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Supply Chain Management > Sourcing > Flashcards

Sourcing Flashcards

1
Q

What does sourcing strategy help us understand?

A
  • How critical suppliers are to the business
  • The appropriate level of time and resources to allocate to the sourcing process
  • How to align the sourcing process with the firm’s strategic goals and direction
  • How to manage the portfolio of suppliers
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2
Q

What is the Kraljic Matrix in terms of categorising spend?

A

Matrix based on degree of impact on business and complexity of the supply market

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3
Q

What is the category with high impact on business and low complexity of supply market under the Kraljic Matrix?

A

Leverage =

  • Multiple sources
  • Abundant supply
  • Medium term focus
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4
Q

What is the category with high impact on business and high complexity of supply market under the Kraljic Matrix?

A

Strategic =

  • Single/parallel sourcing
  • Natural scarcity
  • Long-term focus
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5
Q

What is the category with low impact on business and low complexity of supply market under the Kraljic Matrix?

A

Non critical =

  • Multiple sources
  • Abundant supply
  • Short term focus
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6
Q

What is the category with low impact on business and high complexity of supply market under the Kraljic Matrix?

A

Bottleneck =

  • Single/tiered sources
  • Production scarcity
  • Variable focus
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7
Q

How is complexity of the supply market classified?

A

Fundamentally concerned with risk in the supply market, measuring this risk will vary between orgs

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8
Q

What are the issues affecting risk in the supply market?

A
  • Supply availability
  • Quality requirement
  • Safety and environmental reliability
  • Organisational brand
  • Dependance of supplier
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9
Q

How is the impact on business classified?

A

Fundamentally concerned with the impact on profit or the value obtained and measuring this will vary been organisations

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10
Q

What are the issues affecting the value obtained from suppliers?

A
  • Volume purchased
  • Percentage of total purchase cost
  • Impact on product quality
  • Impact on business growth
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11
Q

How are the axis of the Kraljic Matrix measured in practice?

A

Consensus method - process of reasoning and discussion

One-by-one - select one objective and measure for each axis

Weight factor score - MCDM - multi criterion decision making

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12
Q

What is multiple sourcing?

A

Having multiple suppliers for the same component - prevents a bottleneck where there is congestion in supply

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13
Q

What are the advantages of multiple sourcing?

A
  • Alternative sources of material in case of delivery stoppage by a supplier
  • Reduced probability of bottlenecks due to insufficient production capacity to meet peak demand
  • Increased competition among suppliers = better quality, price, delivery, innovation and negotiating power
  • More flexibility
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14
Q

What are the disadvantages of multiple sourcing?

A
  • Reduced efforts by supplier to match buyer’s requirements

- Higher costs for purchasing organisation (greater number of orders, telephone calls, records)

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15
Q

What is sole/single sourcing?

A

One source of supply. Usually important - a strategic choice, sometimes forced where there is a monopoly

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16
Q

What are the advantages of single sourcing?

A
  • Partnerships between buyers and suppliers = cooperation, shared benefits and LT relationships based on trust
  • Reduced risk of opportunistic behaviour
  • Large commitment from supplier that is willing to invest in new facilities or technology
  • Lower purchase price resulting from reduced production costs, due to better knowledge of the manufacturing process by the supplier + EOS
17
Q

What are the disadvantages of single sourcing?

A
  • Great dependency between the buyer and the supplier
  • Increased vulnerability of supply
  • Increased risk of supply interruption, especially for asset specific products
18
Q

What is delegated sourcing?

A
  • Involves a tiered approach to supplier relationship management
  • 1 supplier responsible for delivery of an entire sub-assembly as opposed to individual supplier
  • This is the strategic supplier - “first tier supplier”
  • Can be used to reduce the number of suppliers but maintain quality, cost and delivery requiremenents
  • First tier supplier coordinates the rest of the component suppliers
19
Q

What are the advantages of delegated sourcing?

A
  • Reduction in transaction costs as working closely with one key supplier
  • Enables knowledge sharing, employee training, cross functional integration and supplier development as close relationship
  • Buying firm displaces some responsibility i.e time
20
Q

What are the disadvantages of delegated sourcing?

A
  • Strategic control over purchasing task could be lost
  • Confidentiality of information could be breached
  • Can become a very large system, first tier supplier can develop more power than than the buying firm
21
Q

What is parallel sourcing?

A
  • Splits suppliers by model, retaining sole supply per model with competition overall
  • Allows buyer to work on single basis with each component supplier in product grip while maintain multiple sourcing across different product groups
  • Suppliers have capacity to produce multiple components so there is threat of supplier switching
22
Q

How do the different types of sourcing relate to the Kraljic matrix?

A

Leverage - multiple sources

Strategic - single/parallel

Non critical - multiple sources

Bottleneck - single/tiered sources

Supply Chain Management (9 decks)

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