Selection is a processSource selection criteriaMark’s “ foolproof ” methodOnce we have our prioritiesWhy this mattersFinding qualified suppliersPutting it togetherMeasurement and retentionMeasurementTypical uses of measurementOther uses of measurementSo what do good measures look like?So lets design a measurement systemA different way to look at thisConclusionSelection is a process•Not all process providers need to be selected in the same way.–First task is make buy which determines what we provide•For other processes we need to:–Determine optimal number of suppliers–Determine the ways that the process effects customer value•Determine criteria to select suppliers–Find possible suppliers–Analyze the available sourcesSource selection criteria•What attributes do we value most in this process? Which will we pay extra for? Which will we be willing to sacrifice to get a lower price?•Some specifics–How important is meeting due dates?•Can we carry safety stock if they are late?•If they are performing a service how much does their being late effect other processes?–How tight are tolerances for this process?–How much impact does this process have on the end value received by the customer–Rejuvenation – “won’t outsource pollution”Mark’s “ foolproof ” method•List key criteria of process–Price –Quality–Delivery–Etc.•Prioritize the criteria – which are most important? least important. Basically trying to determine the costs of non-conformance.–Trying to make trade-offs explicitOnce we have our priorities•Some people try and be very objective and create a weighted scale–Highest point total is selected–Gives at least the impression of rigor and impartiality•Things such as judging the type of relationship, ability to make improvements and the like are always subjective.•Some set up a list of qualifiers and winners – –This is what we do in the management department when screening possible hires–More subjective and more flexible- why do we need that?Why this matters•Absent a list of criteria who gets picked?–How is the decision maker measured? SEPTA article•Making the list ahead of time is a very important exercise because it forces you to really think about what this process means to the overall chain.•The more objective the better – you need to be able to explain to people why you made the decision you made–May even keep you out of court–This matters even when you are bidding – will it be low bidder, second lowest bidder or something else?Finding qualified suppliers•Where do we find suppliers?–I ask a lot of dumb questions- is this the dumbest? –Will you be geographically limited?–Will they all belong to a trade organization?–Are they in the phone book? On the web? –Do they go to trade shows? –Sometimes they find youPutting it together•We have our criteria•We have a list of possible suppliers•When there is a high level of certainty and a large pool of possible suppliers we can solicit bids•When there is much uncertainty (or no-one can do everything we want) we negotiate.•Then we pick a supplier and our job is done?Measurement and retention •Supplier selection is only a small part of the job•We need to determine which suppliers are doing a good job and which need to be eliminated from the chain.•Need to measure to properly manage the relationship.–John Parillo’s from Penske Transportation Services–Boeing and certifying the certifiedMeasurement•When do you tell supply chain members what the performance criteria are going to be?•When do you decide how to measure these criteria?•Can you change these criteria without their knowledge?•Almost everything you learned about performance appraisal for Humans applies hereTypical uses of measurement•Optimization–When reducing the size of the supply base it makes sense to get rid of the poor performers. –So often starting a formal measurement system is the first step in supply base reduction–Tell suppliers what you are up to•Why?•Future profits are one of the biggest incentives you can give a company – linking present performance to future work is a common use of measures- must follow throughOther uses of measurement•Certification- to get and keep–Certified suppliers get more work–May not have to do some processes (like inspection) and so on–Certification may be reviewed – and should be at least annually•Landoll – every 6 months send all certified suppliers performance data and ranking•Constant monitoring may provide warning of problems before they get out of hand.So what do good measures look like?•Quantitative – can be expressed in objective terms•Easy to understand – quickly•Encourages appropriate behavior – discourages game playing•Is defined and mutually understood – by all involved•Is economic to collect•Facilitates trustSo lets design a measurement system•Company?•Strategy•Input (s) of interest - or should all suppliers be measured the same way?•Order winners and qualifiers for input – as related to company•Who is going to collect data? How? Frequency?•What will we do with it once collected?A different way to look at this•Some of you will not like this but… managing the supply base is a lot like managing human resources.–You need to determine the capabilities you need (KSA assessment?)–You need to prioritize these capabilities–You need to identify possible providers (employees?)–You need to select the best provider (employee)–You need to assess them regularly to know if they should be retained and how they should be rewarded.Conclusion•Selecting process providers is a key step in building a supply chain•This should be based on criteria that are important to the end customer•Picking the provider is only the first step•If you can transfer knowledge from selecting and retaining employees to supply chain decision you may be able to create a competitive advantage- or at least avoid reinventing the