Best Practice in Inventory Management Chapter 9 Procurement

Best Practice in Inventory Management Chapter 9 Procurement Dr Tony Wild

Figure 9. 1 Kraljic's Matrix Dr Tony Wild Importance to Customer Unimportant Important Leverage Items Description Customer controls supply Relationship Small Supplier reacts to large customer’s whims Solution Benevolence, planned demand Situation Supplier has to be agile and therefore inefficient Standard Items Description Standard products exstock, many potential suppliers Relationship Not close unless price advantage Solution Rationalise vendors, contracts, VMI Situation C class items, use alternative suppliers Unimportant Strategic Items Description Products important to both parties Relationship Collaboration, Mutual Dependency Solution Single source, Communication Kanbans Situation High Volume A class items, Low stock Risk Items Description Vendor dictates supply to Customer Relationship Large supplier, small customer. Usually poor delivery performance Solution Seek alternative supply Situation Patented product or bulk manufacturer Importance to Customer Important

Figure 9. 2 Supplier Attitudes Manufacturing Attitude Customer Attitude Compromise Provides products Requires solutions Supplier wants narrow range of options Customer sources wider range from each supplier Increased range secures customer Bulk Low cost production Require time-phase deliveries Lean Production Master Schedule Own design, efficient to produce Fits in with products from other suppliers Demand sensitive design Fill Capacity Consistent Lead time Manufacturer adopts lean supply Delivery when available with lead time Fast reliable service, ex-stock where possible Agreed delivery cycle plan Long term fixed plan Flexibility, respond to reasonable demand changes. Schedule with flexibility options Generic service Different service for each customer Develop agile processes Make margin Reduce cost Improve efficiency & design Avoid waste Reliable products Quality Stystems operating Efficient Manufacture Small batches Reduce production change-over times Minimise cost to fulfil demand Convenient ordering process Integrated systems, VMI ‘Provide products’ philosophy Packaged items ready for customers to use or sell Customise products Supplier increases profit thought solutions Dr Tony Wild Best Practice in Inventory Management

Figure 9. 3 Single Sourcing Advantages & Disadvantages Dr Tony Wild

Figure 9. 3 Single Sourcing Advantages & Disadvantages Dr Tony Wild Best Practice in Inventory Management

Figure 9. 4 Partner Selection Checklist Compatibility Dr Tony Wild • Size • Market compatibility • Corporate Objectives and Strategy • Management Style & Ethics • Marketing approach • Profitability • Geographic location • Product Consistency • Supply Reliability • Operational Capability • Information Structure • Interpersonal Match • Development Opportunities • History

Figure 9. 5 Classification of suppliers Status Vendor Class Certified Qualified Inspection First choice. Close relationship Capability Audit Trusted Suppliers. Industry Accreditation No inspection Select group of suppliers Audit and Sample Business Quality Audited Inspection Offered expanding business Approved Used occasionally or Standard items Conformance Items not available elsewhere Certification or full Prototypes, non-inventory items, inspection Proscribed office supplies Avoid using except where unavoidable 100% detailed inspection Dr Tony Wild Best Practice in Inventory Management