Chapter 4-Part 1 Lecture 5Chapter 4- Part 2SCM 3301 1st EditionOutline of Previous LectureChapter 4-Part 1 Lecture 5To Remain Competitive Sourcing Managers MustStrategic Sourcing: managing a firm’s external resources to support long-term goals- Reduce Costs- Reduce Delivery Cycle Times- Improve Quality- Improve Customer Service- Improve Ethical Reputations- Assure Long-Term Financial PerformanceEthical and Sustainable SourcingCorporate Social Responsibility (CSR)“The practice of business ethics”- Ethical Sourcing“That which attempts to take into account the public consequences of organizational buying or bring about positive social change through organizational buying behavior.”o Ethical treatment of workers (Nike)o Fair Trade Products: Product manufactured or grown by a disadvantage producer in a developing country that receives a fair price.- Sustainable Sourcing“A process of purchasing goods and services that takes into account the long-term impact on people, profits, and the plant (3 P’s or Triple Bottom-Line).”- Assurance of future sources of supplyo The ability to meet the needs of current supply chain members without hindering the ability to meet the needs of future generations…- Green Purchasingo Purchased products meet environment objectives of the company in such areas as: waste reduction, hazardous material elimination, recycling, etc.1SCM 3301 1st EditionCurrent LectureChapter 4- Part 2Developing Ethical and Sustainable Sourcing Strategies- Functional Products -> Efficient Supply Chaino Predictable demand, low product variety, low margino Supplier Selection: Low Price, On-time Delivery, Consistent Quality- Innovative Products -> Responsive Supply Chaino Unpredictable demand, high product variety, high margino Supplier Selection: Fast Delivery, Customization, FlexibilitySupply Base Rationalization ProgramsSupply base rationalization (AKA: supply base reduction, supplier rationalization, or supply base optimization) is often the initial supply chain management effortBuyer-supplier partnerships are easier with a rationalized supply base & results in-o Reduced purchase prices: leveraged spendo Fewer supplier management problemso Closer & more frequent interaction between buyer & suppliero Reputation enhancementCreating strategic Supplier Alliances- Strategic Alliance Developmento Collaborative Win-Win vs. Zero Sum Game- Supplier Co-Location (VMI) & Co-Sourcingo Versus Outsourcing, Insourcing (Backsourcing)- Early Supplier Involvement (Value Engineering)o Product Life-cycle