SUPPLIER SELECTION AND DEVELOPMENT

PRESENTED BY,

SREEPATHY R NAIK

IEM 2014-16

NIT CALICUT

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CONTENTS

• IMPORTANCE OF SOURCE SELECTION

• STRATEGIC IMPORTANCE OF SUPPLIER DEVELOPMENT

• IMPORTANCE

• SOURCES OF SUPPLIER INFORMATION

• SUPPLIER DEVELOPMENT

• IMPORTANCE OF SUPPLIER GOODWILL

• PARTNERSHIPS

• SUPPLIER MANAGEMENT

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IMPORTANCE OF SOURCE SELECTION

• GOOD SUPPLIER : INVALUABLE RESOURCE

• Good buyer seller relationship

Buyers gain superior performance

Extra services

Co-operation on cost reduction

Willingness to share process and procedures

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SIX important SUPPLIER ORIENTED ACTION inorder to obtain desired level of

quality, on time, at the right price, the necessary level of technical support and

desired level of service

• Develop and maintain a viable supplier base

• Address the strategic and tactical issues

• Evaluate the suppliers

• Decide whether to use competitive bidding or negotiation

• Select the appropriate source

• Manage the selected supplier

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STRATEGIC IMPORTANCE OF SUPPLIER DEVELOPMENT

• As manufacturing firms outsource more materials,sub assemblies and even

complete products and services to focus on their own core competencies, they

increasingly expect their suppliers to deliver innovate and qualiy products on

time and at a competitive cost .When a supplier is incapable of meeting these

needs, a buyer has 3 alternatives:

1. Bring it in-house and produce internally

2. Re-source with a more capable supplier

3. Help improve existing supplier capabilities

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INTRODUCTION• Adequate supplier base is needed for the well being of the firm

• High technology industries & industries where there is a scarcity of material

• They should meet existing & future demand

• Early supplier involvement

• Trend: down sizing the supplier base

• Parts sourced to one supplier for the life of the product

• Supply base : is a strategic issue

• Driven by quality, cost management, technology access, firms ability to

substitute the management of supplier

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SOURCES OF SUPPLIER INFORMATION

• SUPPLIER PURCHASING INFORMATION FILE

Information files on past and present suppliers: name, delivery history, quality

record, overall desirability .Used because many purchasing operations are repetitive

• SUPPLIER CATALOGUES

Purchasing and supply dept. maintain a catalogue library with/without

indexing system.

• TRADE REGISTERS AND DIRECTORIES

Contains address, no of branches, affiliations of all leading manufacturers,

financial standings.

They are indexed by commodity, manufacture, trade name and trade mark

Eg. Thomas register of American manufacturers, Kompass publications in

Europe

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• TRADE JOURNALS

Advertisements in trade journals, first contact with potential suppliers

general :NAPM insights, purchasing; aircraft :aviation week; steel industry: iron age

• THE YELLOW PAGES

Classified yellow pages in telephone directories, size and capability are difficult to determine; well indexed; starting point if other sources are fruitless

• FILING OF MAILING PIECES

Mail advertisements, brochures and booklets are given a file no, dated and indexed;

some prospective suppliers are given forms showing their details

• SALES PERSONNEL

Excellent sources; wel informed about the capabilities and features of therirproducts; familiar with similar competitive products; can suggest new applications for their products

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• TRADE EXHIBITS

Regional and national trade shows; new products and modified products;

opportunity to compare concurrently similar products; new potential suppliers; new

ideas

• COMPANY PERSONNEL

Personnel from other dept. in buyers firm often provide information; scientific,

research, technical personnel always have valuable suggestions on sources of

supply; new methods, new manufacturers, new products

• OTHER PURCHASING AND SUPPLY MANAGEMENT DEPARTMENTS

Purchasing &supply management dept. in other firms can be helpful; mutually

beneficial; associations can be the media where members help other members to

locate and evaluate sources of supply

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SUPPLIER DEVELOPMENT

• Not all suppliers need development, but to reach status of world class

collaborative relationship, development is needed

• Even best of best require investment on the part of buying firm eg. sun

microsystems use of score cards

• If buying firm is unable to find a world class supplier that is willing to meet its

needs then it selects the most attractive supplier and develops it into one

capable of meeting its present and future needs

• Several leading customer firms provide training in project management, team

work, quality, production process and supply management

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THE IMPORTANCE OF SUPPLIER GOODWILL

• Customer goodwill is a valuable asset

• Company develop customer goodwill by selling acceptable products at fair

price, supported by good service with customer’s interests in mind

• Mutually profitable buyer-seller relationship; seller learns buyer’s business

problem- manufacturing, inventory, receiving and overall operational problem

• The end result is the meshing of the operations of both the companies

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ARGUMENTS FOR PARTNERSHIPS(VOLUNTARY

COLLABORATIONS)

• Every time new partner comes together a learning process is required

• Changing market conditions and technology

• Quality problems and late deliveries reduced

• Open relation can cushion bad times

• Reaction for behavior of buyer

• Less shocks due to supply problems

• More effective performance of supplier

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COST BASED ARGUMENTS

• Cost reductions in manufacturing operations ,through methods improvement

and innovations

• Productivity improvement through value analysis is possible,because the

relationship is long term not contract

• With accumulated experiences from continuous production ,supplier can achieve

improvements which can result in reduced costs

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PARTNERSHIPS

• Long term relationship between buying and supplying organizations

• It recognizes some degree of interdependence cooperation on a specific project

or for a specific purchase agreement

• Sharing of forecast demand and cost data

• Buying firm may have many partners but trend is towards single sourcing

• Properly priced life of products agreement benefits buyer in many ways

• Buyer must agree to protect the supplier partner from sudden changes

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• eg. Ford Motor Company (quality, cost reductions and flexibility)

• Intel corporation (formal supplier partnerships which feature written co-

objectives and regular meetings between senior executives of Intel &its

suppliers)

• downside: study by Bain &co.

out of 100 fortune 500 companies:

58%-partnering failed

34%-it met their needs

8%-it surpassed their expectation

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SIX DANGERS ASSOCIATED WITH PARTNERING

Partnering is a way to reduce purchasing staffs

Partnering can lead to complacency

Partnering can weaken leverage

Purchasing and audit control can be lost

Success can lead to excess

Every supplier wants to be your partner

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SUPPLIER MANAGEMENT

• It is buyers responsibility to ensure that suppliers perform as required or that

appropriate corrective action is taken to upgrade them or eliminate them

• On a periodic basis analyse suppliers abilities to meet firms need in long run

• Suppliers general growth plan

• Future design capability in relevant areas

• Suppliers strategic planning

• Potential for future production capacity

• Financial ability to support such growth

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If present supplier cant meet the future demands then firm has 3 options

1. It may assist the supplier with financing and technology

2. It may develop new sources

3. Develop required capability internally

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THANK YOU

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