SCM summary | Nhi Nguyen | 2020
Chapter 13: Global Sourcing & Procurement
I. Strategic sourcing
- Strategic sourcing – the development and management of supplier
relationships to acquire goods and services in a way that aids in
achieving the immediate needs of the business
- In the past, sourcing was just another name for purchasing, a
corporate function that financially was important but strategically
was not the center of attention
- As a result of globalization, sourcing implies a more complex process
suitable for procuring products that are strategically important to
the firm
- Specificity – refers to how common the item is, and, in a relative
sense, how many substitutes might be available
• Commonly available products can be purchased using a relatively
simple process, from online catalogs. DVD can be purchased from
different vendor => Low specificity
,SCM summary | Nhi Nguyen | 2020
- A request for proposal (RFP) is used for purchasing items that are
more complex or expensive and where there may be a number of
potential vendors.
• A request for bid or reverse auction is similar in terms of the
information packet needed. A major difference is how the bid
price is negotitated. In RFP, the bid is included in the proposal,
whereas in a request for bid or reverse auction, vendors actually
bid on the item in real time and often using Internet software
- Vendor managed inventory – when a customer actually allows the
supplier to manage the inventory policy for an item or group of
items
1. The Bullwhip Effect
- Forward buying: A term that refers to when a customer, responding
to a promotion, buys far in advance of when an item will be used.
- Bullwhip effect – phenomenon of variability magnification as we
move from the customer to the producer in the supply chain
• A slight change in consumer sales ripples backward as magnified
oscillations upstream, like the result of a flick of a bullwhip handle
• Forward buying, the practice of “stocking up” on products due to
temporary price reductions, makes this variability even worse
- Continuous replenishment – inventory is replaced frequently, as
part of an ongoing process to reduce variability
,SCM summary | Nhi Nguyen | 2020
2. Supply Chain Uncertainty framework
2.1 Functional Product
, SCM summary | Nhi Nguyen | 2020
2.2 Innovative Product
- We expand on this idea by focusing on “Supply” side of the supply
chain. While the Supply Chain uncertainty framework captures
important demand characteristics, there are uncertainties revolving
around the supply side that are equally important drivers for the
supply chain strategy.
- Supply Process:
• Stable supply process: manufacturing process and underlying
technology are mature and supply base is well established.
• Evolving supply process: manufacturing process and underlying
technology are still under early development and are rapidly
changing. Supply base is limited in both size and experience.
Chapter 13: Global Sourcing & Procurement
I. Strategic sourcing
- Strategic sourcing – the development and management of supplier
relationships to acquire goods and services in a way that aids in
achieving the immediate needs of the business
- In the past, sourcing was just another name for purchasing, a
corporate function that financially was important but strategically
was not the center of attention
- As a result of globalization, sourcing implies a more complex process
suitable for procuring products that are strategically important to
the firm
- Specificity – refers to how common the item is, and, in a relative
sense, how many substitutes might be available
• Commonly available products can be purchased using a relatively
simple process, from online catalogs. DVD can be purchased from
different vendor => Low specificity
,SCM summary | Nhi Nguyen | 2020
- A request for proposal (RFP) is used for purchasing items that are
more complex or expensive and where there may be a number of
potential vendors.
• A request for bid or reverse auction is similar in terms of the
information packet needed. A major difference is how the bid
price is negotitated. In RFP, the bid is included in the proposal,
whereas in a request for bid or reverse auction, vendors actually
bid on the item in real time and often using Internet software
- Vendor managed inventory – when a customer actually allows the
supplier to manage the inventory policy for an item or group of
items
1. The Bullwhip Effect
- Forward buying: A term that refers to when a customer, responding
to a promotion, buys far in advance of when an item will be used.
- Bullwhip effect – phenomenon of variability magnification as we
move from the customer to the producer in the supply chain
• A slight change in consumer sales ripples backward as magnified
oscillations upstream, like the result of a flick of a bullwhip handle
• Forward buying, the practice of “stocking up” on products due to
temporary price reductions, makes this variability even worse
- Continuous replenishment – inventory is replaced frequently, as
part of an ongoing process to reduce variability
,SCM summary | Nhi Nguyen | 2020
2. Supply Chain Uncertainty framework
2.1 Functional Product
, SCM summary | Nhi Nguyen | 2020
2.2 Innovative Product
- We expand on this idea by focusing on “Supply” side of the supply
chain. While the Supply Chain uncertainty framework captures
important demand characteristics, there are uncertainties revolving
around the supply side that are equally important drivers for the
supply chain strategy.
- Supply Process:
• Stable supply process: manufacturing process and underlying
technology are mature and supply base is well established.
• Evolving supply process: manufacturing process and underlying
technology are still under early development and are rapidly
changing. Supply base is limited in both size and experience.
