Supply Chain Management Flashcards
Supply positioning analysis
The process of classifying spend with a supplier in terms of profit potential and supply risk
Assists in prioritising categories of spend and developing the right strategy.
Supply position diagram
Y axis -Risk/exposure
X axis - Relative cost
Ensure supply I Manage Supplier
Minimise attention I Drive Profit
Examples on manufacturer relationships (builder of luxury yachts
Ensure supply -specialist fittings
Manage supplier - engines
Minimise attention - basic fasteners
Drive profit -fibre glass
What is a Pareto Analysis?
Pareto analysis is often used to identify the 20% of highest value (Class A) items which account for 80% of the spend and to differentiate these “critical few”, from the 50% of the range (Class C items) which often account for less than 2% of the total spend i.e. the “trivial many”.
Limitations of Pareto Analysis
Only addresses basic financial issues, ignoring relative importance of the items purchased.
There may be specialised but low value components that would halt production without them, but the analysis would identify them as “trivial”
A Class A item may be ready and rapidly available from many sources.
Single sourcing
A method whereby a purchased part is supplied by only one supplier.
JIT manufacturers typically have only one supplier so close relationships can be established.
When does partnership occur?
When both customer and suppier judge their relationship to be in the "manage supplier"/"core" quadrants There is trust between the partners. Similar business values Open communication An acceptable balance of power Equality of benefits
Discuss factors that have caused this change of emphasis to securing a stake in the supply market rather than getting it at its lowest possible price?
Shortened product life cycles Constant change in shape of supplier base Political pressures Focusing on core activities Reducing supplier base Single sourcing
Main factors when assessing vulnerability of supply chain.
Supply-demand balance Raw materials availability Raw-materials cost trends Complexity of the market The supplier Production, shipping and distribution methods.
Factors that determine the balance of power in the supplier relationships.
Number of suppliers acceptable
Demand growth for product or service required
Substitution possibles
Knowledge of the product cost breakdown
Knowledge of the suppliers pricing policy
Attractiveness to relevant suppliers
Barriers hindering a change of supplier
How have purchasing managers had to adapt in today’s increasingly competitive business environment
Whilst cost reduction is important, the primary goal today is the need to secure a stake in the supply market, by developing positive supplier attitudes and high performance.
Factors a purchasing manager would need to quantify when applying a failure mode and effect analysis (fmea) for determining vulnerability
probability of an event occuring
likely duration of the problem
its impact on the business
