What is the purpose and characteristics of a “supplier managed inventory” program?
SMI programs shift inventory responsibility to the supplier.
Characteristics:
- Supplier monitors and replenishes buyer’s inventory.
- Supports JIT and lean systems.
- Reduces buyer’s administrative burden.
- Enables closer collaboration and process improvement.
What is the overall objective/purpose of conducting a supplier evaluation and selection activity?
To reduce sourcing risk and maximize value to the buyer by selecting suppliers capable of long-term performance, quality, and strategic alignment
What are the advantages and disadvantages of selecting “local suppliers” over national or global suppliers?
Advantages:
- Faster delivery and shorter lead times.
- Easier communication and coordination.
- Lower logistics costs.
Disadvantages:
- May lack scale or advanced capabilities.
- Limited product range.
- Possibly higher unit costs.
What is the difference and advantages between a “single sourcing”, “sole sourcing”, and “multiple sourcing” approach?
Single sourcing: Choosing one supplier among many. Advantage: Leverage, relationship depth, streamlined operations.
Sole sourcing: Only one supplier exists due to patents/IP. Advantage: Access to exclusive capabilities or technology.
Multiple sourcing: Using several suppliers for the same item. Advantage: Supply assurance, price competition, performance motivation.
What is the difference between a “certified supplier” and a “preferred supplier”?
Certified supplier: Extensively audited; consistently meets/exceeds quality standards.
Preferred supplier: Consistently meets performance/service expectations and adapts well to changes.
What is the definition and purpose of “risk management”? What is the difference between “financial risk management” and “operational risk management”?
Risk management identifies and mitigates threats to supply performance.
Financial risk management: Assesses supplier’s financial health (e.g., bankruptcy risk).
Operational risk management: Evaluates delivery, quality, and capacity risks.
What are the methods available to buyers to gather additional information and select a supplier once the buyer has made an “initial cut” to eliminate unqualified suppliers?
- Supplier-provided info (RFIs, RFPs, RFQs).
- Site visits.
- Use of preferred/certified/partnered suppliers.
- External or third-party data.
- Domestic vs. international comparisons.
What are the characteristics of an effective supplier survey?
- Comprehensive and performance-focused.
- Objective and reliable.
- Flexible and easy to understand.
- Uses clear scoring and weighting systems.
When creating a weighted average supplier evaluation survey, what must the total weights used in survey add up to?
100
What is the difference between a supplier “performance problem” and a supplier “deficiency”?
Performance problem: Temporary issue (e.g., late delivery).
Deficiency: Systemic failure (e.g., poor quality systems or lack of capability).
Why would process mapping be used during the supplier evaluation process?
To visualize supplier operations, identify inefficiencies, and assess alignment with buyer’s requirements for improvement and decision-making.
How are “commodity teams” used during the supplier evaluation and selection process?
Commodity teams evaluate suppliers for specific categories, combining cross-functional expertise (e.g., purchasing, quality, engineering) to ensure thorough and strategic selection.
What is the role/function of a “data warehouse” during the supplier evaluation/selection process?
It stores and organizes supplier performance data, enabling analysis, benchmarking, and informed decision-making across sourcing activities.
What is the criteria the text suggests using to determine if a company should buy direct from a manufacturer or buy the same product through a distributor?
- Size of purchase.
- Manufacturer’s direct sales policies.
- Storage availability.
- Required services.
- Inventory management needs.
- JIT or lean support.
What are the 3 general criteria to rate key suppliers?
- Cost/price
- Quality
- Delivery performance
