Flashcards in (1, 2) - An Introduction to Supply Chain Improvement Deck (17)
What is the value chain and a value network and how can developing linkages add value?
The principle that every organisation can be viewed as a sequence of activities that successively add value as resources flow throughout to the customer. Value adding throughout the wider value chain is known as the value network. Each chain is interdependent and each element can affect the efficiency and cost of another element. Developing the linkages can add value through either optimisation or co-ordination.
Organisational infrastructure represents the structures, cultures, attitudes, resources and facilities needed for the operation of an enterprise. What value adding influence does organisational infrastructure have on adding value?
¥ Organisational Structure: traditionally vertical structures with process flowing horizontally.
¥ Cross-functional working: functional structures create silo’s with barriers to cross-functional communication and work-flows
¥ Organisational attitudes: May affect carelessness, safety consideration etc.
¥ Information Technology: May lack cross supply chain integration needed or may be inefficient.
How can an organisation make it more flexible and adaptable?
¥ Flatter structures: de-layering makes strategic management closer to the supplier-facing and customer-facing parts
¥ Project management: creating a temporary structure for a project
¥ Virtual structures: where individuals work together regardless of distance, using IT support.
Centralisation or Devolution is the extent to which the decision making is kept close to the centre or top of the organisation. What benefits might this bring?
¥ Easier resolution of conflicting priorities between divisions
¥ Increased opportunities for specialisation
¥ Greater co-ordination of procurement activities and standardisation of best practices
Organisational culture can substantially help, or hinder, an organisation in achieving it’s aims. Poor cultures can be changed over time, how can this be done?
¥ New policies or procedures
¥ Publicised success or horror stories
¥ Constant reinforcing and rewarding of the right behaviours
A business process is a sequence of activities aimed at delivering value. How can you improve the efficiency of a process?
1. Understand how it actually works: this may not be what is written down
2. Observe and interview those involved
3. Time various stages of the process
4. Document it in a flow chart, known as process mapping
What is value stream mapping?
A method of improving business processes. To do this method you must:
1. Assess the as-is state and turn it into a flow chart with time required for each step
2. Identify which steps do not add value (e.g. machine set ups or testing) and move to one side
3. Add up all the time on non-value added and compare it with the value added time
The non-value added steps become the target for improvement
What are the 10 steps of the sourcing process and what value-adding leverage can the supply chain function apply at each?
1. Identify Needs: challenge user statements, could we re-use / repair, do we need to procure at all
2. Supply Market Research: assessing price trends, keeping up to date with innovations, seeking early supplier engagement, assessing security of potential supply source
3. Procurement Risk Assessment: identifying and evaluating potential risks early on, and using this information to inform the sourcing plan / specification
4. Write Specification: avoid over-specifying, incorporating the latest innovative ideas from supply market research, bringing in others to influence the specification, improving feasibility, acceptability and innovation.
5. Develop Sourcing plan: evaluating sourcing options (single sourcing, competitive tendering, global sourcing, e-auctioning). Using procurement segmentation to decide preferred supplier relationship strategies, should procurement be devolved
6. Supplier Pre-Qualification: establishing approaching screening criteria, carrying out site visits where appropriate
7. Invite Bids: determining the best process for soliciting bids, putting together an attractive information pack, using procurement marketing techniques to maximise response rates
8. Evaluate Bids and Select a Winner: setting appropriate award criteria, establishing fair and transparent processes with equal opportunities
9. Award Contract: using appropriate forms of contracts, using formal written contracts, ensuring clarity on terms and conditions
10. Contract and Relationship Management: includes using sensible performance monitoring and feedback, information sharing and continuous improvement, developing and applying supplier incentives, managing and resolving supplier conflicts
List the spectrum of relationships starting with the least collaborative.
¥ Arm’s length
¥ Closer Tactical
¥ Single Source
What is the supplier preferencing matrix?
How a supplier will categorise different buyers with Low value sales,
Difficult to deal with: Nuisance
Easy to deal with: Development
and with high value sales,
Difficult to deal with: Exploit
Easy to deal with: Core
As part of supply chain management, collaboration can often provide benefits to both parties. What factors have driven the trend for more collaboration?
¥ IT advances making inter-organisational communication much easier
¥ Shorter product life-cycles requiring faster product development
Partnerships are the most collaborative form of relationships and the supplier is seen as an integral part of the organisations competitive advantage and future plans. It is most often used when expenditure is high and product complexity is high. What are advantages and disadvantages of partnering?
+Improve supply and cost stability
+Efficiency savings through joint planning
+Improved security of business
+Sharing of risk and access to technology
-Reduced flexibility to change
-Supplier may become complacent
-Mutual benefits not being shared fairly
What are characteristics of a partnership supply arrangement?
¥ A high level of systems integration
¥ Some staff from each of the others organisation based at the others location
¥ Complementary expertise, so each party adds to the relationship
¥ Joint objectives and measurable performance indicators in relevant areas
In a competing relationship you may expect to change supplier regularly as such relationships can’t work long-term. Each party aims to get the best outcome for itself at the expense of others if necessary. What are advantages and disadvantages of regularly changing suppliers?
+The existing supplier may perform badly
+A new supplier may offer innovation or a more competitive solution
+A new supplier may offer better skills
+Many suppliers offer identical goods in a price-driven market
-The cost of the procurement process
-Operation of change costs
-Costs of handover from old supplier
-Risks of taking on a new supplier
What is outsourcing?
It is the decision to move a part of the business which is done internally and have it provided by an external provider. It is part of the make vs buy decision.
What are some advantages and disadvantages of outsourcing?
+Cost certainty for outsourced services
+Cost savings because of economies of scale
+Access to specialist expertise not available internally
+Management time freed up to concentrate on core activities
-Potential loss of in-house expertise
-There may be no cost savings because of the providers profit
-Potential to be locked into a provider who is not performing
-May not benefit from specialist expertise if staff TUPE across
What can be done to reduce the risks of outsourcing?
¥ A very strong business case for the outsourcing decision
¥ Clear and agreed service levels
¥ Robust supplier management to ensure contract compliance
¥ A thorough pre-procurement risk analysis which includes poor supplier performance as a risk
¥ Supplier appraisal to include helpfulness, history of collaboration and ethical standards