quality access to technology and innovation social responsibilities Module 8 To Buy or Not to Buy Learning about Sourcing IKEA Supplier Partnerships Supply Management Identification acquisition and management of inputs and supplier relationships design collaboration Timely availability of resources total cost more than purchase price Supply Risk Occurrence of an unplanned event that will negatively affect a firm Delays and disruptions theft of intellectual property price product safety problems Samsung is a key supplier of Apple they share information but then apply thinks Samsung stole their intellectual rights Total Cost of Ownership TCO Sum of costs incurred before during and after a purchase Before cost of finding checking and picking a supplier During cost of buying receiving the item After cost and risk of holding items include those after sales The Sourcing Decision and purchasing activities Link a company with supply chain partners primary strategic decision Sourcing decisions high level often strategic decisions regarding which products or services will be provided internally and which external supply chain partners will provide Purchasing the activities associated with identifying needs locating and selecting suppliers negotiating terms and following up to ensure supplier performance The Sourcing Decision High level strategic decisions Make or Buy Insourcing Advantages vs Dis advantages Insourcing using resources within the firm to provide product or service Outsourcing using sc partners to provide service and products If time is restraining then I ll outsource What resources within will be used What suppliers will provide Advantages Disadvantages More control easy operation Ability to oversee the program visibility of business policies if outsourcing firm doesn t meet standards Require strategic flexibility high investment investing in different kind of equipment is costly Economies of scale scope Access to better products by potential suppliers Outsourcing Advantages vs Dis advantages Advantages Disadvantages High Strategic flexibility Low Investment risk Dell waits for Intel processor Improved Cash Flow Access to state of the art products May choose a bad supplier Loss of control of process and technologies Communication challenges different country Hollowing out of the corporation info leak outsource may become competition Total Cost Analysis A process a firm identifies and quantifies all major costs regarding sourcing options Insourcing and Outsourcing Costs Direct Cost costs that are tied directly to the level of operations production labor Indirect Cost costs that are not tied directly to the level of operations Direct Costs Indirect Costs Insourcing Direct materials labor freight variable overhead Supervision supplies maintenance equipment depreciation lease fixed overhead Outsourcing Price from invoice freight Purchasing receiving quality control 1 Portfolio Analysis P204 Value Complexity suppliers Sourcing Strategies Read the Book about advantages disadvantages of multi vs single vs cross vs dual Single Sourcing not a bottleneck option buyer depends on a single company for all of a item service Multiple Sourcing buyer shares it business with multiple suppliers Cross Sourcing using a single supplier for a certain part of service and another supplier with same capabilities for a similar part backup plan Either supplier can substitute the other Dual Sourcing using two suppliers for the same purchased product guarantees supply continuity Same product sourced from two different suppliers 50 50 40 60 Weighted Point Evaluation System Purpose evaluating potential suppliers track performance over time rank current suppliers Process assign weights to performance dimensions rate performance of suppliers scale 1 5 calculate total score Assess and Select Suppliers Weighted Point Model Performance dimensions weighted by importance Determine Quality inspect the facilities of suppliers Although A is the cheapest B has the highest weighted score in performance Trends in Supply Management Sustainable Supply forced to think about consequence of actions workers in sustainable working environment Supply Base Reduction importance of relationships with key suppliers force companies to reduce of suppliers Global Sourcing Video SY Technology Ford persuaded suppliers to move to their campus for a more efficient and less costly option Flexible capacity by eliminating transportation cost and lead time Relevant Points SC Distribution SC Capacity Transportation Costs 1 To make or buy is the FUNDAMENTAL strategic choice every company makes 2 The sourcing decision requires both quantitative and qualitative analysis 3 Trends in sourcing reveal a stronger focus on relationships and CSR 2 Module 9 All Roads Lead to Rome Logistics Read Harry Potter Logistics Logistics Is Planning implementing and controlling the efficient flow and storage of goods between origin and consumption Why the Increasing Interest Deregulation removing barriers rules transportation in US improved prices barriers to entry Globalization reinvention of cargo containers reduced cost and lead times allows outsourcing to China Technological Breakthroughs SKUs barcode scanning Environmental Concerns EPA Standard refit emission production in US limited space for material waste Performance Impact Seafood Fast and Fresh Darden Video everything affects the quality of food you serve Logistics Management Areas Transportation Warehousing location distribution Material handling Amazon Packaging Apple Mac Box vs Lenovo Box protect quality of product Inventory Management stuff moving at location Logistics information systems what goes where and how fast Reverse Logistics Systems emerging area Downstream raw material down to customer Upstream customer returning products Logistics going opposite way Major Transportation Modes know Adv vs Dis adv in book Leap Frog airfreight toys Kraft issue with distribution Customer returns warranty failures incorrect orders Repair and remanufacture process support Recycling importance Water 1st Weight to Value ratio Rail 2nd Weight to Value ratio Air low Weight to Value ratio Pipeline homes with gas plants water plants Highway truck Multimodal Solutions Crates on ships easier to move cargos to different routes Transportation Owning vs Outsourcing Does the volume of firm justify a private system Would ownership limit the ability to respond to marketplace changes Is logistics a core competency Are