PURCHASING & MATERIALS MGMT
PURCHASING & MATERIALS MGMT MGMT 3352
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Mrs. Horace Corwin
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This 6 page Class Notes was uploaded by Mrs. Horace Corwin on Thursday October 22, 2015. The Class Notes belongs to MGMT 3352 at University of Central Arkansas taught by Elizabeth Tuck-Rowan in Fall. Since its upload, it has received 23 views. For similar materials see /class/227206/mgmt-3352-university-of-central-arkansas in Business, management at University of Central Arkansas.
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Date Created: 10/22/15
CHAPTER 4 A PORTFOLIO OF RELATIONSHIP TRANSFORMATION From reactive and mechanical to proactive procurement and strategic SUPPLY CHAIN MANAGEM ENT Reactive Reasonably cordial but frequently adversarial WinLose outcome 1980 s1990 s Partnerships lack of clarity From management Many salespeople did not understand implications partnerquot legal Partnership common term Prefer collaborative relationship and strategic alliance 3 TYPES OF BUYERSUPPLIER RELATIONSHIPS 1 Transactional 0 Most common and basic 0 Neither goodnor bad 0 Arms length relationship 2 Collaborative o Interdependence and necessity of cooperation 3 Alliance 0 Institutional trust 0 Failure to develop and manage is the principal reason supply alliances fail TRANSACTIONAL CHARACTERISTICS 0 Absence of concern by both parties about the other party wellbeing WinLose 0 One of a series of independent deals each on its own merit Costs data forecasts are not shared PriceMajor focus Quality of the relationship little or no concern Minimum purchasing time and energy is required to establish prices Lend eprocurement and in some cases reverse auctions ADVANTAGES Relatively less purchasing time and effort required to establish price Lower skill levelspersonnel D ISAD VAN TAG ES Communications difficulties greater Considerable investment in expediting and monitoring I Timely delivery I Incoming quality I Right quality nflexible when flexibility may be required I Changing teChnOlOgy BuyerSupplier Relationships I Market conditions Quality only as good as required Suppliers minimum service required Less effective performanceless to lose Subject to more supply disruptionsshortages Supplier not motivated to invest time and energy Buyers TCO seldom know Frequent changes and hidden switching costs COLLABORATIVE AND ALLIANCE RELATIONSHIPS 76 CEO S external collaboration with business partners and customers is key to innovation Tend result in lower total costs R and D more app Cost reduction Long term relations VEVA Longterm performance agreements give suppliers an opportunity to reduce their costs Controlled competition Benchmarking Advanced supply management pricing practices RESULTS 0 Lower total costs 0 Higher quality 0 Reduced time to market 0 Reduced risk of supply disruptions Successful buyersupplier relationship 1 2 way communications 2 The supplier responsiveness to sm s needs 3 Clear product specifications 0 Better communication 0 Shared information regarding products purchased and new products in development stages I Better quality I Faster response time I Improved cost savings I Greater efficiencies COLLABORATIVE RELATIONSHIPS Key difference Awareness of the interdependence and necessity of cooperation I Trust building I Communications I Joint efforts I Planning and fostering interdependence I Cooperation 0 Continuous improvement 0 Likelihood of disruptions reduced greatly 0 Lower TC common collaborative and alliance relationships 0 Level of certainty 0 Continuity of demand 0 Investments R and D 0 Training VEVACosts reductions MAJOR DISADVANTAGE 0 Amount of human skill time and energy required to develop and manage the relationship SUPPLY ALLIANCES Difference collaborative and supply alliancespresences of institutional trust Dyer Physical asset specialization Relationships specific capital investments machinery tools information systems delivery processes etc FASTER through put GREATER product customization HUMAN SPECIALIZATION Knowhow Long standing relationships Working together BENEFITS SUPPLY ALLIANCES 0 Lower total costs Direct Labor machinery materials I ndirectgt overhead 0 Reduced time to market I Better profit market 0 Improved quality I Design and manufacture quality rather than inspection 0 Improve technology flow from suppliers I Examples IBM amp DELL 0 Improved continuity of supply Least likely disruptions ALLIANCES SHARE SERVERAL ATTRIBUTES 0 Continuous improvements 0 Inflow of innovation 0 High level of recognized interdependence and commitment o Cooperation exists 0 Ethics 0 Relationshipsface changing 39 39 39 39 39 U Md issues 0 Negotiationsrenegotiations 0 Executive level commitment APPROPIATE RELATIONSHIP SEE PAGE 72 SUPP LIER PERSPECTIVE World class suppliers I Finances ability to pay I Good growth prospects o Timely payment 0 Customer secretive open and approachable 0 Buyers honestethical 0 Procurement responsive 0 Customers professionals QUESTIONS TO BE ADDRESSED BEFORE PROCEEDING SEE PAGE 74 ALLIANCESMAY NOT BE APPROPIATE 1 Stability of prices market and buyer demand I Price volatility commodities traded on open markets share risks I Demand volatility materials or services I High switching likelihood with high switching costs 0 Changing technology 0 Critical quality 2 Capability of potential suppliers I No partnershipalliance capable supplier for the item 0 Lack of capable supplier o No full service I No partnershipalliance capable supplier in the 39 39 39 area 0 No full service I Rapid technological change 0 Disadvantage lock in one supplier o Remain competitive I Mismatch of rates of 39 change 0 Buying firm changing more rapid than supplier 3 Competition in the supply market I Noncompetitive market 0 Supplier take advantage of buying firm I Supplier dependency creation I Neglected areas 0 Mismanage or not mismanaged I Supplier seeking to reduced 39 0 May save in short run 0 Eliminate competition and reduce industry capacity 4 Benefits to the buying firm from the relationship I No leverage form partnership 0 Volume 0 Inventory 0 Innovation 0 Total cost I No hard savings from partnership 0 Nonquantifiable 0 Soft savings 0 Staff reduction 0 Cost avoidance 5 Internal buyin to partnership I No internal customer buy in THE ROLE OF POWER llPower is at the heart of all business to business relationships 0 Influence 0 Can be seen as unethical POWER Captive buyer Captive supplier PORTFOLIO APPROACH No approach is superior 1 The product exchanged and its technology 2 The competitive conditions in the upstream market 3 Capabilities of the suppliers available ECOMMERCE RIGHT RELATIONSHIP 1 Avoid cumbersome process and webbize it 2 Magic pill 3 Supplier equality BZB Great focus role market ERA Reengineering entire value chains and networks start finish Sound business judgment on relationship picked
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