Supply Chain Management - MGMT614
Supply Chain Management - MGMT614
Supply Chain Management - MGMT614
SUPPLEMENT TO LECTURE 4
ETHICAL AND SUSTAINABLE PURCHASING INITIATIVES
Ethical and Sustainable Framework of purchasing includes numerous initiatives like Supply Base
Rationalization Program and Supplier Certification Programs.
Supply base rationalization Also Known As (AKA) supply base reduction or supply base
optimization is often the initial supply chain management effort.
Buyer-supplier partnerships are easier with a rationalized supply base & result in –
1. Reduced purchase prices
2. Fewer supplier management problems
3. Closer & more frequent interaction between buyer & supplier
4. Greater levels of quality & delivery reliability
Supplier certification programs are used to identify strategic supplier alliance candidates
Enterprises use in-house formal certification programs, & most require ISO 9000/ 14000 or similar
certifications as part of the certification process
Buyers can monitor quality assurance methods & specify the type of acceptance sampling & statistical
process control methods used
Outsourcing Products and Services
Virtual University Students are already aware of the benefits of outsourcing for the sake of easy reference
we list the benefits or advantages. Outsourcing allows an enterprise to –
1. Concentrate on core capabilities
2. Reduce staffing levels
3. Accelerate reengineering efforts
4. Reduce management problems
5. Improve manufacturing flexibility.
Outsourcing Products and Services decision carries inherent risk. Risks associated with outsourcing, include:
a. Loss of control both with respect to production decisions & intellectual property
b. Increased undue reliance on suppliers
c. Increased need for supplier management
The two common types of Outsourcing of Products and Services include In-sourcing and Co-sourcing.
1. In-sourcing (back sourcing): Reverting to in-house production when quality, delivery, and
services do not meet expectations
2. Co-sourcing (selective sourcing): The sharing of a process or function between internal staff and
an external provider & provides flexibility to decide what areas to outsource, when, and for how
long.
Early Supplier Involvement, Value Engineering & Vendor Managed Inventories
Early supplier involvement (ESI) is one of the highly effective supply chain integrative techniques. Key
suppliers become more involved in the internal operations of the enterprise, particularly with respect to
new product & process design, concurrent engineering design for manufacturability techniques.
Value Engineering activities help the enterprise to reduce cost, improve quality & reduce new
product development time
Vendor Managed Inventory (VMI): Suppliers manage buyer inventories to reduce inventory carrying
costs & avoid stock-outs for buyer
Selecting quality and capable suppliers
Selecting supplier is not an easy process. Many different formulas and techniques can be used. One effective
method assigns suppliers to four basic categories based upon their level of performance in key areas, such as