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How Many Suppliers Do You Need?Customer ExpectationsOrganizational StrategySupplier CriteriaAspects of Many vs. Few SuppliersSlide 6Slide 7Systematic Methods for Managing Supplier Selection(QFD) Quality Function Deployment ProcessQFD & Choosing SuppliersSlide 11Slide 12ConclusionSourcesHow Many Suppliers Do How Many Suppliers Do You Need?You Need?Blake Holmes Blake Holmes Mike Telmar Mike Telmar Jason Harman Jason Harman Kaptaan Hickey Kaptaan Hickey Ryan Beugli Ryan BeugliCustomer ExpectationsCustomer ExpectationsDrives overall business strategyDrives overall business strategyWhat is most important to the What is most important to the customercustomerCostCostTimeTimeInnovationInnovationOrganizational StrategyOrganizational StrategyBasis of all business decisions Basis of all business decisions including how many suppliers you including how many suppliers you should useshould useWhen innovation is a core strategy When innovation is a core strategy for your business fewer suppliers are for your business fewer suppliers are optimaloptimalWhen price is a core strategy for When price is a core strategy for your business many suppliers are your business many suppliers are optimal optimalSupplier CriteriaSupplier CriteriaProduct CapacityProduct CapacityQualityQualityBrand NameBrand NameWarranty/Product supportWarranty/Product supportPrice (not always the most Price (not always the most important)important)Aspects of Many vs. Few SuppliersAspects of Many vs. Few SuppliersIncreased Increased competition may competition may promote better promote better quality and reduced quality and reduced costcostLow likelihood Low likelihood organization will be organization will be left without left without production inputs production inputs Suppliers gain Suppliers gain considerable considerable amount of amount of bargaining power. bargaining power. Less resource to Less resource to potentially exploit.potentially exploit.High risk of High risk of suppliers defaulting suppliers defaulting on delivery. on delivery. Many Suppliers Few SuppliersAspects of Many vs. Few SuppliersAspects of Many vs. Few SuppliersSuppliers will Suppliers will experience decreased experience decreased demand, driving sales demand, driving sales down and costs up.down and costs up.Logistics and Logistics and operations become operations become complex and difficult complex and difficult to manage.to manage. Increased demand Increased demand makes it easier for makes it easier for suppliers to suppliers to experience economies experience economies of scale.of scale.Streamlined logistics Streamlined logistics and operations are and operations are easy to manage. easy to manage. Many Suppliers Few SuppliersAspects of Many vs. Few SuppliersAspects of Many vs. Few SuppliersUtilizing many suppliers Utilizing many suppliers can undermine trusting can undermine trusting relationship and display relationship and display a lack of commitment a lack of commitment to long term business.to long term business.Difficult to collaborate Difficult to collaborate with suppliers, allowing with suppliers, allowing inputs to be developed inputs to be developed in parallel with in parallel with organizations products.organizations products.Shows commitment to Shows commitment to long term relationships long term relationships which can promote which can promote trust.trust.Often easier to Often easier to collaborate with collaborate with suppliers to develop suppliers to develop products in parallel with products in parallel with organizations products.organizations products.Many Suppliers Few SuppliersSystematic Methods for Managing Systematic Methods for Managing Supplier SelectionSupplier SelectionCategorical MethodsCategorical MethodsData Envelopment AnalysisData Envelopment AnalysisCase-Based ReasoningCase-Based ReasoningLinear Weight ModelsLinear Weight ModelsArtificial Intelligence ModelArtificial Intelligence Model(QFD) Quality Function Deployment (QFD) Quality Function Deployment ProcessProcessQFD (aka “House of Quality”) was first implemented by Yoji QFD (aka “House of Quality”) was first implemented by Yoji Akao at Mitsubishi Industries Kobe Shipyard to integrate the Akao at Mitsubishi Industries Kobe Shipyard to integrate the “voice of the customer” into the design and delivery of oil “voice of the customer” into the design and delivery of oil tankers”. The concept can be applied to supplier selection by tankers”. The concept can be applied to supplier selection by integrating the voice of the customer into selection criteria.integrating the voice of the customer into selection criteria.Draft a list of supplier requirements that Draft a list of supplier requirements that contribute to the fulfillment of contribute to the fulfillment of customers needs.customers needs.Formulate evaluation criteria for Formulate evaluation criteria for suppliers.suppliers.Determine the importance (weight) of Determine the importance (weight) of the criteria. the criteria. Rank your suppliers, and make Rank your suppliers, and make appropriate selection that will appropriate selection that will accommodate customer needs. accommodate customer needs. QFD & Choosing SuppliersQFD & Choosing SuppliersSupplier Priority MatrixSupplier Priority Matrix(Considers Tangible & Intangible Criteria)(Considers Tangible & Intangible Criteria)Producing Commodity or Producing Commodity or Specialty ProductSpecialty ProductImportance of Suppliers Brand Importance of Suppliers Brand name name Importance of time constraints Importance of time constraints Technical competency among Technical competency among candidatescandidatesProduction volume requirementsProduction volume requirementsNeed for collaborationNeed for collaborationFew SuppliersMany SuppliersConclusionConclusionCustomer expectations govern Customer expectations govern organizational strategy, which will define organizational strategy, which will define supplier selection criteria. supplier selection criteria. Systematic methods can be used to rank Systematic methods can be used to rank suppliers.suppliers.Both positive and negative aspects are Both positive and negative aspects are associated with few/many suppliers.associated with few/many suppliers.Choosing


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OSU BA 457 - LECTURE NOTES

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