Flashcards
Purchasing lecture 4
Cards in this deck (24)
- 1Why is portfolio/category management important?Portfolio management is very important in the purchasing because it is not necessary to put the same amount of energy in sourcing every product categorizing the spend can be done by using the Kraljic Matrix
- 2Categories Kraljic Matrix-leverage items (high profit impact, low supply risk); the goal is to create mutual respect in the supplier relationship
- non-critical items (low profit impact, low supply risk); company should reduce the number of suppliers and the number of duplicate products
- strategic items (high supply risk, high profit impact); should manage purchases by establishing a close relationship with the supplier
bottleneck items (low profit impact, high supply risk); standardize purchase, concurrent engineering - 3X-asis -> complexity of the supply market1. produxt characterstics;
-novelty
-complexity
2. supply market characteristics;
-suppliers' power
-suppliers' technical and commercial competence
3. environmental characteristics
- risk
-uncertainty - 4y-axis -> impact on the business1. competence factors
- core competencies
- knowledge improvements
- technological strength
2. economic factors
- volume/monetary value
- value added
- profitability
- leverage for other purchases
3. image factors
- supplier image/brand name
- environmental/safety concerns - 5formulating strategies for the Kraljic matrix; from leverage to strategichold position: Exploitation of purchasing power, maintain a partnership of convenience, strategies; competitive bidding, supplier selection, product substitution, targeted price negotiation
pursue another position: develop strategic partnership - 6Formulating strategies for the kraljic matrix; from bottleneck to non-criticalHold position: accept the dependence, volume assurance, strategies; supplier control, safety stock, back up plans
Pursue another position: de-complex the product, find a new supplier (Note: this is not always possible) - 7Formulating strategies for the Kraljic matrix; from non-critical to leverageHold position: individual ordering, efficient processing, strategies: optimization of order volumes and inventory levels (VMI), e-procurement solutions
Pursue another position: pooling of requirements - 8Formulating strategies for the kraljic matrix; from strategic to leverageHold position: maintain a strategic partnership, accept a locked-in partnership
Pursue another position: terminate partnership and look for a new supplier (not always possible due to a monopoly) - 9Benefits of the Kraljic matrix- facilitates the coordination of the sourcing patterns of strategic business units within firms
- facilitates the discussion, visualization, and illustration of the development of differentiated purchasing strategies
- facilitates the differentiation of the overall purchasing strategy
-helps the configuration and management of supplier relationships - 10Limitations of the Kraljic matrix-Counterproductive; either exploit power or avoid risk
- buyer-centric perspective: lacking a dyadic and network perspectives
- Measurement difficulties
- Non-proactive: assumed power structured
- Does not depict the interdependencies between two or more items - 11Power and dependence , the purchasing chessboard- leverage (high buyer power, low supplier power); buyer dominance, leverage competition amongst suppliers
- strategic (high supplier power, high buyer power); interdependence, seek joint advantage with suppliers
- Non-critical (low buyer power, low supplier power); independence, manage spend
- Bottleneck (high supplier power, low buyer power); supplier dominance, change nature of demand - 12four different sourcing strategies-Multiple sourcing
- Single sourcing
-delegated sourcing
- parallel sourcing - 13Multiple sourcing-Obtaining the same product from more than one supplier
- where costs are low, and complexity of the supply market is low - 14Benefits multiple sourcingadvantages; helps maintain competition within supplier market, maintain the buyers bargaining position, can encourage suppliers to bid against each other, reduces supply risk, can switch sources in case of supply failure, wide source of knowledge and expertise to tap into
- 15Disadvantages of multiple sourcingHard to encourage supplier commitment, difficult to develop effective supplier quality assurance, high communication costs, suppliers less likely to invest in new processes, hard to obtain economies of scale, little opportunity to use partnership sourcing, unproductive and generally ten to results in high average price over time
- 16Single sourcing-buyer obtain all of one product from one supplier
- occurs due to choice, high item cost, or strategic importance of the product
- benefit from economies of scale
- but, high risk of lock in effect ( company make it hard for a buyer to leave)
- supplier might have monopoly, so no other choice - 17Advantage single sourcing-Firm has to only manage one buyer-supplier relationship for that component
- easier to share technical knowledge, and to look for ways to improve the product
- allows the use of long-term arrangements
- cost transparency (lower prices) - 18Disadvantage single sourcing- lock-in effect
-supply risk (i.e. only one source of supply)
- Loss of buyer firm bargaining position - 19Delegated sourcing- Tiered approach to supplier relationship management
- one supplier responsible for delivery of an entire sub-assembly
- can be used to reduce number of suppliers, but maintain quality, cost and delivery requirements
- enables buyer to work closely with one first tier supplier
- buying firm does not have to assemble sub-assemblies themselves - 20Advantages of delegated sourcing- Using a delegated sourcing strategy can reduce the number of first suppliers, whilst at the same time focusing the firm's resources on the key supplier
- reduces day-to-day transaction costs
- allows the use of open book costing
- lower total costs
- knowledge sharing, supplier development
- for the supplier, it increases its bargaining power, and guarantees future sales - 21Disadvantages delegated sourcing- first tier suppliers can become very powerful
- can help to create 'mega suppliers' (i.e. large first tier key suppliers)
- can result in price increase
- change market and power dynamics within buyer-supplier relationships - 22Parallel sourcing-method of building upon the advantages of single and multi-sourcing, and avoid the disadvantages
- split suppliers by model, retaining sole supply per model with competition overall - 23Advantages parallel sourcing- this allows the buyer to maintain competition across the model groups
- it also allows the firms to benchmark and compare the performance between the models and the associated suppliers
- helps to maintain competition within the supplier markets
- less supply risk because another supplier can take over - 24Disadvantages of parallel sourcingThis is a complex supply chain structure to manage
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- Flashcards on Purchasing lecture 4, created by Elisa Vink on 30/09/2020.
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- Elisa Vink · Sep 2020
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- Oct 2, 2020
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