SCM Exam 2 Flashcards
(51 cards)
What is the 7 step sourcing process
- Spend Analysis
- Supply Market Assesment
- Total Cost Analysis
- Supplier identification
- Sourcing Strategy
- Supplier Negotiation / Selection
- Contract Management Evaluation
What is Spend Analysis (short)
- Analysis of historical spend data
- The challenge is that data will be “dirty” and incomplete
What is Supply Market Assesment (short)
- Macro and Mirco-level analysis of the supply market that provides context for sourcing strategy
Total Cost Analysis (short)
- Analytically determine how future prices will trend in the market
- Determine what an item should approximately cost
Supplier Idetification/ Evaluation (short)
- Identify all suppliers who have the capabilities to meet your supply requirements
- Evaluate all potential suppliers for financial strength, past performace (score-carding), and supply capabilities
- Which suppliers will be on contract? Supplier rationalization or supply base optimization
Sourcing Strategy (short)
- Craft the sourcing strategy to the particulars of the spend category
Supplier Negotiation/ Selection (short)
- Maximize the leverage of the buyer firm then drive value to the firm through shrewd negotiations that harness that leverage
Contract Management/ Supplier Evaluation (short)
- Make sure that suppliers adhere to the terms and conditions of the contract
- Minimize Spend Leakage
What is the Spend Leakage Formula
Maverick Spend + Non-Contract Compliance
Maverick Spend
Maverick spend is when an organization doesn’t follow its purchasing policies. Maverick spend can occur for many reasons, but it’s often because an employee does not have the authority to approve purchases.
What are the four primary objectives of Spend Analysis
- Ascertain true category spend
- Non-addressable: Spend not relevant to the category or for which we have no contril
- Determine our demand pricing trends
- Identify potential strategic sourcing opportunities
What are Macro and Micro level analysis in Supply Market Assessment
Macro: Global Supply and Demand Analysis - and their impact on pricing and our leverage
Micro: Supply Market-Level Analysis (at level of suppliers)
What does Supplier Identification do?
Enchance the supplier pool
How do we reduce the supplier pool?
-Through Financial Assessment
- Ratio Analysis
- Vendor Scorecarding
What are the 4 ratios in ratio analysis?
Liquidity Ratios
Leverage Ratios
Activity Ratios
Profatibility Ratios
Liquidity Ratio
(Cash) How capable is the supplier in meeting its short-term cash needs?
Leverage Ratio
(Debt) Is the supplier capable of paying its deby obligations?
Activity Ratio
(Assets) How effective is the supplier in managing its assets?
Profitability Ratio
(Earnings) What rate of return is the supplier earning?
Z-Score Analysis
- Developed by Dr.Edward Altman
- 90% effective in predicting bankruptcy one year in advance
- 75% effective in predicting bankruptcy two years in advance
How many ratios do you need for a z-score analysis?
4 ratios (5 if public company)
What is Vendor Scorecarding?
A supplier performance assessment system where each supplier is evaluated ascross a series of performance metrics, typically on a Likert Scale, and then a composite score is aggregated for comparison with other suppliers
What is supply base optimization?
a strategy to improve a company’s supply chain by reducing the number of suppliers it relies on, especially those who are inactive or offer limited value
What is supplier rationalization?
Optimizing the # of suppliers who receive a portion of the supply contract value to maximize leverage without significantly increasing supply disruption risks
