Wednesday, December 31, 2008

The Challenge to cut Carbon Emissions

The Threats of 'GHG" (Green House Gases)
Whether we like it or not this is the unseen threat to our Supply Chain. Yes global warming is a threat. Businesses have to become aware aware of it and those that do will benefit.
Will legislation be the only thing to make business change?
The UK is taking the lead. Can we follow? Is it feasible in today's economic turmoil?
Read this article:
from "Inside Supply Management" of December 2008

Thursday, December 25, 2008

SOURCING ! - What choices does business' have?

The various sourcing options open to us are:

Multiple sourcing
Multiple sourcing implies buying from three or more suppliers. Typically this may be non-strategical items or office supplies, where the employees are given the freedom to choose a supplier of their liking. Sourcing strategical items from more than one or two suppliers is not normally recommended, unless the company is in a transition phase and considering replacing some its suppliers, and hence testing the supplier market in order to see who can perform better than the other.
Dual sourcing
Many companies apply dual sourcing, buying from two suppliers. The driving force is that both suppliers have to compete against each other.
Double sourcing
Using two suppliers, both will attempt to become the preferred supplier, thus maximizing quality delivered from the supplier and minimizing costs to the buyer. For instance, one option could be to have a supplier in China for low-cost mass-produced components and a supplier in Europe for high-end low-volume components.
See-saw sourcing
As the name implies, this type of sourcing uses the see-saw principle to distribute contracts in an uneven manner, say 70/30, with both suppliers competing for next year’s (or so) contracts, such that if the supplier with the lesser volume performs better than the supplier with the larger volume, next time that supplier will be awarded with 70%.
Parallel sourcing
Both double and parallel sourcing implies that a the same required product or volume is split between two suppliers. Parallel sourcing implies that sometimes one supplier is used for a component of a model at one assembly plant while another supplier is used at a different plant. Parallel sourcing can also mean sourcing more than one required product or volume from the same supplier. This eliminates quality or performance differences between suppliers for different components.
Single sourcing
Single sourcing was once hailed as the ultimate sourcing strategy since buyer and supplier enter a very close long-term relationship, where they rely upon and support each other. However, as the Nokia versus Ericsson fire incident showed, it can be disastrous.
Societal/political-related monopoly or sole sourcing
Sometimes, for political or legal reasons, one company is given monopoly for the distribution of a certain good, e.g. water or power supply. Here, the buyer will have little or no choice and little or no buying power that enables discounts or advantages compared to other customers.
Market-related monopoly or sole sourcing
Market-related sole sourcing can have several causes. One reason could be the company procurement policy that (for whatever the reason may be), effectively rules out all but one supplier. Another reason is when the buyer company willingly or not (in most cases: unwillingly) sets up technological barriers (due to their choice of production processes or market segment) that bar all but one supplier. Instead of seeking competition leading to development and alternative solutions, the company has remained passive, which in turn may have been exploited by the supplier, making it a secure source of income, since the buyer has no other alternative.
Direct single sourcing
One way to make critical supplies less critical is direct single sourcing. Here, the buyer and supplier enter a business partnership or strategic alliance, or maybe a simple operational alliance with a set goal or even a planned termination.


There are many ways a company can enter a buyer-supplier relationship. All strategies have their distinct advantages and disadvantages.Whichever strategy is chosen may also depend heavily on the industry sector the company operates in. More often than not, however, a large part of company procurement will end up with a small number of suppliers, often termed strategic supplier partners or strategic suppliers, but not always treated as strategic suppliers. Rather, they are treated and exchanged like regular suppliers in free competition. In terms of bringing down costs, this may be a good strategy.

Friday, December 5, 2008

PURCHASING ~ Best Business Practices

Purchasing best practice delivers profit growth!

Would you take a pile of ten dollar notes and set fire to them? I thought not. Yet that is exactly what an awful lot of businesses do in the way they approach their purchasing.

Apart from salaries, the biggest area of expense for most businesses is purchasing. In our experience, a sharpened focus on buying can reduce a business’s costs by as much as 20%. What would be the impact on your business of even a 10% saving on your
total purchase bill?

All too often purchasing is treated as the poor relation compared with other functions within a business. Yet, apart from sales, no other area of a business has so much potential to impact on the bottom line. Every pound saved by better buying is a dollar of additional profit. And it goes further than that. More value and improved innovation from your suppliers equate to a superior proposition for your customers.
So better buying can deliver both lower total cost and improved revenues.
You ignore your organisation’s purchasing function at your peril.

How does your business measures up?