Failure is Not an Option: By his own account, Hancock has had a "great" career in supply chain management.
How to Select Strategic Suppliers — Part 1: Buyers need to be wary of entering into dependent relationships where the supplier will gain a dominant position. In researching published approaches to determining procurement organisation, and in a series of discussions with procurement professionals on LinkedIn, I have gradually come to realize that surprisingly little reference is made to supply market constraints and the willingness or otherwise of suppliers to do business.
The connection between procurement organisation and selecting suppliers to add value is that the historic focus of procurement organisation has, in my opinion, been directed at cost-down rather than value-adding initiatives.
What alternative model would you suggest, and why? Many procurement professionals will be acutely aware that fervent supplier interest is not always present. Small businesses often suffer a lack of interest from potential suppliers.
Medium-sized groups may find themselves unable to gain any traction on what, at first glance, might seem to be volume-leveraged opportunities. Research into strategically important categories reveals, when suppliers are ready and willing, more often than not, it is they who have the upper hand.
How do we do this?
Purchasing Portfolio Analysis a. FIGURE 1 I have previously commented on Kraljic and similar matrices with regard to the significant weaknesses in their practical application to supplier appraisal.
Supply positioning models nevertheless convey important concepts, notably the differentiated purchasing strategies for different segments of the portfolio. Together with other tools e. Kraljic proposed three strategies for strategic items exploit, balance or diversify based on the relative power of buyer and supplier.
Gelderman and Van Weele proposed strategic directions for all quadrants: Digressing slightly from the main thrust of this article, it is worth noting that Gelderman and Van Wheele concluded that it is not possible to deduce strategies from a 2-dimensional portfolio analysis.
Other factors need to be considered: Where they expected to find a balance of power within the strategic quadrant, they actually found that supplier dominance prevailed. These sources provide a compelling case, still valid today, for Procurement to place particular focus on the circumstances and outlook of the supplier.
Although satisfactory for tactical procurement, supplier preferencing is not a suitable tool for strategic category management. A fundamental weakness is that it offers no insight, and no response, to the future development or unsustainability of relative value.
For example, might the present offering be under competitive threat? Our interest as buyers may be in relatively narrow products or technologies rather than the suppliers overall business portfolio.
FIGURE 3 A better approach may be to undertake a less comprehensive assessment and then appraise the supplier by alternative methods which I shall come to in part 2. I started this article with a statement that few supplier-customer partnerships are equal, and a warning with regard to entering into relationships where the supplier might gain dominance.Cast Your Vote for the Top 10 3PL Excellence Awards.
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