Supply Chain Management

QUESTION ONE

 

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Use a flowchart to illustrate the activities and parties that Walter would have involved during the purchasing process of the folding machine. (20 Marks)

 

 

 

 

Joan Kada Senior buyer Maintenance Equipment and Supplier
Edward Bell Senior Buyer Scientific Equipment
Glen Meredith Senior Buyer Computer and Business Products
Ray Sharen Manager Purchasing Systems
Elizabeth Robertson Purchasing Administrator
Ken McKellar Buyer
Leslie Heyninck Buyer
Heather Sloman Buyer
Barbara Hillman Clerk
James Pryor Central Supplier
Blake Hyatt

Director

Cindy Prosser Administrative Assistance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

QUESTION TWO

 

 

 

Discuss the process that Heather and the purchasing department followed to arrive at the 1200 approved suppliers. (10 Marks)

 

 

 

 

The selection criteria for becoming an approved vendor was based on the following weighted average evaluation system:

 

 

  • Price, 50 percent

 

  • Compliance with specifications, 25 percent

 

  • Service, 20 percent

 

  • Partnership, 5 percent

 

The purchasing department had three buying groups, and each group handled approximately 20 requests each day. In addition, approximately 250 contracts were rebid each year for ongoing purchases, such as snow removal services and photocopier supplies.

 

The total dollar volume of purchases amounted to $75 million of goods and services each year. According to Heather Sloman, the main objective of the purchasing department was to achieve the greatest cost savings.

 

She commented on the role of purchasing at the university: “Our training in purchasing allows us to negotiate the best deals for the university and help avoid wasting university money.” Although it was university policy that approval from the purchasing department was required before commitments could be made to suppliers, it was not unusual that university personnel contacted suppliers directly.

 

Every year there were about 275 cases where contracts were signed with suppliers without prior approval of purchasing. Heather described what happened in these situations: “Most of the time, the only thing we can do is to call them and ask them to provide the details of the purchase. Usually, the purchase has already been made, and there isn’t much else that can be done.”

 

 

 

 

 

 

 

 

 

 

 

THE EXPLORATORY STAGE (PRE-EVALUATION PHASE)

 

This investigation stage involves the identification of possible suppliers and a pre-screening to reject unsuitable onesyhg with the purpose of creating a pool of potentially suitable suppliers.

 

 

Step 1 – Identification of potential suppliers: sources of information for initial selection and evaluation There are a variety of sources available to identify suppliers. Many of these can be used to carry out subsequent research on “short-listed” suppliers. Most important sources of information include: Internet search engines Company websites Chambers of commerce or business Embassies and consular general officers’ National associations Purchasing institutes Trade directories trade journals and business directories Industrial trade fairs Financial and industrial newspapers and magazines Credit bureaus Existing suppliers, sales representatives etc.

 

 

Step 2 – Pre-screening to reject unsuitable suppliers It is important to perform an initial screening operation to eliminate suppliers that are unsuitable. There are many grounds for the elimination of suppliers at this early stage: Suppliers that do not meet the organisation’s quality requirements Suppliers that are in a poor financial situation Suppliers that are experiencing protracted labour problems and strikes Suppliers whom the organization has previously rejected, e.g., for poor delivery Where there is a reasonable risk of interruption in supply.

 

THE SELECTION STAGE (EVALUATION PHASE) The first two steps identified possible suppliers while eliminating unsuitable suppliers to provide a shortlist or pool of potentially suitable suppliers. The choice of supplier should be in line with the purchasing policy guidelines.

 

Step 3 – Conduct research on potentially suitable suppliers There are several avenues available to purchasing managers to obtain the information needed to conduct research on potentially suitable suppliers in relation to the selection criteria. Clearly the depth of investigation and the criteria used can vary widely depending on the product or service being purchased. Information sources for supplier research include: Information in the public domain – supplier’s websites, financial information Supplier visits – by cross-functional teams Supplier surveys or questionnaires – request for information (RFI)

 

Step 4 – Choose an evaluation method and analyse the suppliers Evaluation methods range from the informal to the formal. Informal techniques would include the purchasing manager’s judgement for low-value; non-critical purchases to panel consensus where a group (e.g., a cross-functional team) would discuss the relative merits of each supplier before deciding. The executive round table is a semi-formal method where the purchasing team prepares and delivers a presentation to the board of directors for them to make the choice. The most formal method is the weighted-point supplier performance rating where all pertinent criteria are weighted according to their importance and each potential supplier is then scored against them.

 

Step 5 – Select the supplier or suppliers After studying the evaluation in relation to the criteria, the purchasing manager or the cross-functional team will be able to approve the supplier or suppliers. This will be carried out within the framework of the purchasing policy guidelines.

 

 

 

THE SUPPLIER MANAGEMENT/ MAINTENANCE STAGE (POST-EVALUATION PHASE)

 

This stage is part of supplier management. After evaluation, selection, and approval of suppliers, it is essential to maintain and develop them.

 

Step 6 – Ongoing measurement of supplier performance Supplier performance measurement can be done using the weighted point evaluation method together with a rating sheet. Many organizations base their on-going measurements on quality, cost reduction, on-time deliveries, technology, and service.

 

Step 7 – Supplier accreditation Over a period of time, suppliers who have gone through the selection and evaluation process successfully can be classified in three groups: · Approved suppliers – these are suppliers that have met the requirements of the supplier selection process (steps 1-6) · Preferred suppliers – these suppliers have shown that their past performance consistently meets and exceeds the organization’s required levels for criteria such as quality, cost reduction, delivery and service · Certified suppliers – certification of suppliers is the ultimate supplier accolade and many organizations hold functions to present such awards. The certification is an in-depth assessment of the supplier and revolves around quality management systems and continuous improvement. Being in a certain category will influence decisions on future orders and contracts.

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