in which suppliers attempt to underbid their competitors
-company identities are known only by the buyer
-way to find suppliers when price is the primary criteron (e.g. for comodities)
Order Processing
-on supplier side this starts once customer’s order is received
-activity required to administratively process a customer’s order and make it ready for shipment or production
Vendor-Managed Inventory (VMI)
-means of optimizing supply chain performance in which the supplier has access to the customer’s inventory data and is responsible for maintaining the inventory level required by the customer
-accomplished by a process in which resupply is performed by the vendor through regularly scheduled reviews of the on-site inventory
-the on-site inventory is counted, damaged, or outdated goods are removed, and the restocked to predefined levels
-vendor obtains a receipt for the restocked inventory and accoridngly invoices the customer
-can be used with or without consignment
Consignment
-process of a supplier placing goods at a customer location without receiving payment until after the goods are used or sold
-can minimize bullwhip effect, reduce total inventories, and minimize chance of stockouts and eliminate need to make many small MRP order releases
Continuous Replenishment
-process by which a supplier is notified daily of actual sales or warehouse shipments and commits to replenishing these sales (e.g. by size or color) without stockouts and without receiving replenishment orders
-result: lowering of associated costs and an improvement in inventory turnover
Supplier Measurement
-act of measuring the supplier’s performance to a contract
-measurements usually cover delivery reliability, lead time, and price
Point of Use Delivery
-near the operation in which it is to be used
Least Total Cost
-dynamic lot-sizing technique that calculates the order quantity by comparing the setup (or ordering) costs and the carrying cost for various lot sizes and selects the lot size where these costs are most nearly equal
Part period balancing (PPB)
-Dynamic lot-sizing technique that uses the same logic as the least total cost method, but adds a routine called look ahead/look back
-when the look ahead/look back feature is used, a lot quantity is calculated and before it is firmed up, the next or the previous period’s demands are evaluated to determine whether it would be economical to include them in the current lot
Wagner-Whitin algorithm
-mathematically complex, dynamic lot-sizing technique that evaluates all possible ways of ordering to cover net requirements in each period of the planning horizon to arrive at the theoretically optimum ordering strategy for the entire net requirements schedule
Safety Lead Time
-element of time added to normal lead time to protect against fluctuations in lead time so that an order can be completed before its real need date
-when used, the MRP system, in offsetting for lead time, will plan both order release and order completion for earlier dates than it would otherwise
