Strategies for Procurement and Outsourcing Flashcards
Purchasing and Supply Management definition
The design, initiation, control and evaluation of activities
within and between organisations aimed at securing inputs from suppliers at the most favourable conditions
Forms of outsourcing
Extent - capacity outsourcing for flexibility
Nature - peripheral outsourcing non critical activity
Origin - substitution outsourcing
Porter’s value chain management
all stakeholders of the same SC are challenged to improve the final product and/or service for the end-customers (value adding)
Strategic purchasing
Align purchasing and supply objectives with corporate objectives
Outsourcing
Sub-contractual non critical processes. Done for cost purposes, suppliers are better, or focus on own comp advantages
Advantages of outsourcing
- Creating economies of scale
- Use risk pooling
- Less capital investment
- Focus on core competencies
- High degree of flexibility
Technology clockspeed
How quickly company’s environment changes and how fast product or tech becomes obsolete
Part of development chain
Modular products
Products build from several independent parts
- better for outsourcing
Integrated products
Manufactured in their entirety
- better for in house
Bottleneck items
High supply risk
Low profit impact
Ensure supply
Strategic items
High supply risk
High profit impact
Form partnerships
Non-critical items
Low supply risk
Low profit impact
Simplify and automate
Leverage items
Low supply risk
High profit impact
Exploit purchasing power and minimise cost
4 stage approach
- Classification - what sort of products need to be bought
- Market analysis - how buyer and seller related to each other
- Strategic positioning - buyer adjust to supplier
- Action plans
Company strength low, supply market strength high
Diversify
