W2 Flashcards
what is a sourcing strategy
- the decision over how many suppliers should be used during purchasing (structural decision)
- can also apply to the type of supplier relationship - Kraljic’s model
- if the item is strategic the product should be categorised as high cooperation etc. (look at diagram)
the sourcing methods
(look at diagram)
single sourcing
- the use of one source per product (making use of one supplier)
Adv:
- economies of scale - buying in bulk from one person
- control costs and risk better - close eye on one supplier
- fits lead supply and partnership approach
multiple sourcing
- using three or more suppliers
- focus on price and delivery
Adv:
- reduces dependency on one supplier
- spreading risk
- increases inter-supplier comp
dual sourcing
- 2 suppliers providing a company with the same product and are in competition
Adv:
- tension between comp
parallel sourcing
- one buyer two suppliers
- the same product from two supplier are used to make different products
- water bottle example - still and flavoured
Adv:
- suppliers not competing with each other one is just back up
delegated sourcing
- company wants to produce a product but doesn’t have the expertise so delegates to a specialist and the specialist finds and sources the suppliers
Adv:
- enhance relationship development with preferred suppliers
- work closely with few suppliers
triads
- two suppliers come together and work together to provide the product
- the third part significantly multiplies the relational and contractual complexity
suppliers as ‘full service’ integrated systems
- moving from tactical to high collaboration
- Rolls Royce example
what is a relationship
- it is a process (has an input and an output)
- need to understand the parameters within which the relationship sits
- working with suppliers isn’t just about buying parts but working long term to design new ranges of products (through relationships)
- firms need to evaluate the output of relationships in relation to the inputs:
- scales and knowledge
- communication
- cultural values
reasons for failure of SRM
- overly optimistic
- poor comms
- lack of financial commitment
- cultural mismatches
- lack of shared benefits
importance of SRM
- absorb suppliers knowledge
- access new capabilities
- learn about new tech
paradox in supply
- firms are competitors and collaborators at the same time
- each can only manage self but must rely on activities in others
interaction between players and supply chain
- interactions are changing
- price has changed
- info has changed
- relationships have changed
- went from sharing bits of info to high level of transparency (integrated to adversarial)
types of supplier relationships
(look at graph)
- best strategy is to use partnership or supply manager
- do everything important
- the best way out is to be vertically integrated (buy out suppliers and do it yourself)
lean supplier partnerships
- any activity that doesn’t add value should be eliminated
spectrum of relationships
- relationships move through a spectrum
- adversarial on one side:
- short term orientation
- transaction based
- focus on price, quality
- little sharing of info
- collaborative on the other side:
- long term orientation
- cooperation based
- high supplier contact
- high trust
- sharing of info
- collaboration is the main benefit to a long term partnership
- tackling environmental challenges require collaboration and understanding the basic tenets of how to form a partnership (trust, respect etc. )
Effective relationship and value
- value is anything that reduces costs and increases market value
- for a buyer and supplier to have value they need high levels of trust
- relationships last longer with trust
- can identify issues and solve them quicker
characteristics of healthy relationship`;
- high trust
- efficient comms
- collaborative problem solving
dimensions of relationship value:
- problems spotted early and resolved
- reduced transaction costs
IMP model
- IMP considers the long term partnership
- work closely over a long period of time that there is a point where you can’t tell the difference between activities of the buyer and supplier (institutionalisation)
(look at diagram)
- Sako (1992) introduced trust characteristics to the model
- relationships are illustrated on a spectrum from ACR to OCR
ACR-OCR Model
- relationships move from adversarial to high levels of collaboration partnerships
development of trust:
- as you move from arms length (ACR) to obligation (OCR) there are different factors you move through:
- contractual - I engage with you for the first time we write a contract and expect to meet the expectations of the contract
- competence - ability to perform the tasks that are given to you, meet expectations of demand (showing competence)
- goodwill - over a long period of time trust forms and if smth goes wrong business knows even if it isn’t in the contract supplier can fix it
- these elements of trust ate linked to the spectrum of relationship development and the degree of asset specificity
- asset specificity - how customisable the product being made is
linkage of trust elements (Sako)
- high amounts of trust = high customisation
- low amounts of trust = low customisation
(look at diagram)
Evaluation of Sako
Adv:
- provides definition of trust
- built on empirical as opposed to conceptual research
Disadv:
- may be more factors than trust and asset specificity
- too rigid - what about influence of power in relationships?
Power and dependence
- power and dependence have many dimensions and underlying factors:
- company size and volumes
- control over access to unique assets
- one party may be powerful in one respect, the other in another respect
Buyer and supplier power model
- If company is powerful do they have to rely on a supplier and vice versa (what the model looks at)
(look at diagram)
dependency - certainty model
- the more you work with suppliers the more your certainty of them increases
- the model is a way for firms to think of how to select and manage their collab relationships, then decide whether to change or keep it
