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Flashcards in EXAM2 Deck (31):

Steps in the supplier management process

1. Identify Need – Material, Service, Relationship 2. Select Supplier – ID requirements, Search, Evaluate, Negotiate 3. Develop Supplier – Issue Resolution, Continuous Improvement 4. Provide Feedback – Goals, Report Cards


Transactional Relationships

• The buyer has many suppler choices, does not need to share internal company info, purchasing a routine item, does not require technology innovation, does not expect to experience shortages in supply • Arm’s-length relationships


Collaborative Relationships

• Limited supplier options, procuring a critical item, needs technology innovation, concerned about the availability of supply, working together and integrating processes between the buyer and supplier, sharing information, knowledge, and expertise.


Weighted Factor Analysis

The things you care about times a weight


Searching for potential suppliers

• Current Suppliers • The Internet • Trade Registers • Trade Journals • Company Personnel • Trade Shows • Professional Organizations


Request for quote (RFQ) / Request for Proposal (RFP)

Contains the specification of what is needed and details the information that must be submitted by a supplier who wishes to be considered for the purchase.


Supplier Evaluation tools

Percent Delivered Late - late/total Percent Improvement - (Old - New) / Old


Negotiations process

• Preparation – 90% of your time • Face-to-face negotiation • Debriefing


Using a scorecard

• Identifies the supplier performance metrics that are most critical to the supply manager organization • Enables the evaluation of suppliers against these key metrics • For the supplier: enables a link between the supplier’s own internal performance measures and the strategic objectives of the supply manager, enables the supplier to identify opportunities for improvement, and documents the criteria used to define what levels of performance are considered unacceptable.


Logistics trade-offs

Cost-to-Cost Trade-Offs • Slow down transportation so as to save fuel costs Modal Trade-Offs • Understand the relationships between and within the various modes of transportation Cost-to-Service Trade-Offs • Improving service or service levels will cost additional money for the company


Transportation modes

• Maritime Shipping – cheapest per tonnage of nonpiepline carriers, used for global shipments • Rail – Carries the most weight in terms of tons within the US, cheap, limited where it can go • Trucks and Cargo – Used to ship door to door • Air – Most expensive way to ship, used for overnight and lightweight shipments • Pipelines – Used for fluids, haul the most tonnage and are the most cost effective


Square root law

• Used to determine safety stock • X2 = total safety stock inventory in future facilities • X1 = total safety stock inventory of present facilities • N2 = number of future facilities • N1 = number of existing facilities


Weighted center of gravity method

• Used to determine the placement of a new facility • All the Xs times X weight divided by total weight, same for Ys


Consolidation Warehousing

• Takes small shipments and combines them into larger shipments


Cross docking

• Multiple shipments come in are mixed then go back out • Not a warehouse


Break bulk facilities

• Takes in large shipments then break out small shipments when needed


Hub and spoke systems

• Reduces the number of trucks or other carriers needed using a network of cities


Demand Processing

Independent demand – the demand that the customers actually create

Dependent demand – the demand created for production that is necessary to produce an end item

Derived demand – the demand is created as managers conceptualize forecasts and guess at future demand; only exists on paper


Inventory Management

When to order inventory

How much inventory to order

How much extra inventory they will hold



Second largest cost behind COGS



Facility for storing inventory

Square root rule for safety stock


Structural Networks

The extent of vertical integration – outsourced versus being owned by the firm

Flexibility – ability to respond to changes in customer needs or requirements

Cooperation – strength of integrated information and business models between logistics providers and customers

Geographical dispersion – constrains the choice of logistics modes available, timing, and costs


Dimensions of quality

Performance – efficiency with which a product achieves its intended purpose

Features – Product attributes that supplement the product’s basic functionality

Reliability – Propensity for a product to function over its useful life

Conformance – The extent to which products meet specifications

Durability – The degree to which a product tolerates stress or trauma without failing

Serviceability – Ease of repair for products

Aesthetics – Subjective sensory attributes of a product such as taste, feel, sound, look, and smell

Perceived Quality – Quality assessment based on customer opinion


W. Edwards Deming

Statistical Thinking

System for quality improvement (processes, tools, equipment, or people)

Taught Japanese about quality

Plan – Process Development

Do – Process Implementation

Check  - Quality Assurance

Act – Process Enhancement


Joseph Juran

Planning, Control, Improvement (Trilogy)

Strategic Approach

Big Q strategic issues

Little q tactical issues 


Philip Crosby

Quality is free

DRIFT (Do it right the first time)

14 Steps for quality improvement 


Kaoru Ishikawa

7 basic tools of quality

Democratized statistics (anyone can use them)

Company-wide quality control


Malcolm Baldrige National Quality Award Criteria for Performance Excellence

US government

Increasing national competitiveness

Small and large companies 

7 categories (ADD THEM FIG 13.11)

Goes to the best


ISO 9000

International Organization for Standardization in Geneva

Shows a firm’s quality has been audited by an outside firm

Set of standards 


Seven basic quality tools 

Process Maps – Symbols to help define steps, decisions, and flows. Diamonds decisions, Rectangles processes 

Check Sheets – Used to form histograms and perform Pareto analysis. Tally defects/problems 

Histograms – Graphical representations of data in bar charts, width of bars must be consistent and classes must be mutually exclusive and all-inclusive 

Scatter Plots – Used to study the relationships between variables

Run Charts – Used to plot time series data and identify data trends

Fishbone Diagrams – cause-and-effect/Ishikawa diagram, good brainstorming tool for identifying underlying causes to problems

Pareto Charts – Identify and prioritize problems that need solved, 80/20 rule 80 percent of quality problems are caused by a small number of causes 


Types of benchmarking

Process – Comparing processes such as how another company performs receiving or purchasing 

Financial – Comparing business results and accounting information

Performance, Comparing costs structures, speed, quality levels, etc.

Product – Comparing product attributes and functionality

Strategic – Comparing firm competitiveness along several dimensions

Functional – Comparing or learning how another firm performs a particular function such as call centers