SOURCING STRATEGIES IN A SUPPLY CHAIN
SOURCING STRATEGIESIN A SUPPLY CHAINByGERARD JOSEPH BURKE JR.A DISSERTATION PRESENTED TO THE GRADUATE SCHOOLOF THE UNIVERSITY OF FLORIDA IN PARTIAL FULFILLMENTOF THE REQUIREMENTS FOR THE DEGREE OFDOCTOR OF PHILOSOPHYUNIVERSITY OF FLORIDA2005
Copyright 2005byGerard Joseph Burke Jr.
This work is dedicated to my family, and especially my wife, Amy, for yourlove and support.
ACKNOWLEDGMENTSThe hard work and dedication required by me to create this dissertationwere made possible by the personal and practical support of my family, friends,committee members and other members of the Decision and Information SciencesDepartment. I wish to express my gratitude by specifically acknowledging eachgroup of supporters.I wish to thank God; my parents, Jerry and Carlyn; my wife, Amy; my children, Maddie, Marley, Ella and James; my grandfather, Frank Burke (whosesupport is priceless); and my mother-in-law, Deb Crenshaw for their love, inspiration, and support. I also thank my Hoosier family, Hank and Betty Tallman, Jimand Joni Ping, Jeannie Meenach, and Drew and Pam Kissel for their unwaveringencouragement, love and much needed breaks from my studious endeavors.Although this next group for gratitude is legally not considered family,they are closer to me than friendship describes. I wish to thank Lou and SandyPaganini, and Ed and Atwood Brewton for their support, faith, and perspective.Also, many thanks go to the Kempers and Nelsons for their friendship.My doctoral studies were greatly enriched by the comradery of my fellow doctoral students Mark Cecchini, Selcuk Colak, Enes Eryarsoy, Ling He, Jason Dean,Yuwen Chen, Christy Zhang, Fidan Boylu, and Michelle Hanna. Additionally, Iwould like to thank Pat Brawner, Shawn Lee, and Cindy Nantz for assisting methroughout this tribulation.My capability to complete this dissertation was developed in large part by theseminars and coursework taught by members of my dissertation committee. I wishto thank Janice Carrillo, Selcuk Erenguc, Anand Paul, and Joe Geunes for theiriv
instruction and service on my dissertation committee during my doctoral studies.I also wish to thank Janice Carrillo for candidly sharing her experiences in theacademic profession. Finally, I wish to thank Professor Asoo Vakharia, my advisorand committee chair, for his expert guidance, timely responses to the drafts of eachchapter of my dissertation, and genuine interest in my personal and professionalwell-being.v
TABLE OF CONTENTSpageACKNOWLEDGMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .ivLIST OF TABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .ixABSTRACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .xiCHAPTER1INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.11.2.13457789101414LITERATURE REVIEW . . . . . . . . . . . . . . . . . . . . . . . . . .162.12.22.32.4.161617181819STRATEGIC SOURCING DECISIONS WITH STOCHASTIC SUPPLIER RELIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . .271.31.41.51.6233.13.23.33.4Supply Chain Management-An Overview .Strategic Issues in SCM . . . . . . . . . . .1.2.1 Product Strategy . . . . . . . . . .1.2.2 Network Design . . . . . . . . . . .Operational Issues in SCM . . . . . . . . .1.3.1 Transportation . . . . . . . . . . . .1.3.2 Transformation . . . . . . . . . . .1.3.3 Information Sharing . . . . . . . . .Focus of this Research: Strategic SourcingOrganization of this Dissertation . . . . . .Statement of Contribution . . . . . . . . .Overview . . . . . . . . . . . . .Strategic Evolution of SourcingBuyer-Supplier Relationships . .Strategic Sourcing . . . . . . . .2.4.1 Qualification Criteria . .2.4.2 Selection and Allocation.Introduction . . . . . . . . . . . . . .Sourcing Model . . . . . . . . . . . .Model Development . . . . . . . . . .Analysis . . . . . . . . . . . . . . . .3.4.1 Heterogeneous Suppliers . . .3.4.2 Heterogeneous Cost Suppliersvi.1.272830303135
.363739394044IMPACT OF SUPPLIER PRICING SCHEMES AND CAPACITY ONSOURCING STRATEGIES . . . . . . . . . . . . . . . . . . . . . . . .483.53.644.14.2Suppliers. . . . . . . . . . . . . . . . . . . . . . . . . .Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Sourcing Model . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.2.1 Preliminaries . . . . . . . . . . . . . . . . . . . . . . . . . .4.2.2 Supplier Pricing Schemes and Capacity . . . . . . . . . . .Analysis and Insights . . . . . . . . . . . . . . . . . . . . . . . . .4.3.1 Constant Price . . . . . . . . . . . . . . . . . . . . . . . . .4.3.2 Linear Discount Price . . . . . . . . . . . . . . . . . . . . .4.3.3 Incremental Units Discount Price . . . . . . . . . . . . . .4.3.4 All Units Discount Price . . . . . . . . . . . . . . . . . . .4.3.5 Summary of Insights from Analysis . . . . . . . . . . . . .Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Optimal Algorithm for Incremental Quantity Discounted Sourcing4.5.1 Algorithm Description . . . . . . . . . . . . . . . . . . . . .4.5.2 Computation and Validity of LB p and U Bf . . . . . . . . .4.5.3 The Branching Process . . . . . . . . . . . . . . . . . . . .4.5.4 Formal Statement of the Algorithm . . . . . . . . . . . . .Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4850505152525356596162646566676768STRATEGIC SOURCING WITH DIVERSIFICATION CONSIDERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .704.34.44.54.653.4.3 Heterogeneous Reliability3.4.4 Homogeneous Suppliers .Numerical Analysis . . . . . . .3.5.1 Experimental Design . .3.5.2 Results . . . . . . . . . .Conclusions . . . . . . . . . . .5.15.25.35.45.55.6Introduction . . . . . . . . . . . . . . .Integrated Selection/Allocation Model5.2.1 Preliminaries . . . . . . . . . . .5.2.2 Model Development . . . . . . .Analysis . . . . . . . . . . . . . . . . .5.3.1 No Diversification Benefit . . . .5.3.2 Diversification Benefit . . . . . .Model Extensions . . . . . . . . . . . .Numerical Analysis . . . . . . . . . . .5.5.1 Experimental Design . . . . . .5.5.2 Results . . . . . . . . . . . . . .Conclusions and Implications . . . . . .vii.707171757777818386868791
6SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .946.16.26.3949698Key Results and Directions for Future Research from Chapter 3 .Key Results and Directions for Future Research from Chapter 4 .Key Results and Directions for Future Research from Chapter 5 .APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100APROOFS FOR CHAPTER 3 . . . . . . . . . . . . . . . . . . . . . . . . 100A.1A.2A.3A.4A.5A.6A.7A.8A.9A.10A.11Bof Corollary 3.1 .of Theorem 3.1 .of Corollary 3.2 .for Corollary 3.3of Corollary 3.4 .of Corollary 3.5 .of Corollary 3.6 .of Theorem 3.2 .of Theorem 3.3 .of Theorem 3.4 .of Corollary 3.7 .100101102102102103103104104104104PROOFS FOR CHAPTER 4 . . . . . . . . . . . . . . . . . . . . . . . . fProofProofProofProofProof of Theorem 4.1 . . . . . . . . . . . . . . . . . . . .Proof of Result 4.1 . . . . . . . . . . . . . . . . . . . . .Linear Discount Pricing Test Problems Data . . . . . . .Incremental and All-Unit Discount Pricing Test Problems. . . . . . . . . .Data .106107109112PROOFS FOR CHAPTER 5 . . . . . . . . . . . . . . . . . . . . . . . . 142C.1C.2C.3Proof of Theorem 5.1 . . . . . . . . . . . . . . . . . . . . . . . . . 142Proof of Theorem 5.2 . . . . . . . . . . . . . . . . . . . . . . . . . 144Proof of Theorem 5.5 . . . . . . . . . . . . . . . . . . . . . . . . . 146REFERENCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148BIOGRAPHICAL SKETCH . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154viii
LIST OF TABLESTablepage3–1 Model Notation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .293–2 Description of Numerical Examples . . . . . . . . . . . . . . . . . . . .403–3 Results for Numerical Examples . . . . . . . . . . . . . . . . . . . . .414–1 Linear Discount Heuristic Performance . . . . . . . . . . . . . . . . . .564–2 Incremental Units Discount Heuristic Performance . . . . . . . . . . .584–3 All-Units Discount Heuristic Performance . . . . . . . . . . . . . . . .614–4 Product A Bid Information Data . . . . . . . . . . . . . . . . . . . . .624–5 Product B Bid Information Data . . . . . . . . . . . . . . . . . . . . .634–6 CPO Product A Solutions Comparison . . . . . . . . . . . . . . . . . .644–7 CPO Product B Solutions Comparison . . . . . . . . . . . . . . . . . .644–8 Number of Subproblems Solved for each Test Problem . . . . . . . . .685–1 Sensitivity Analysis of the Key Parameters . . . . . . . . . . . . . . .885–2 Impact of Minimum Order Quantity on the Sourcing Strategy . . . . .895–3 Interactions between Minimum Order Quantities and Reliabilities . . .905–4 Parameter Values for Ranked Supplier Characteristics . . . . . . . . .915–5 Selected Results for Capacity Adjusted Model A . . . . . . . . . . . .91B–1 Linear Discount Pricing Test Problems Data (1-12) . . . . . . . . . . . 109B–2 Linear Discount Pricing Test Problems Data (13-24) . . . . . . . . . . 110B–3 Linear Discount Pricing Test Problems Data (25-30) . . . . . . . . . . 111B–4 Incremental and All-Units Pricing Test Problems Data (1-3) . . . . . . 112B–5 Incremental and All-Units Pricing Test Problems Data (4-6) . . . . . . 115B–6 Incremental and All-Units Pricing Test Problems Data (7-9) . . . . . . 118B–7 Incremental and All-Units Pricing Test Problems Data (10-12) . . . . 121ix
B–8 Incremental and All-Units Pricing Test Problems Data (13-15) . . . . 124B–9 Incremental and All-Units Pricing Test Problems Data (16-18) . . . . 127B–10Incremental and All-Units Pricing Test Problems Data (19-21) . . . . 130B–11Incremental and All-Units Pricing Test Problems Data (22-24) . . . . 133B–12Incremental and All-Units Pricing Test Problems Data (25-27) . . . . 136B–13Incremental and All-Units Pricing Test Problems Data (28-30) . . . . 139x
Abstract of Dissertation Presented to the Graduate Schoolof the University of Florida in Partial Fulfillment of theRequirements for the Degree of Doctor of PhilosophySOURCING STRATEGIESIN A SUPPLY CHAINByGerard Joseph Burke Jr.August 2005Chair: Asoo J. VakhariaMajor Department: Decision and Information SciencesThe focus of this dissertation is on supply chain management (SCM), andmore specifically on the upstream connection between a firm and its suppliers.My research examines single versus multiple supplier sourcing strategies underthree specific scenarios. In general, my dissertation seeks to characterize when abuying firm should single source its requirements instead of employing a diversifiedpurchasing policy under various commonly encountered operating scenarios.First, the effects of upstream and downstream uncertainty on a firms sourcingstrategy are examined. Our results show that order-splitting (i.e., choosing amultiple supplier strategy) is an optimal choice for the firm even when suppliers arecompletely heterogeneous in terms of their reliability and costs. Additionally, thechoice of single versus multiple sourcing depends to some extent on supplier prices.This latter result motivates investigating our second scenario to gain insight intohow alternate supplier pricing schemes may impact sourcing decisions.The second scenario we examine is motivated not only through the resultsobtained under the stochastic supply setting described earlier but also through anunderstanding of the supplier selection and quantity allocation decisions made byxi
a major office products retailer located in Florida. The pricing schemes quoted byits suppliers tend to be either a constant price, a linearly discounted price, or astaged quantity discount (i.e., all-units and/or incremental discounted price) price.For each type of pricing scheme, we develop a unique optimization model wherethe objective is to minimize the sum of concave cost functions while satisfying thefirms total requirements. We adapt existing branch and bound algorithms in orderto identify the optimal number of suppliers who should receive an order.Finally, we incorporate explicit diversification benefits (due to channel powerleverage and price competition) into a newsvendor framework to analyze a firmssourcing decisions when suppliers are unreliable. Analysis reveals that a trade-offbetween the marginal benefit of diversification and the marginal cost of shiftingallocated order quantities away from lower cost suppliers need to be assessed.Managerially, this model stresses the importance of consistency between a firmssourcing strategy and its corporate strategy.xii
CHAPTER 1INTRODUCTION1.1 Supply Chain Management-An OverviewA supply chain can be visualized as a network of firms servicing and beingserviced by several other firms. However, it is conceptually easier to imagine achain as a river, originating from a source, moving downstream and terminating ata sink. The supply chain extends upstream to the sourcing of raw materials anddownstream to the afterlife activities of the product, such as disposal, recycling andremanufacturing. Regardless of magnitude, every supply chain can be visualized asconsisting of sourcing stages, manufacturing stages and distribution stages.Each of these stages plays both a primary (usually physical transformation orservice creation) and a dual (market mediator) role. The approach taken to executeactivities in support of both roles depends on the strategy of the supply chain,which in turn, is a function of the serviced products’ demand pattern (Fisher,1997). Depending upon the structure of the chain (in terms of products andprocesses employed), channel power can reside with the sourcing (e.g., monopolistsupplier of key commodities such as oil), manufacturing (e.g., dominant producerof a unique product such as semiconductors), or distribution (e.g., key distributorof consumer items) stages in the supply chain. Relative power in the supply chaininfluences strategic positioning of each link in the chain. Thus, managing supplychains is a negotiation between the objectives of constituent’s benefit at eachstage and the impact of each constituent’s objective to the overall objective ofmaximizing the benefit of the entire chain.The contribution captured at each stage depends on the nature of the dealingsbetween the buyer and supplier. The traditional model is characterized by an1
2adversarial relationship where a buyer awards contracts to one or more competingsuppliers based on price and other pertinent criteria. This paradigm has beenwidely criticized as short sighted by proponents of partnered buyer-supplierrelationships. The partnered approach favors a smaller or even single supplier basefor more supplier management initiatives to minimize inventory investments andencourage collaboration in, among other things, new product development.Supply chain management (SCM) is the art and science of creating andaccentuating synergistic relationships among the trading members that constitutesupply and distribution channels. Supply chain managers strive to deliver desiredgoods or services on time to the appropriate place in the ordered quantity in themost effective and efficient manner. Usually this is achieved by negotiating abalance between conflicting objectives of customer satisfaction and cost efficiencies.Each link in each supply chain represents an intersection where supply meetsdemand, and directing the product and information flows at these crossroads is atthe core of SCM. The integral value proposition of an integrated supply chain isas follows. Total performance of the entire chain is enhanced when all links in thechain are simultaneously optimized as compared to the resulting total performancewhen each individual link is separately optimized. Supply chain performance asa whole hinges on achieving fit between the nature of the products it supplies,the competitive strategies of the interacting firms, and the overall supply chainstrategy.Coordination of the individual links in the chain is essential to achieve thisobjective. The ability of trading partners to jointly communicate in real time andthe transactional ease of digital dealings allow web-connected firms to virtuallyintegrate. The Internet and information technology in general facilitate theintegration of multitudes of channel enterprises. On-line collaboration enables
3better informed economic decision making, reduces the costs of order placement,tracking and receipt, and enhances customer satisfaction.Information technologies are a key driver of modern operational efficiency,and efficient operational execution is a driver of effective SCM. Selection of tradingpartners, location of facilities, manufacturing schedules, transportation routes andmodes, and inventory levels and location are the fundamental operations decisionsthat run supply chains. These operational dimensions are the tributaries that pilotthe chain downstream through its channel to end demand. Accurate and timelyintegrated information navigates the chain from source to sink.A supply chain is a collection of multiple suppliers’, manufacturers’ anddistributors’ processes. Each process employs a distinct focus and a relateddimension of excellence. Key issues in managing an entire supply chain relate totactical and strategic analysis of coordinated decisions in logistics, manufacturing,distribution, and after sales activities of service and disposal or recycling; analyzingproduct strategies; and network design decisions.The motivation for this research is derived from the debate as to the best number of suppliers to employ for satisfying a buyer’s requirements. Further, the buyerconsidered is an intermediary in the supply chain and therefore must incorporatedownstream demand into its sourcing decision. Essentially, the decisions analyzedaddress the question of whether a single sourcing strategy is optimal or not. Tounderstand the relevance of strategic sourcing decisions, it must be understood howa firm’s supply chain strategy is anchored to its sourcing strategy.1.2 Strategic Issues in SCMA supply chain is only as strong as its weakest link. How the chain definesstrength is at the core of a supply chain’s strategy, and therefore design. Is strengthanchored in efficiency or responsiveness? Regardless of which strategic position ischosen, a firm’s ability to maintain a competitive advantage will depend on how
4well it reinforces its firm level value proposition with functional and departmentalstrategic decision-making. By analyzing product demand characteristics and thesupply chain’s capabilities, and crafting a fit between them, an individual supplychain manager can be assured that the specific product and process strategyemployed does not create dissonance within his firm and further throughout theentire supply chain.1.2.1 Product StrategyAchieving a tight fit between the competitive strategies of supply chainmembers and the supply chain itself is gained by evaluating the characteristicsof the products serviced by the chain. “The root cause of the problems plaguingmany supply chains is a mismatch between the type of product and the type ofsupply chain” (Fisher, 1997, p.106). Critical product attributes are (a) the demandpattern; (b) the life-cycle; (c) variety of offerings; and (d) the product deliverystrategy. Fisher (1997) categorizes a product as being either functional (basic,predictable, long-lived, low profit margin) or innovative (differentiated, volatile,short-lived, high profit margin). Further, using the product life cycle argument,innovative products (if successful) will eventually evolve to become functionalproducts. The types of supply chains needed to effectively service these twocategories of products are quite distinct. An efficient or low cost supply chain ismore appropriate for a functional product while a responsive or customer attunedsupply chain better services an innovative product. Obviously, a spectrum ofchain varieties exists between the end points of responsiveness and efficiency, andhence, most supply chains are hybrids which target responsiveness requirementsfor each product serviced while exploiting commonalities in servicing all productsto gain economies of scope. Thus, the strategic position of a supply chain balancescustomer satisfaction demands and the firm’s need for cost minimization.
5Information technologies enable both efficient and responsive supply chainssince they have the potential to provide immediate and accurate demand and orderstatus information. Efficiency gains via information technologies are gleaned fromdecreased transactional costs resulting from order automation and easier accessto information needed by chain members. Likewise, responsiveness gains can beobtained by a quicker response to customer orders. Hence, in practice, it seemsto have become standard practice for all supply chains to utilize some form ofinformation technology to enable not only a more efficient physical flow of theirproducts but also to simultaneously improve their market mediation capability.However, the efficiency of physical flow primarily depends on a supply chain’sinfrastructure.1.2.2 Network DesignIn general, network design determines the supply chain’s structure. Thesignificant capital investments required in building such a structure indicate therelative long run or strategic importance of network decisions. Network decisionsin a supply chain involve facility focus, facility location, capacity planning, andsourcing/distribution channels (Chopra and Meindl, 2001). Each network designdecision impacts the firm’s ability to provide value. Therefore, these decisions mustincorporate their strategic influence into the analysis.Facility focus relates to how network investments facilitate the supply chainstrategy. If the facility in question is a manufacturing plant and the plant is set upto produce only a specific product type, the chain will be more efficient but lessflexible than it would be if the plant produced multiple product types.Facility location decisions are essential to a firm’s strategy. The cost ramifications of a sub-optimal location decision could be substantial. Further, shuttingdown or moving a facility is significant not only in terms of financial resources, butalso in terms of the impact on employees and communities. Other factors which
6should be considered are the available infrastructure for physical and information transportation, flexibility of production technologies employed, external ormacroeconomic influences, political stability, location of competitors, availability ofrequired labor and materials, and the logistics costs contingent on site selection.Depending on the expected level of output for a facility, capacity allocationsshould be made so that idle time is minimal. Under-utilization results in lowerreturn on investment and is sure to get the attention of company executives.On the other hand, under allocating capacity (or large utilizations) will create abottleneck or constricted link in the supply chain. This will result in unsatisfieddemand and lost sales or increased costs as a result of satisfying demand from anon-optimal location. The capacity allocation decision is a relatively long-termcommitment, which becomes more significant as sophistication and price of theproduction technology increase.The most basic question of an enterprise is: Who will serve our needs andwhose needs will we serve? This is a recurring question. Decisions regarding thesuppliers to a facility and the demand to be satisfied by a facility determine thecosts of material inputs, inventory, and delivery. Therefore, as forces driving supplyand/or demand change, this decision must be reconsidered. The objective here istypically to match suppliers and markets to facilities in order to minimize not onlythe system-wide costs but also the customer responsiveness of the supply chain.Each of these network design decisions is not made in isolation since there is aneed to prioritize and coordinate their combined impact on the firm and its supplychain. In general, network configuration is the structure of the supply chain and itis within this structure that operations strategies and tactics are implemented toreinforce the overall strategy of the entire chain. Of particular relevance for thisresearch is a firm’s sourcing strategy.
71.3 Operational Issues in SCMSCM has evolved from process reengineering efforts to coordinate and integrateproduction planning at the factory level in order to expand the scope of strategicfit (Chopra and Meindl, 2001). Positive results from these intra-functional effortshave extended the SCM philosophy throughout the enterprise. Further, processimprovements at the firm level highlighted the need for suppliers and customersof supply chain managed firms to adopt an integrated SCM philosophy. Makinga supply chain’s linkages as frictionless as possible is the tactical goal of suchan integrated philosophy. Key tactical coordination decisions for SCM relate totransportation, transformation, and information transmission.1.3.1 TransportationTransportation decisions impact product flow not only between supply chainmembers but also to the market place. In many supply networks, transportationcosts account for a significant portion of total supply chain cost. In determining themode(s) and route(s) to employ through the supply chain, transportation decisionsseek to strike a balance between efficiency and responsiveness so as to reinforcethe strategic position of the supply chain. For example, an innovative product’stypically short life-cycle may warrant expensive air freight speed for a portion orall of its movement through the chain, while a commodity is generally transportedby slow but relatively economical water or rail freight. Shipping via truck is alsoused frequently. Trucking is more responsive and more expensive than rail, and lessresponsive and less expensive than air. Most supply chains employ an intermodalstrategy (e.g., raw materials are transported by rail or ship, components by truck,and finished goods by air).A supply chain’s transportation network decisions are inextricably linked tostrategic network design decisions. Transportation network design choices driverouting decisions in the supply network. The major decisions are whether to ship
8directly to buyers or to a distribution center, and whether a routing scheme isneeded. As consumers’ expectations regarding merchandise availability and deliverybecome more instantaneous, the role of a supply chain’s transportation network ismore critical.1.3.2 Transformation“A transformation network links production facilities conducting work-inprocess inventories through the supply chain” (Erenguc, Simpson, and Vakharia,1999, p.224). Suppliers linked to manufacturers linked to distribution systems canbe viewed as a transformation network hinging on the manufacturer. Transformingsupplies begins at the receiving stations of manufacturers. The configuration ofmanufacturing facilities and locations of transformation processes are determinedby plant level design decisions. The manufacturing process strategy employed at aspecific plant largely drives the decisions. While an assemble-to-order (ATO) plantmay have very little investment in production, it requires larger investment in subassembly inventories. On the other hand, a make-to-stock (MTS) facility may havelittle or no investment in process inventories, it typically requires larger investmentsin raw materials and finished goods inventories. A make-to-order (MTO) facilitymay have significant investment in components and production facilities, with fewraw materials and finished goods inventories. A product’s final form can also takeshape closer to the end consumer. To keep finished goods inventory costs as low aspossible, and better match end demand, a supply chain may employ postponementto delay customizing end products.Major design decisions such as facility configuration and transformationprocesses are considered longer term decisions. These decisions constrain the shortto mid-term decisions addressed in a plant’s aggregate plan. An aggregate plan is ageneral production plan that encompasses a specific planning horizon. Informationrequired to develop an effective aggregate plan include accurate demand forecasts,
9reliable supply delivery schedules, and the cost trade-offs between production andinventory. Each supply chain member develops an aggregate plan to guide mediumterm tactical decisions. To ensure that these individual plans support each other,the planning process must be coordinated. The degree and scope of coordinationwill depend on the economics of collaborative planning versus the costs of undersupply and over-supply. In general, a manufacturer should definitely involve majorsuppliers and buyers in aggregate planning. Whether this planning informationtrickles to other sup
1.1 Supply Chain Management-An Overview A supply chain can be visualized as a network of firms servicing and being serviced by several other firms. However, it is conceptually easier to imagine a chain as a river, originating from a source, moving downstream and terminating at a sink. The supply chain extends upstream to the sourcing of raw .
Global Sourcing Success Factors refer to the factors, which have the highest correlation with successful global sourcing, and are thus highly important to do right as to be successful in global sourcing. Global Sourcing Drivers refer to the benefits and advantages that can be gained from global sourcing.
for sourcing receipts: market-based sourcing or cost-of-performance sourcing. Market Sourcing Under market-based sourcing, receipts are sourced to the state where the ''benefit is received.''10 Although that rule is simply stated, it can present some complexities in application. For example, Georgia has sourcing regulations stating that re-
The Sourcing Process: Step by Step Making it Happen: Sourcing Steps Let's now take a walk through each step of the sourcing process: 1. Make/Design/Buy Analysis . RFX is a catch-all term in strategic sourcing that captures all references to Request for Information (RFI), Request for Proposal (RFP), Request for Quote (RFQ), and Request for
This eBook assumes that some important steps have occurred in preparation for your strategic sourcing initiative, steps that are critical for the success of the project. Notably among them . Development of your sourcing strategy is an important milestone in the sourcing process. A sourcing strategy includes the following elements: A list .
Coupa Whitepaper Understanding the Sourcing Organization Maturity Model 2 Introduction The goal of every Sourcing Organization is to optimize the way the company purchases goods and services. This paper describes a Sourcing Organization Maturity Model useful for determining
The Strategic Sourcing Model The six step Strategic Sourcing Model above links the entire process together from Data . specializing in one focus area. Performing steps 1 & 2 above would yield this . We’ve nearly completed a full 5S strategic sourcing exercise. All the steps have been taken to Sort, Standardize, .
Strategic Plan Strategic Sourcing Group . 8 . 3.2 Improve internal and external marketing of Strategic Sourcing services Without mandatory use of our strategically sourced contracts, marketing of our Strategic Sourcing services is imperative to our success. A detailed marketing plan
sourcing rules took effect in 2015, New York became one of approximately 20 states to have adopted those sourcing rule s for some or all their receipts. Since 2015 an additional three states have passed market-based sourcing and an additional three or four states are considering legislat
