Term
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Definition
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Term
| Supplier Relationship Management (SRM) |
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Definition
| Process for identifying all interactions with key supplier and then managing them in a way that increases the value from the relationship for both parties |
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Term
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Definition
| A supplier that is part of the same company as its customer. It provides the products or services that co-workers within the organisation need in order to do their job |
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Term
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Definition
| A supplier that is independent of the organisation and provides products or services to it |
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Term
| An internal supplier normally produces products and services that are |
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Definition
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Term
| Advantages of using an internal supplier |
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Definition
- Greater control and continuity of supply
- Relationship is stable and longterm
- Improved quality control
- Potential lower costs as no external supplier margin is added to the cost
- Intellectual property is protected |
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Term
| Disadvantages of using an internal supplier |
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Definition
- No guarantee of value for money
- supplier has both fixed and variable costs
- As there is no money involved internal supplier may be less motivated to meet required performance
- Internal supplier needs continual investment, eg new machinery |
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Term
| It may not be possible for an organisation to produce a product or service itself due to the following factors |
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Definition
- High costs of production if required volumes are low
- Legislative barriers, eg permits/licences are required for some services
- Skill shortages in areas that are key to producing the product or service |
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Term
| Advantages of using an External supplier |
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Definition
- Often an expert in their field
- May be more cost effective and able to offer economies of scale if producing for other customers
- Frees up internal resources
- External supplier may be more flexible to meet changing levels in demand
- Useful for when small volumes are required |
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Term
| Disadvantages of using External suppliers |
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Definition
- Dependancy on the supplier, increasing risk
- Damage to buyers reputation if supplier engages in unethical behaviour
- Cost and risk of transportation
- Risk of relationship issues |
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Term
| The Relationship Spectrum |
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Definition
From Competitive Tactical to Collaborative Strategic
Adversarial
Arm's length
Transactional
Closer Tactical
Single-sourced
Outsourced
Strategic alliance
Partnership
Co-destiny |
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Term
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Definition
| Also called the 80/20 rule, this states that 80% of the outputs come from 20% of the inputs |
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Term
| The duration of the relationship/contract will increase if |
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Definition
| a supplier is of key importance to a buyer, the buyer will want to lock them into a longer-term agreement in order to secrure the supply and price |
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Term
| Trust between two parties will increase as |
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Definition
| the two businesses become more involved in each others activities, trust will develop between the staff working on the contract |
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Term
| Communication in terms of both frequency and detail will increase if |
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Definition
| a requirement has significant importance to a business it will need to communicate to the supplier regularly to ascertain key information such as lead times |
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Term
| Levels of innovation will increase if |
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Definition
| a contract is long-term the supplier is more likely to want to work with a buyer ti make improvements that will drive value for both parties |
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Term
| Characteristics of an Adversarial relationship |
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Definition
- The outcome of the deal is more important than managing the relationship over a long period
- Suppliers providing non-core products or a one off, ie stationary
- Poor communication, lack of trust |
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Term
| Characteristics of an Arm's-length relationship |
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Definition
- Supplier used infrequently, short term.
- Both parties act independently of each other |
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Term
| Characteristics of a Transactional relationship |
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Definition
- Similar to arm's length, however the frequency or volume of the purchase is slightly higher, but product or service still low value and low risk
- Markets that have a number of competing suppliers, allowing buyer to undertake regular competitive tendering processes |
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Term
| Characteristics of a Closer tactical relationship |
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Definition
- The time and resources required to develop a collaborative relationship are not justifiable, but the buyer needs to enure that it is dealing with a competent supplier
- In some tiered supply chains this type of suppler may co-ordinate the activities of other suppliers |
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Term
| Characteristics of a single-source relationship |
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Definition
- Where an organisation purchases a product or service exclusively from one supplier
- Single-source decisions usually made at a strategic, top management level
- Offering exclusivity requires a high level of trust
- Not to be confused with a sole source supplier (there is only one supplier that is able to fill the requirement (monopoly)) |
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Term
| Characteristics of an outsourced relationship |
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Definition
- service previously carried out inhouse is transferred to an external supplier
- the aim of outsourcing is to reduce costs, staffing and overheads.
- often outsourced to an economy where labour is cheaper
- a business will only outsource non-core activities, allowing them to focus on its core competencies |
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Term
| Characteristics of a Strategic alliance relationship |
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Definition
- where two or more suppliers join together to deliver a joint offering, such as a new product (eg Toyota and Subaru)
- Aim is that working together will be mutually beneficial and will bring benefits quicker than if an organisation worked alone |
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Term
| Characteristics of a Partnership relationship |
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Definition
- Beneficial when procuring a high-risk, high value product or service
- allows supplier to have a much greater understanding of the buyers needs
- Both parties will keep the other informed of future plans and the relationship is long-term
- The relationship is equal in terms of the balance of power |
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Term
| Characteristics of a Co-destiny relationship |
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Definition
- The buyer and supplier organisations will be very closely linked, making decisions about their futer together
- High level of interdependence between the two parties
- Joint ventures are an example of a co-destiny type of relationship |
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Term
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Definition
| Transfer of Undertakings (Protection of Employment) |
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Term
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Definition
| regulations that protect the rights of the employees where work they were employed to undertake is transferred to a new business |
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Term
| The stages of the relationship life cycle |
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Definition
On-boarding
1. Qualification
2. Segmentation and risk management
3. Performance management
4. Development and innovation
Phase-out (if required) |
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Term
| There are two main processes that buyers use to on board and select suppliers |
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Definition
- Request for information (RFI)
- Request for Proposal (RFP) |
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Term
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Definition
| key model that buyers can use to support them in building effective selection and qualification processes |
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Term
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Definition
1. Competency
2. Capacity
3. Commitment to quality
4. Control of processes
5. Cash
6. Cost
7. Consistency
8. Culture
9. Clean
10. Communication |
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Term
| Carter's 10 C's - 1. Competency |
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Definition
| The buyer will want to check that the supplier has delivered similar products or services and is competent to perform the task(s), may also ask for references/evidence |
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Term
| Carter's 10 C's - 2. Capacity |
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Definition
| The supplier will need to have a sufficient capacity to provide the required volume of products or service levels |
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Term
| Carter's 10 C's - 3. Commitment to quality |
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Definition
| A supplier will need to demonstrate how it manages quality, such as through an internal system or a third party system such as ISO 9001 |
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Term
| Carter's 10 C's - 4. Control of processes |
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Definition
| There are various aspects of controls of processes, like the internal processes and procedures, that the supplier has. In some industries, control will be governed by legislation eg, catering and food production |
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Term
| Carter's 10 C's - 5. Cash |
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Definition
| A buyer needs to ensure that the supplier is financially stable, with sufficient cash flow, and therefore not likely to go out of business |
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Term
| Carter's 10 C's - 6. Cost |
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Definition
| referes to the price submitted by the supplier |
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Term
| Carter's 10 C's - 7. Consistency |
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Definition
| The buyer will be looking for a supplier that is able to perform consistently, perhaps who is able to produce the product of service at the required quality consistently |
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Term
| Carter's 10 C's - 8. Culture |
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Definition
| The supplier should have the same values and ways of operating as the customer. This becomes more important the further the relationship moves to the right along the spectrum |
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Term
| Carter's 10 C's - 9. Clean |
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Definition
| particularly important in industries such as construction and heavy manufacturing where breaches of environmental legislation are more likely and could result in costly fines |
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Term
| Carter's 10 C's - 10. Communication |
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Definition
| How will a supplier communicate with the buying organisation? This needs to be in the format that the buying organisation requires. This point also includes the use of IT software and hardware |
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Term
| The relationship life cycle stage 2 - Segmentation and risk management |
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Definition
| The procducts that a supplier provides will be segmented and classified to ensure that the correct relationship type is developed with each supplier |
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Term
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Definition
| A process involving risk indentification, assessment and management. Ongoing process that links to supplier relationship management |
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Term
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Definition
- A key supply chain partner going out of business
- A supplier using child labour, causing reputational risk
- An event such as flooding, or a supplier staff strike, affecting deliveries of component parts |
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Term
| Supplier performace measurement |
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Definition
| the assessment of a suppliers current performance. This may be assessed against the required standards, the suppliers previous performance and how it compares to other suppliers delivering a similar service |
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Term
| The contract management process will involve the use of key performance indicators (KPI's), which may include the following |
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Definition
-Safety: Lost time injury frequency, Total injury frequency, near miss incidents/accidents
- Quality: Stock accuracy, Pick accuracy, Stock loss/damage, Obsolescence, Shrinkage
- Delivery: In full on time, delivered with defects, goods receipt discrepencies, compliance to paperwork, conformance certs
- Cost: Cost to budget, output, continuous improvement, waste revenue stream
- Morale: Attendance, employee/supplier survey/opinion results
- Environment: waste to landfill, CO2 emissions |
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Term
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Definition
| The process of working with a supplier to improve its processes and/or the products and services it delivers. The aim of supplier development is commercial benefits for the buying organisation; however there will also be benefits for the supplier |
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Term
| Reasons why a buyer might undertake supplier development activities |
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Definition
- Previous performance issues with a key supplier resulting in quality issues that need to be addressed
- The buying organisation needs to improve its own performance
- The buyer wants the supplier to adopt some of its own technologies such as ordering systems
- The buyer wants to develop new products and services |
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Term
| Supplier developement can result in a number of benefits for both the buyer and the supplier, such as |
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Definition
- It can reduce costs for a buyer and supplier
- Working together can result in elimination of waste from the supply chain, again reducing costs
- Long term security of businesses can serve to increase the motivation of a supplier, which could lead to innovative benefits |
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Term
| A buyer supplier relationship can come to an end for various reasons such as |
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Definition
- The contract comes to a natural end and there is no longer a requirement to purchase that product
- The contract is re-tendered and another supplier is able to provide a more competitive offer
- The contract with the supplier is terminated due to a material breach such as poor performance
- The supplier becomes insolvent |
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Term
| There are a number of portfolio analysis techniques that can be used by a buyer to support the development of sourcing and supplier relationship strategies |
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Definition
- Supply positioning (the Krajic model)
- Supplier preferencing model
- Market management matrix |
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Term
| Undertaking a positioning exercise has a number of benefits for the buyer such as |
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Definition
- Allowing a buyer to focus on leveraging the available resources by identifying both sourcing and relationship opportunities that may be able to add value
- Identifying opportunities to develop competitive advantage
- Providing a framework for decision-making and action planning for the buyer
- Improving risk management, by helping the busines to identify which products and suppliers pose a vulnerability |
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Term
| Three examples of procurement objectives and how these could be supported by the use of portfolio analysis |
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Definition
- Identifying opportunities to move non-contract spend on to a contract and as a result reduce costs. Perato analysis
- Identifying an organisations key products and supplier. Kraljic model identfying strategic items
- Developing value-adding relationships with strategic suppliers. Supplier preferencing model |
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Term
| ABC Anaylsis can be used to look at reducing the costs of a product or service. What is the application of ABC Analysis |
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Definition
- A items account for 80% of cost and 20% of volume
- C items represent low-cost and high-volume items
- B items are in the middle |
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Term
| Pareto analysis and ABC analysis are based on |
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Definition
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Term
| The downside of the pareto model or ABC analysis is that |
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Definition
| it does not consider the impact of the categories or the market complexity. Also it does not provide strategic reccommendations, it has no real guidelines and therefore it is not a portfolio technique |
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Term
| There are various types of risk that could affect procurement, that can be related to the two following factors |
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Definition
- inputs from the supplier
- buyer-supplier relationships |
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Term
| Zsidisin (2003) states that risks tend to arise from |
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Definition
| - individual supplier failure - market factors |
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Term
| Supplier failure can relate to problems with |
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Definition
- quality,
- delivery,
- relationship
- price |
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Term
| Risks that arise from market characteristics relate to |
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Definition
| demand and the number of suppliers in the marketplace |
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Term
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Definition
Total risk = Likelihood x Impact
(eg scale of 1 to 5, 25 is the highest score) |
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Term
| The higher the degree of potential risk, |
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Definition
| the more a business will want to gain control of the sourcing process and ensure continuity and quality of supply |
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Term
| The Kraljic model is used to |
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Definition
| distingtuish between different types of procurement depending on the value of the products or services neing purchased, balanced against the risk of the purchase |
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Term
| The Kraljic model can be used to |
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Definition
| develop procurement strategies |
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Term
| The kraljic model consists of two axes |
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Definition
Vertical axis = Financial risk/impact
Horizontal axis = Supply risk/impact |
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Term
| The kraljic model contains four quandrants |
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Definition
- Routine (low risk / low value)
- Bottleneck (high risk / low value)
- Leverage (low risk / high value)
- Strategic (high risk / high value) |
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Term
| Examples of the 'Routine' section of a Kraljic model (low risk / low value) |
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Definition
- Stationary supplies
- Consumables
- Materials such as maintenance, repair and operation (MRO)
- Low level temporary labour |
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Term
| Issues of the 'Routine' section of a Kraljic model (low risk / low value) |
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Definition
- Can be time-consuming compared to the value due to the volume of orders and requisitions
- On a day-to-day basis can distract a buyer from more strategic/value-adding activities |
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Term
| Strategies to use for the 'Routine' section of a Kraljic model (low risk / low value) |
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Definition
- Use tactics to leverage savings and reduce costs eg reverse e-auctions
- Optimise ordering process and stock holding
- Use online catalogues to improve efficiency
- Standardise products as much as possible to increase volumes
- Construct framework agreement/call off contracts to reduce burden of tendering |
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Term
| Examples of the 'Bottleneck' section of a Kraljic model (high risk / low value) |
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Definition
- OEM parts
- Computer chips |
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Term
| Issues of the 'Bottleneck' section of a Kraljic model (high risk / low value) |
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Definition
- Prone to supply risk such as limited availability
- Potential storage issues
- Likely to be a small numberof suppliers in marketplace
- Can seriously affect the delivery of the product or service |
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Term
| Strategies to use for the 'Bottleneck' section of a Kraljic model (high risk / low value) |
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Definition
- Secure long-term supply contracts with clauses regarding to late delivery charges for delivery failure
- Look for alternatives in the marketplace
- Focus on managing the procurement process |
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Term
| Examples of the 'Leverage' section of a Kraljic model (low risk / high value) |
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Definition
| - Product specific materials |
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Term
| Issues of the 'Leverage' section of a Kraljic model (low risk / high value) |
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Definition
- Unit cost management is important due to volume
- Can have a large impact on profit due to the high value |
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Term
| Strategies to use for the 'Leverage' section of a Kraljic model (low risk / high value) |
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Definition
- Obtaining the best deal via competitive tendering due to nature of market
- Target pricing and product sunstitution where possible
- Enhancing buyer power by engaging in consortia procurement |
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Term
| Examples of the 'Strategic' section of a Kraljic model (high risk / high value) |
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Definition
| - Major outsourcing providers such as IT |
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Term
| Issues of the 'Strategic' section of a Kraljic model (high risk / high value) |
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Definition
- Dependent on small number of suppliers
- Could severely affect profits
- Likely to be important for gaining/maintaining competitive advantage |
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Term
| Strategies to use for the 'Strategic' section of a Kraljic model (high risk / high value) |
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Definition
- Long-term relationships as changing the sourrce of supply likely to be costly or difficult
- Balancing power and co-operating with supplier |
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Term
| Relationship strategies for the four quandrants of the Kraljic model |
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Definition
Routine - Adversarial, Arms length/transactional
Bottleneck - Single source, long-term contracts
Leverage - Closer tactical, Outsourced
Strategic - Strategic alliance, performance-based partnership, co-destiny |
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Term
| Use of the Kraljic model to segment the products and services that an organisation procures has a number of benefits |
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Definition
- The model is simple to understand and apply
- It can be applied across all industries and company types
- It can result in a buyer having a better understanding of the importance of each of the products
- It can assist in deciding what is the optimum relationship strategy for each purchase/supplier
- It can provide an adddional insight into strategic issues |
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Term
| There are some limitations of the Kraljic model, such as |
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Definition
- Supply markets are complex, it is not easy to classify products
- There is an element of subjectivity regarding where products and services are located within the model
- Overtime there are likely to be changes in the marketplace
- The analysis applies to the products or services being purchased and not the supplier
- Not all supply risks arise within the buyer-supplier relationship
- It has a limited academic foundation, there are also risks that are external to this |
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Term
| Supplier preferencing model allows |
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Definition
| a buyer to understand how suppliers view the buying organisation and its requirements |
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Term
| The supplier preferencing model is based on two axes |
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Definition
- Account attractiveness
- Relative value of the business |
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Term
| Elements linked to the vertical axis of the supplier preferencing model 'Account attractiveness' |
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Definition
- Profitability
- Opportunity for growth and development with the buyer
- Stability of future contracts
- The reputation of the buyer in the marketplace
- Ethical trading practices
- Willingness to collaborate on projects, including sharing risks and costs with a supplier |
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Term
| The four quadrants of the supplier preferencing model |
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Definition
- Development (High attractiveness / Low value)
- Core (High attractiveness / High value)
- Nuisance (Low attractiveness / Low value)
- Exploitable (Low attractiveness / High value) |
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Term
The supplier preferencing model quadrant - Nuisance (Low attractiveness / Low value)
Actions a supplier may take |
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Definition
- Decide to stop dealing with the buyer and withdraw from the relationship
- Service levels and/or quality may be poor
- Raise prices and push into exploitable |
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Term
The supplier preferencing model quadrant - Nuisance (Low attractiveness / Low value)
Potential buyers responses if a key product/service (strategic) |
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Definition
| Try and move into the development quandrant. Could do this bylooking at areas of business that the supplier might find attractive, such as being involved in a prestigious project |
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Term
The supplier preferencing model quadrant - Exploitable (Low attractiveness / High value)
Actions a supplier may take |
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Definition
- Regular price increases and lack of negotiation on terms and conditions
- Supplier is seeking short-term advantage
- Will not go out of its way to service the buyer |
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Term
The supplier preferencing model quadrant - Exploitable (Low attractiveness / High value)
Potential buyers responses if a key product/service (strategic) |
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Definition
| Try to move into the core quadrant by looking at areas of business that the suppplier might find attractive, such as being involved in a prestigious project |
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Term
The supplier preferencing model quadrant - Development (High attractiveness / Low value)
Actions a supplier may take |
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Definition
- Provision of good customer
- Supplier is proactive, regularly going the extra mile in an attempt to win more business from the buyer
- Competitive pricing provided |
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Term
The supplier preferencing model quadrant - Development (High attractiveness / Low value)
Potential buyers responses if a key product/service (strategic) |
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Definition
Move into core area by rewarding suppliers efforts with additional business (if possible)
Undertaking supplier development activities |
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Term
The supplier preferencing model quadrant - Core (High attractiveness / High value)
Actions a supplier may take |
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Definition
- Provision of great customer service in order to defend and retain the business
- Supplier drives innovation
- Receptive to a close relationship |
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Term
The supplier preferencing model quadrant - Core (High attractiveness / High value)
Potential buyers responses if a key product/service (strategic) |
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Definition
| Review regularly to ensure position as a core customer is ongoing |
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Term
| Advatages to applying the supplier preferencing model |
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Definition
- It provides the supplier view.
- It may provide the buyer with information that it was unaware of; eg it may not have realised that its suppliers view it as exploitable |
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Term
| Limitations of the supplier preferencing model |
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Definition
- It is only a snapshot in time
- Although some information about services provided can be quantified, such as KPI reports, the model is subject to the judgement of the buyer |
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Term
| The two models that combine to make the Market management matrix |
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Definition
- The Kraljic model
- The Supplier Preferencing model |
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Term
| the market management matrix will give |
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Definition
| a more holistic view of supply positioning and supplier preferencing |
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Term
| The market management matrix helps the buyer to |
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Definition
| understand where its requirements are and how it is viewed by the market. |
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Term
| The market management matrix model attempts to |
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Definition
| provide practical advice on which strategy a buyer should adopt after it has judged the position from its own point of view (Kraljic model) as well as from the suppliers point of view (supplier preferencing) |
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Term
| Benefits of using the market management matrix |
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Definition
- It offers further chance to minimise risks and maximise opportunities by showing, eg, which supplier may be open to partnership development, avoiding wasted resources
- It can indicate when action should be taken, eg when a change of supplier is needed
- It can indicate where a change of relationship rather than a change of supplier might be required |
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Term
| The insights provided by the positioning models should be used to |
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Definition
| develop supplier relationship management action plans |
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Term
| Actions plans developed from analysing Kraljic, supplier positioning and market management models should take into account |
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Definition
| the suppliers view of the buyer. It should also consider the power that both the buyer and the supplier have in the marketplace. This needs to be considered to ensure that time and resources are not spent on attempting to develop a relationship with a supplier that has no interest in doing so. |
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Term
| Porter stated that there were two elements to selecting a competitive strategy |
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Definition
- The attractiveness of the industries for long-term profits
- Factors that determine relative competitive position within an industry |
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Term
| Porter stated that there were three generic strategies for acheiving above-average performance within a market |
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Definition
1. Cost leadership
2. Differentiation
3. Focus (Cost focus and differentiation focus) |
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Term
| Competitive Strategies - Cost leadership |
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Definition
- A company sets out to become the lowest-cost producer in the marketplace
- could do this with economies scale by standardising their product exploiting all sources of cost advantage
- If there is more than one leader in a market, rivalry will be fierce
- Examples; Aldi, Ryanair, Primark |
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Term
| Competitive Strategies - Differentiation |
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Definition
- A company will seek to be unique in a way that is valued by buyers
- Could be based on the product itself, its distribution or its marketing strategy
- Able to charge premium price, that must exceed the costs of creation
- In contrast to cost leadership there could be more than one successful differentiation strategy
- Examples; Waitrose, Emirates, Burberry |
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Term
| Competitive Strategies - Focus (seperated into cost focus and differentiation focus) |
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Definition
- A company selects a segment within the marketplace and focuses its strategy on that
- In cost focus a company seeks a cost advantage in its target segment
- In differentiation focus a compney seeks differetition in its target segment
- possible to have multiple focus strategies targeting different segments
- Examples; The Body shop (Focus on animal welfare and vegan food), Free From supermarket product ranges (focus on foods free from dairy or gluten) |
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Term
| Porters generic strategies model |
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Definition
| Competitive Scope vs. Cost Strategy. Scope can range from broad to narrow market, and cost strategy can range from low to high cost. |
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Term
| Procurement objectives of a Cost leadership strategy |
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Definition
- Achieve high % of savings/reduce costs
- Improve economies of scale
- Review market for new suppliers to imporve competition
- Look at opportunities to source from low-cost countries
- Look at opportunities to standardise/use substitue products
- Reduction of waste |
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Term
| Procurement objectives of a Differentiation strategy |
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Definition
- Source a supplier that is able to support the 'unique' element of the product/services
- Involve the supplier early in the process to add as much value as possible for the buyer
- Achieve high percentage of savings/reduce costs |
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Term
| Procurement objectives of a focus strategy |
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Definition
- Source a supplier that is able to support the needs of the niche buyers
Cost focus:
- Select a supplier that enables the buyer to be able to offer the product/service at a cost the market can afford
- Earlier supplier involvement may be used to reduce waste of rework
Differentiation focus:
- Earlier supplier involvement to add as much value as possible, especially if the product is innovative |
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Term
| In addition to the three generic strategies outline by Porter there are other elements of a business that can develop a company's competitive advantage |
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Definition
- Human resource management, staff and skills
- Organisation culture and structure
- Processes and practices
- Products and intellectual property
- Capital
- Natural resources
- Technology |
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Term
| Michael Porter's Value Chain is |
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Definition
| a set of activities and processes that an organisation must undertake in order to create value for its customers |
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Term
| Porter's Value Chain Model - Primary activities |
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Definition
1. Inbound logistics,
2. Operations,
3. Outbound logistics,
4. Marketing and sales,
5. After-Sales service |
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Term
| Porter's Value Chain Model - Support activities |
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Definition
1. Firm's Infrastructure (accounting, finance, management)
2. Human Resources Management
3. Product & Technology Development (R&D)
4. Procurement |
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Term
| When analysing a company's value chain the following steps should be taken |
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Definition
- Split all activities within the company's value chain into primary and secondary activities
- Review each area, looking for processes that are wasteful, eg, double handling invoices
- Consider the linkages among the activities that are important for competitive advantage, eg, could procurement be used to reduce the cost of outbound logistics? |
|
|
Term
| There are a number of ways in which procurement can help to add value and generate a bigger margin for organisations |
|
Definition
- Selecting a supplier and negotiating the best deal for the raw materials/inputs and logistics, thereby reducing the cost of these inputs
- Developing relationships with a key supplier to ensure continuity of supply of inputs
- Managing quality of inputs by monitoring supplier performance
- Managing inventory and stock control
- Supporting the other support functions by sourcing products and services that the organtisation requires in order to undertake these functions |
|
|
Term
| The Five Rights of Procurement |
|
Definition
- Place
- Quality
- Quantity
- Time
- Price |
|
|
Term
| Porter's Five Forces Model |
|
Definition
| A model for analyzing the competitive forces within the environment in which a company operates, to assess the potential for profitability in an industry. |
|
|
Term
| The five competitive forces that determine the attractiveness of an industry (porters five forces) |
|
Definition
1. Threat of new entrants
2. Bargaining power of suppliers
3. Bargaining power of buyers
4. Threat of substitutes
5. Rivalry among existing competitiors |
|
|
Term
| Types of markets in existance |
|
Definition
- Monopoly
- Oligopoly
- Imperfect competition
- Monopolistic competition
- Perfect competition |
|
|
Term
|
Definition
where there is one large supplier in the marketplace
Buyer power: Very low
Supplier power: Very high |
|
|
Term
|
Definition
A market structure in which a few large firms dominate a market
Buyer power: Low
Supplier power: High |
|
|
Term
|
Definition
where there are a number of supplier in the marketplace, but they are not selling similar services and products, therefore competition is not strong
Buyer power: Strengthening
Supplier power: Weakening |
|
|
Term
|
Definition
companies in the market offer simlar products/services, but they are not perfect substitutes
Buyer power: Weakening
Supplier power: Strengthening |
|
|
Term
|
Definition
where there is a number of suppliers selling identical products/services, also a large number of buyers
Buyer power: Very high
Supplier power: Low |
|
|
Term
| Rivalry between companies in a market can be affected by a number of factors |
|
Definition
- Industry growth or decline
- Product differences/brand identity
- Switching costs, if costs of switching between products are low for buyers then rivalry will be more intense
- Diversity of competitors
- Exit barriers |
|
|
Term
| Porters Five Forces - Barriers to entry (threat of new entrants) include but are not limited to the following points |
|
Definition
- Economies of scale
- Access to capital and high start-up costs
- Licences and permits
- Strong brand identities already dominate in the marketplace
- High switching costs for buyers to switch to alternative products/services
- Access to distribution networks
- Government policy |
|
|
Term
| Porters Five Forces - factors that can affect substitution (Threat of substitutes) |
|
Definition
- Relative price performance of substitutes, if substitutes are cheaper, buyers are more likely to switch products
- Switching costs for buyers
- Buyer propensity to substitute and how they evaluate the economic benefits |
|
|
Term
| Porters Five Forces - Supplier power is strong when the following factors occur |
|
Definition
- A supplier can differentiate its offering
- Switching costs for buyers are high
- There is a lack of substitute products or services
- There are a number of suppliers in the marketplace (concentration) |
|
|
Term
| Porters Five Forces - Buyer power is affected by a number of different factors including |
|
Definition
- The number of buyers in the marketplace versus the number of suppliers, at one extreme this is a monopsony
- The volume of purchases made by buyers
- Costs for buyers
- Availability of information for decision-making
- Ability to backward integrate
- Substitution of products and services |
|
|
Term
| Model of buyer and supplier power |
|
Definition
Vertical axis - Buyer power (High/Low)
Horizontal axis - Supplier power (High/Low)
Four quadrants:
- Buyer dominance (High/Low)
- Interdependance (High/High)
- Interdependance (Low/Low)
- Supplier dominance (Low/High) |
|
|
Term
|
Definition
Social
Technological
Economic
Environmental
Political
Legislative
Ethical |
|
|
Term
| The STEEPLE model analyses |
|
Definition
| potential external influences and risks (macro-environmental) that could affect a company or a marketplace |
|
|
Term
|
Definition
| This element of the analysis relates to demographic (population) trends. Consumer tastes and buying habits change over time. What is fashionable today may not be the same in a years time |
|
|
Term
|
Definition
| There has been a high rate of innovation in technology in recent decades, especially in the areas of artificial intelligence, automation and robotics, which has reduced the number of people employed in some industries |
|
|
Term
|
Definition
| This area covers matters concerning finance such as exchange rates, interest rates, increase to the national minimum wage, the introduction of the living wage, changes to pensions and maternity/paternity entitlements |
|
|
Term
|
Definition
| Seeking to reduce carbon emission, improve waste management and reduce the amount of material sent to landfill. Recently there has been large drive towards reduing the consumption of plastics, which are polluting the oceans and threatening marine life |
|
|
Term
| Corporate Social Responsibility (CSR) |
|
Definition
| A business approach that contributes to sustainable development by delivering social, environmental and economic benefits for all stakeholders |
|
|
Term
|
Definition
| relates to the current government, its stability and its policies, particularly those that affect trade and industry. This will include global trade agreements and restrictions such as tariffs and import duties |
|
|
Term
| STEEPLE - Legislative (Legal) |
|
Definition
| Changes to legislation will affect the way that a business operates. This can result in cost increases in order to ensure that the organisation is compliant. |
|
|
Term
|
Definition
| a concept that has developed in recent decades, as consumers have become more concerned with the processes involved in manufacturing the products and services that they buy |
|
|
Term
|
Definition
| making sure businesses act in an ethical manner and consider the effects it has on its employees and customers, the local community and the environment in which it operates. Ethical issues also cover other aspects such as use of child labour, modern-day slavery, protecting local environments etc. |
|
|
Term
|
Definition
| Non-cash releasing benefits generated via procurement processes and supplier relationship management |
|
|
Term
| Added value is the busness case for |
|
Definition
| justifying spending time and resources on building relationships with suppliers, The time spent on developing these relationships has to deliver value for the business |
|
|
Term
| The process of developing positive relationships will suppoer achieving added value outcomes. Procurement can support the delivery of a number added value benefits |
|
Definition
- Cashable savings and/or cost avoidance, which can have a direct impact on internal budgets.
- Competitive advantage over others who are not reaping the benefits created by collaborative relationships
- Thorough risk management
- Improved business efficiency
- Improved CSR |
|
|
Term
|
Definition
| a set of connections between organisations interacting with each other which benefits the entire group |
|
|
Term
| The relationships between a buyer and a supplier can add value for both parties. Examples of this added value include |
|
Definition
| reduced costs and improved quality |
|
|
Term
| The value chaing key points are as follows |
|
Definition
- An organisation will add value to its inputs in order to create value for the customer
- This will generate margin (profit) for the company
- The activities in the value chain are interdependant; what affects one will affect the other
- Waste across the value chain should be eliminated |
|
|
Term
| There are various ways in which procurement can influence the pricing that is achieved for a product or service |
|
Definition
- Reducing the unit cost paid for the product or service
- Getting additional products or services for the same price
- Increasing the payment terms
- Mitigating a price increase that a supplier requests |
|
|
Term
| There are two main ways that a supplier can price a product or a service |
|
Definition
- Cost-based pricing
- Market-based/demand pricing |
|
|
Term
|
Definition
| Total cost plus mark-up calculated for profit |
|
|
Term
| Market-based/demand pricing |
|
Definition
| Pricing that stimulates demand for a product |
|
|
Term
| One of the first elements in managing the cost of inputs is to work with the user department and other key internal stakeholders on the specification of the requirements. The following are the elements to consider |
|
Definition
- Ensuring that the user department has not over-specified the requirement
- Making sure that the specification is clear and unambiguous
- Ensuring that all spend with a supplier is captured under the contract and in line with agreed rates
- Reviewing whether any products could be substituted for non-branded alternatives
- Involving the supplier early on in the process |
|
|
Term
| Follwing the specification stage , if there is sufficient competition in the marketplace the procurement department will |
|
Definition
| competitively tender the requirements in order to get the best price |
|
|
Term
|
Definition
| Where the supplier allows the buyer access to its finances so the buyer knows what the costs are |
|
|
Term
| Elements of a price-cost iceberg |
|
Definition
Surface:
- Price
Underwater/Hidden:
- Logistics and handling
- Customer service
- Re-work
- Consumables
- Stock costs
- Training & support
- Delay
- Inspection |
|
|
Term
| There are a number of elements that make up whole life costing and they are |
|
Definition
- Pre-aquisition costs, eg surveys
- Cost of procurement process
- Transport/delivery/insurance during carriage
- Actual cost of an item
- Operating and maintenance costs over the life of the item
- Disposal costs/residual value at end of life cycle of the item |
|
|
Term
| What type of relationships are needed with suppliers in order for them to endorse open book costing? |
|
Definition
| Strategic and partnership |
|
|
Term
|
Definition
| Procurement methods such as auctions, RFQ processing, private exchanges, and secondary activities such as trading partner collaboration, contract negotiation, and supplier selection |
|
|
Term
| In terms of cost management, procurement can add value via |
|
Definition
| careful specification development, competitive tender, e-soucing and negotiations and contract management |
|
|
Term
| The type and quality of the specification used are important. There are two key elements when considering the quality of products and services |
|
Definition
- Whether they are fit for purpose
- Whether the products or services meet the specification |
|
|
Term
| two types of specification |
|
Definition
- Conformance
- Performance |
|
|
Term
| Conformance specification |
|
Definition
| Detailed description of what the product or part must consist of. The supplier must conform to the spec. Mainly used for products - inputs based |
|
|
Term
| Advantage of conformance specifications |
|
Definition
| Easy for the supplier to understand and enables buyer to detail technical information |
|
|
Term
| Disadvantage of conformance specifications |
|
Definition
| Limits the suppliers freedom to innovate |
|
|
Term
| Performance Specifications |
|
Definition
| Describes what it expects a part, material or service to achieve. Mainly used for services - outputs based |
|
|
Term
| Advantages of performance specifications |
|
Definition
- Easier to draft which may be relevant if the buyer has little knowledge of the product
- Encourages innovation from the supplier, which may add value and could also widen the supplier base |
|
|
Term
| Disadvantage of performance specifications |
|
Definition
| The burden is placed on the supplier to ensure that the outcomes are achieved |
|
|
Term
| There are several ways value can be added when quality is improved on. Poor quality comes at a cost |
|
Definition
- Cost of the organisation undertaking rework to products that may include faulty components
- Cost of downtime
- Poor-quality products/services reaching the end customer, affecting the reputation of the buying organisation |
|
|
Term
| There are four processes involved in ensuring the right quality |
|
Definition
- Planning
- Control
- Assurance
- Improvement |
|
|
Term
|
Definition
| the process of controlling variation. It is used to verify the quality of the output and is often undertaken by spot checking a sample of the parts, products or services produced. |
|
|
Term
|
Definition
| the process of managing quality. This involves various systems and processes. |
|
|
Term
| Value Engineering/Value Analysis |
|
Definition
| a method to improve the benefits and costs of a product through a detailed examination of its function |
|
|
Term
| Issues that can arise if products and services do not arrive on time |
|
Definition
- Product bottlenecks or stoppages
- Lost time costs, paying overheads and salaries, plus additional overtime if staff have to catch up after stoppages
- Late delivery to customer, resulting in reputational damage and financial costs if the contract included late delivery clauses |
|
|
Term
| Lead times could be shortened by the following ways |
|
Definition
- Paying higher prices
- Simplifying transaction processes such as time taken to convert a purchase requisition to a purchcase order
- Working with suppliers to reduce waste in the cycle of ordering
- Holding more stock |
|
|
Term
| There are a number of reasons to hold stock |
|
Definition
- Can cause continuity of supply if unforeseen events occur
- Can reduce long lead times
- Potential discounts may be available for buying in bulk
- Can protect against price fluctuations
- Stock holding can support demand management |
|
|
Term
| Although there can be benefits of holding stocks, there are also a number of costs associated with it, such as |
|
Definition
- Cost of storage space
- Cost of capital, cash flow
- Obsolescence, depending on the product
- Opportunity costs, the money invested in stock could potentially have been better invested in alternative projects |
|
|
Term
|
Definition
| A system that works alongside Lean manufacturing. In order to reduce waste in the supply chain, JIT makes sure that stock is not held unnecessarily in inventory |
|
|
Term
| vendor-managed inventory (VMI) |
|
Definition
| an inventory management system whereby the supplier determines the product amount and assortment a customer (such as a retailer) needs and automatically delivers the appropriate items |
|
|
Term
|
Definition
| In consignment stocking, a supplier provides products (inventory) to a buyer, which is held in stock at the buyer's facilities, but the inventory is still owned by the supplier. The buyer assumes responsibility for the stock when stock is withdrawn from that consignment inventory, makes payment for quantities used, and notifies the supplier of the need to replenish inventory. |
|
|
Term
| There are a number of ways that procurement can add value for the buying organisation through the way it manages and builds relationships with external suppliers. This includes |
|
Definition
- Pricing and cost management
- Improving quality
- Timescales
- Quantities
- Place considerations |
|
|
Term
| Supply Chain Management (SCM) |
|
Definition
| Systems that can help a firm manage aspects of its value chain, from the flow of raw materials into the firm, through delivery of finished products and services at the point-of-consumption. |
|
|
Term
|
Definition
| one that has systems and processes that enable it to react quickly to changes in its environment |
|
|
Term
| Total Quality Management (TQM) |
|
Definition
| the philosophy that everyone in the organization is concerned about quality, throughout all of the firm's activities, to better serve customer needs |
|
|
Term
|
Definition
- Internal end users
- Contract managers
- Legal
- Employees |
|
|
Term
|
Definition
- Suppliers
- Customers/clients |
|
|
Term
|
Definition
- Competitors
- Communities
- Government and other public agencies |
|
|
Term
| Value for money is often described as the 'three E's', however the National Audit Office (UK) notes that in some areas there is a fourth E |
|
Definition
- Economy
- Efficiency
- Effectiveness
- Equity |
|
|
Term
| CIPS makes referenceto some typical factors that are taken into account in defining value for money |
|
Definition
- Fitness for purpose
- Quality
- Total lifetime costs
- Risk
- Environmental and sustainability issues |
|
|
Term
| A supplier may include the following added value elements in their tender submissions |
|
Definition
- Providing work experience opportunities for the long-term unemployed
- Providing education and training opportunities
- Apprenticeships
- Supplier staff undertaking voluntary work on specific projects
- Donations of products/materials for community projects
- Sponsorship of events |
|
|
Term
| A lack of compliance with procurement processes and procedures can result in benefits and value leaking from the buying organisation, this could happen in a variety of ways such as |
|
Definition
- Lack of contract coverage
- Maverick buying activity
- If there is no formal specification the buying organisation may end up procuring a product or service that is not fit for purpose
- Procurement activity is not assessed and managed in a consistent way |
|
|
Term
| The procurement and supply cycle |
|
Definition
1. Requirement determination
2. Source determination
3. Vendor selection
4. Order processing
5. Order monitoring
6. Goods receipt
7. Invoice verification
8. Payment |
|
|
Term
| Where procurement adds value to the supply cycle - Stage 1 understand the need |
|
Definition
- Consider make or buy decision
- Support formation of a cross-departmental team to develop the spec
- Ensure that the requirement is not over-specified
- Review where branded products could be replaced by substitute non-branded products/materials to reduce costs
- Encourage standardisation of common products
- Provide advice on whether conformance or performance spec would be most suitable
- Involve supplier in this stage if this would be added value |
|
|
Term
|
Definition
| A process in which value is created by reducing or eliminating waste and operational inefficiences |
|
|
Term
| There are 7 wastes as defined by Taiichii Ohno (TIMWOOD) |
|
Definition
1. Transportation (excessive)
2. Inventory (unnecessary stock holding)
3. Motion (Unnecessary)
4. Waiting
5. Over-production
6. Over-processing
7. Defects |
|
|
Term
| Following development of the specification, a..... |
|
Definition
| market review will need to be undertaken to assess the number of key suppliers in the marketplace and how the market operates |
|
|
Term
| By taking a more strategic approach procurement can add value by leveraging expertise and knowledge in the following ways |
|
Definition
- Spend reviews across various areas provide a fuller overview than reviewing spend on a contract-by-contract basis
- Following on from spend reviews procurement can aggregate demand and consolidate spend
- Supplier relationship management and improved risk management plans can be developed
- Specialist category and supplier knowledge regarding the market and potential sources of supply can be developed |
|
|
Term
| Supplier relationships can result in value for money in a number of different ways |
|
Definition
- Being able to identify and use an appropriate approach to deal with supplier issues
- Innovation developed as part of collaborative projects with strategic suppliers
- Reduction of waste
- Resilience and risk reduction |
|
|
Term
| Sources of information that a buyer can use to identify a suitable supplier |
|
Definition
- Internal stakeholders/user department knowledge
- Preferred supplier lists
- Internet searches
- Tradeshows, exhibitions
- Networking with other procurement professionals
- Advertising the requirment on e-procurement platforms
- Vendor engagement events
- Agents |
|
|
Term
| Once a list of suppliers has been identified there are a number of key questions that a buyer should ask themself |
|
Definition
- How many suppiers in the marketplace are able to provide the product/service?
- Is this a single or sole-source situation?
- What is the relative buyer and suppier power in the marketplace?
- How might the suppliers in the marketplace view the buyer? Do all of the suppliers have the same view?
- How will the make-up of the market affect the selection process? |
|
|
Term
| The number of suppliers that are identified in the marketplace will have a direct effect in |
|
Definition
| the type of procurement processes and procedures used to select suppliers |
|
|
Term
| When undetaking a procurement in the public sector in the EU, the buyer will be required to |
|
Definition
| advertise the requirement in the Official Journal of the European Union (OJEU). This means that the requirement will be advertised across all the EU member countries |
|
|
Term
|
Definition
| Common Procurement Vocabulary |
|
|
Term
| Common Procurement Vocabulary (CPV) |
|
Definition
| Numerical classifications for products and services. The aim of these codes is to standardise the references used by buyers to describe the products and services that they are purchasing |
|
|
Term
| If a public sector buyer is unsure about the level of competition in the marketplace it can issue a |
|
Definition
| Prior Indicative Notice (PIN), which informs the marketplace of the requirement, who the buyer is and when the tender is likely to be issued. This can be used to gauge the level of interest in the marketplace |
|
|
Term
| Once the potential suppliers in the marketplace have been identified the buyer will move on to the supplier assessment and selection process. This is part of stage 6 of the procurement cycle. This involves the following |
|
Definition
- Developing RFI documents and criteria
- Evaluating suppliers against this criteria, only suppliers that meet the buyer's minimum requirements will be short-listed and will progress to the next stage (RFP)
- Evaluate tenders |
|
|
Term
| When to use competitive bidding |
|
Definition
- When the item or service is of sufficient value
- When there is a clear specification so that competitive bids can be evaluated side by side
- When competition exists between a number of good quality suppliers
- When there is enough time for the process to be completed properly |
|
|
Term
| When not to use competitive bidding |
|
Definition
- When it's not possible to obtain firm prices
- When the specification is likely to change
- When price is not the main driver
- When set-up cost and time is prohibitive |
|
|
Term
| Drawbacks to competitive tendering |
|
Definition
- It takes time for the buyer to develop and issue the tender documents and evalute the responses
- Bidders may be discouraged if they think that the buyer has no intention of switching suppliers and the buyer is using the process to benchmark its incumbent supplier
- Contract awards may be a one-off, regular competitive tenders do not result in deepening buyer-supplier relationships |
|
|
Term
| The key method of supplier assessment and selection in the private sector is |
|
Definition
| the request for information |
|
|
Term
| Request for Information (RFI) during supplier selection |
|
Definition
| The aim of this process is to create a shortlist of suppliers that will be invited to the next stage of the process |
|
|
Term
| The following information is typically requested at the RFI stage |
|
Definition
- Information on previous contracts that are relevant to the buyer
- Financial information
- Insurances, public, employers and product liability
- Certificates such as ISO accreditations
- Supplier acceptance of the buyers standard payment terms and contractual terms and conditions
- Minimum levels of health and safety standards |
|
|
Term
| There are four key principles of procurement in the EU |
|
Definition
- Transparency in the process of procurement
- Equality of treatment of suppliers
- Non-discrimination
- Proportionality, the procurement process must be proportionate to the value of the contract |
|
|
Term
| Pre-qualification questionnaire (PQQ) |
|
Definition
| A document sent to potential suppliers asking for information necessary to support their qualification as an approved supplier |
|
|
Term
| The key procedure used to assess, pre-qualify and select suppliers in the public sector is the |
|
Definition
| restricted tender process |
|
|
Term
| A restricted tender process is a two stage process that involves |
|
Definition
| an initial PQQ to create a shortlist of suppliers, who will then be invited to to the next stage, the ITT, if they meet the requirements |
|
|
Term
| Request for Proposal (RFP) |
|
Definition
| used in cases where there are fewer suppliers in the marketplace or shortlisting has already been undertaken and the requirement is well developed. Where are RFI has been used as part of the selection process it will be followed by an RFP |
|
|
Term
| At the RFP stage, several pieces of info are also required in order for the buyer to be able to make their decision regarding awards. This will include |
|
Definition
- Detailed info on how the supplier will produce the products or deliver the service, including method statements
- Risk assessments
- Full pricing information |
|
|
Term
| Key procurement procedures used in the private sector for supplier selection include |
|
Definition
| request for information (RFI), request for proposal (RFP), e-auctions and rounds of negotiations |
|
|
Term
| Five key procurement processes and procedures that buyers can use in EU public sector procurements in order to assess and award contracts to suppliers |
|
Definition
- Open tender process
- Restricted tender process (Part 2)
- Competitive procedure with negotiation
- Competitive dialogue
- Innovative partnership procedure |
|
|
Term
|
Definition
| This is a one-stage process, similar to an RFP and is referred to as an invitation to tender (ITT) |
|
|
Term
| Restricted tender process (part 2) |
|
Definition
| Following on from issuing an PQQ and selecting suppliers from a shortlist, a buyer will then issue these suppliers an RFP. |
|
|
Term
| Competitive procedure with negotiation |
|
Definition
| This can include a PQQ stage. Following this , shortlisted bidders are invited to submit a tender. Following initial submission there may be subsequent rounds of tenders followed by negotiation |
|
|
Term
|
Definition
| This process is used when the buyer has a complex requirement and several phases of negotiation are required. Therefore neitherthe open nor the restricted procedure is suitable |
|
|
Term
| Innovative partnership procedure |
|
Definition
| This process allows for research, development and purchase of a product or service within a single procurement. The final purchase must correspond to pre-agreed levels of performance and maximum costs |
|
|
Term
| Pre-established framework |
|
Definition
| the selection stage has alrady been completed and the buyer will only need to undertake the award stage ITT |
|
|
Term
|
Definition
| Most Economically Advantageous Tender |
|
|
Term
| There are a number of benefits to undertaking stakeholder mapping, such as |
|
Definition
- It allows identification of key stakeholders who need to be closely involved in the process
- It allows the identification fo the stakeholders that need a higher level of communication fue to their level of power/interest
- It allows us to start to think about how each stakeholder type should be managed and which should be prioritised
- When positive relationships are created and actively managed, the outcomes of a project or procurement are likely to be better |
|
|
Term
Mendelow's stakeholder mapping model
Definition |
|
Definition
| a way of prioritising stakeholders by 'subjective' mapping of them, in order to understand and resolve any issues or conflicts that may exist. This model prioritises by mapping which stakeholders should more likely considered and therefore 'satisfied' by the organisation. |
|
|
Term
| The four quadrants of mendelows stakeholder mapping matrix |
|
Definition
- Keep satisfied (High power/Low interest)
- Keep informed (Low power/High interest)
- Manage closely (High power/High interest)
- Minimum effort (Low power/Low interest) |
|
|
Term
| It is important to first indentify who the stakeholders of a project/procurement are and then to map them based on their |
|
Definition
|
|
Term
| Mendelows stakeholder mapping matrix - Minimal effort stakeholders |
|
Definition
- these stakeholders are low in power and their level of interest is also low
- meeting their needs will take minimal effort. Resources and time will not be spent on this area
- lack of interest and power may make them more open to influence and they are more likely than others to accept the situation |
|
|
Term
| Mendelows stakeholder mapping matrix - Keep informed stakeholders |
|
Definition
- these stakeholders are interested but they lack power
- this group may try to gain power by joining with thte stakeholders who are either key player or there to keep satisfied
- they will need to be kept informed regularly of plans, outcomes and changes via a range of communication methods |
|
|
Term
| Mendelows stakeholder mapping matrix - Keep satisfied stakeholders |
|
Definition
- these stakeholder are high in power but have a low level of interest. If they become dissatisfied their level of interest may increase
- procurement needs to avoid them gaining too much interest and becoming key players; this can be achieved by keeping them satisfied |
|
|
Term
| Mendelows stakeholder mapping matrix - Key players stakeholders |
|
Definition
- these stakeholders are high in power and their level of interst is also high
- these stakeholder will need to be involved early in the process and should participate in key decision-making in order to secure their support
- they should be regularly updated with regard to progress, otherwise they could delay or stop progress altogether |
|
|
Term
| Limitations to mendelows stakeholder model |
|
Definition
- it does not consider whether the stakeholder is a supporter of the project or against it
- when mapping stakeholders their level of interest may be underestimated
- the concept of power may be misunderstood
- the mapping exercise may result in the selection of strategies that are biased to one type of stakeholder group
- as with many of the models we have discussed, it only provides a snapshot in time |
|
|
Term
| Benefits that can be achieved by developing positive relationships with stakeholders |
|
Definition
- it makes them more likely to support a project/procurement
- support from stakeholders that have high power/interest can mobilise resources and support for the project and can also reduce resistance
- stakeholders will often make important contributions via their expert input to a project
- fewer project delays caused by resistance lead to less waste |
|
|
Term
| Four quadrants of the Overcoming Resistance model |
|
Definition
- Negative leaders
(High influence on stakeholders/Opposition stance on project)
- Promoters
(High influence/Support stance)
- Supporters
(Low influence/High support stance)
- Silent opponents
(Low influence/Opposition stance) |
|
|
Term
| Projects and procurements may meet with resistance. This resistance may be due to |
|
Definition
| the fact that the objectives of the procurement process conflict with another departments objective, or the resistance may be on a personal level |
|
|
Term
| Reasons why a stakeholder may resist a procurement project |
|
Definition
- Fear of change or uncertainty. This could be managed by involving stakeholders in the planning and supplier identification process and ensuring they are kept informed
- Loss of control. This can be managed by suring that the users are involved in the specification development and evaluation process |
|
|
Term
| 3 stages of the Kubler-Ross change curve |
|
Definition
1. Shock and denial
2. Anger and depression
3. Acceptance and integration |
|
|
Term
| The Kubler-Ross change curve can help us to |
|
Definition
| understand the stages that stakeholders pass through during a time of change. |
|
|
Term
| Kurt Lewin's Force Field Analysis |
|
Definition
| aims to identify the driving forces for a project or procurement activity as well as the restraining forces |
|
|
Term
|
Definition
- Concern for self (vertical axis). This is the extent to which a person will try to satisfy their own needs first, assertiveness
- Concern for others (horizontal axis). The extent to which a person tries to satisfy others concerns, co-operativeness |
|
|
Term
| The Five different methods of resolving conflict as a result of the Thomas-Kilmann model |
|
Definition
Assertiveness vs Co-operativeness
1. Competing
2. Collaborating
3. Compromising
4. Avoiding
5. Accomodating |
|
|
Term
| Improved outcomes of working in cross-organisational teams |
|
Definition
- More comprehensive and accurate specifications resulting in reduced costs
- Innovation/creation of synergies by combining individuals and functions
- Improved risk management by viewing risk on a more holistic, organisation-wide basis
- Knowledge sharing/problem solving and development of team members |
|
|
Term
| A good example of a cross-organisational team is one set up for the procurement of a new product or service that would affect many parts of an organisation, such as a new IT system. Such a team would need to include the following key points |
|
Definition
- End users of the system will use the new system in their daily work
- The IT department must ensure the system will integrate with current systems
- The procurement team should source and establish a contract with a supplier to deliver the system
- The finance team need to ensure that the project stays on budget
- The legal team need to be on hand to support any queries on data protection, cybe security etc |
|
|
Term
| Tuckman's Team Development Model |
|
Definition
Forming,
Storming,
Norming,
Performing,
Adjourning |
|
|
Term
| Tuckman's Team Development Model - Stage 1 - Forming |
|
Definition
| This is the stage where the team will come together for the first time and learn about each other, their preferences for interaction, skills and key competencies. Decisions will need to be made regarding how the team and the work will be organised. |
|
|
Term
| Tuckman's Team Development Model - Stage 2 - Storming |
|
Definition
| Team members will compete with each other for status and acceptance of their ideas. As a result, team performance may decline at the stage of team development. Then the team starts working towards the goals and objectives that it has been set |
|
|
Term
| Tuckman's Team Development Model - Stage 3 - Norming |
|
Definition
| Team performance begins to improve, as members of the team start to work together more effectively. Trust has grown and members are actively seeking others input as they recognise their strengths. The team members are taking on more responsibility and the team manager is less involved and acts more as a coach and mentor |
|
|
Term
| Tuckman's Team Development Model - Stage 4 - Performing |
|
Definition
| The team is performing and delivering benefits, meeting its objectives and goals by working together. Not all teams will reach this level some will stop at Norming. The team can now agree about a change without conflict. |
|
|
Term
| Tuckman's Team Development Model - Stage 4 - Adjourning |
|
Definition
| The team is completing the current project and the members will move on to new projects and form new teams. This stage focuses more on the wellbeing of its members |
|
|
Term
| Teams that are no working together effectively wil display a number of negative characteristics such as |
|
Definition
- Poor communication
- Lack of clarity on job roles
- Blaming others for failure
- Lack of focus
- Not meeting deadlines
- Members competing or working alone
- Conflict
- Low levels of motivation
- Low levels of trust |
|
|
Term
|
Definition
| A process that buyers use to understand all of the costs that make up a suppliers price. The model is used to understand how the cost is broken down across the production of a product or service |
|
|
Term
|
Definition
| 'The total sum involved, including all expenditure associtated with ownership and use of a product or service including price' |
|
|
Term
|
Definition
| The amount paid to a supplier for a given product or service |
|
|
Term
| A number of benefits can be acheived by developing accurate cost modelling |
|
Definition
- It allows buyers to understand what makes up a suppliers cost
- The buyer understands the suppliers pricing strategy
- Increases the buyers negotiating power
-Can be used as a baseline to calculate savings acheived
- Data from cost modelling provides a more accurate information base, which can then be used to develop procurement strategies that will result in cost savings |
|
|
Term
| Ask and Laseter (1998) note that there are five key principles to ensuring accurate and robust cost models |
|
Definition
- Capture cost drivers, not just elements of cost.
- Build commodity-specific models to look at cost drivers
- Consider the impact of the total cost of ownership
- Start with a simple model and only add complexity if it is required
- Triangulate around data to improve accuracy |
|
|
Term
| Price fluctuations can occur for a number of reasons |
|
Definition
- A product becomes scarce and demand outstrips supply
- Increases in import duties or exchange rates increase
- Political instability |
|
|
Term
|
Definition
| How much the demand for a product or service is affected by a change in its price. |
|
|
Term
|
Definition
| The demand for a product is not very responsive to price changes. The range of a demand curve where elasticities of demand are less than 1.0. |
|
|
Term
|
Definition
| The demand for a product is highly responsive to price changes. The range of a demand curve where elasticities of demand are greater than 1.0. |
|
|
Term
| A buyer can reduce the impact of price fluctuations by working with the supplier Working with a supplier could involve several techniques |
|
Definition
- Monitoring elements in the market across the whole value network of suppliers that could increase costs.
- Forward buying
- Working with the supplier to help it mitigate increases from its supplier chain
- Working with supplier on supply chain efficiency projects ro remove waste and reduce costs elsewhere
- Preparing strategies to deal with increases |
|
|
Term
|
Definition
| Buyer similar quantities of the same product in two seperate markets at the same time on the basis that a price increase in one will be offset by price decrease in the other |
|
|
Term
|
Definition
| Early Supplier Involvement |
|
|
Term
| Early Supplier Involvement (ESI) |
|
Definition
| A process that involves a companys preferred supplier in the development of new products and/or services |
|
|
Term
| Before early supplier involvement (ESI) begins, to mitigate any risks the buyer should ensure that the relationship is covered by a contract. This should detail several points such as |
|
Definition
- The key roles and responsibilities of both parties
- How the supplier will be paid for any product design/development work.
- It should clarify ownership of intellectual property rights (IPR) |
|
|
Term
| Benefits for a buying organisation if it involves its suppliers in the ESI programmes |
|
Definition
- The supplier may be able to bring additional knowledge and innovation to the product design stage
- The overall quality of the product can be improved
- Performance can be improved
- Product developent costs can be reduced
- It could increase the speed that a company is able to get a product to market
- ESI can serve to further enhance the supplier relationship as the supplier feels itself to be a valued business partner |
|
|
Term
| Disadvantages of involving suppliers in ESI programmes |
|
Definition
- Often issues with communication between buyer and supplier
- If the relationship breaks down there could be issues producing the product or service in the future
- It is necessary to carefully select the suppliers that are invited to participate in ESI. Time and resources are wasted if the wrong supplier is selected |
|
|
Term
| Benefits of knowledge transfer and innovation for the buyer |
|
Definition
- Cost savings, profitability and competitive advantage
- The development of realationships with suppliers
- Improvements to current products and services in the company's portfolio
- The opportunity for procurement to demonstrate the value that it can bring to the wider business
- The development of cultural changes internally that promote the development of innovation and knowledge sharing |
|
|
Term
| Risks of knowledge transfer and innovation for the buyer |
|
Definition
- The management of intellectual property, as information that provides the buyer with a competitive advantage could be leaked to competitors taht the supplier works with
- Bonte and Wiethaus noted that knowledge disclosure bears the risk of benefiting ones own competitors due to opportunistic knowledge transmission through the common supplier |
|
|
Term
| Barriers to a dynamic purchasing system |
|
Definition
- Lack of interaction with procuring organisations
- Over-specified tenders, as opposed to the use of outcome-based specifications
- Low competencies of procurers
- Poor management of risk during the procurement process |
|
|
Term
|
Definition
| Measurements that evaluate results to determine whether a project is meeting its goals, also known as KPI |
|
|
Term
| Damlin et al. list six qualitative KPIs that can be used as common metrics to measure the buyer and supplier relationship |
|
Definition
1. Trust
2. Power
3. Transparency and information sharing
4. Communication
5. Commitment
6. Co-operation |
|
|
Term
|
Definition
1. Define the KPIs
2. Measure the supplier against the KPIs
3. Analyse the buyer-supplier relationship
4. Identify areas for improvement
5. Ongoing monitoring
-Back to 1. |
|
|
Term
| Damlin et al (2012) noted a large number of benefits of looking at common relationship measures and metrics |
|
Definition
- Enabling the buyer and supplier to be more competitive in the marketplace
- Lower transaction costs
- Reduction of opportunistic behaviours from both parties, which should improve information flows
- Improved customer relationships and reputation
- Improved profitability
- Improvements in quality
- Reduced conflict |
|
|
Term
| Business Continuity Planning (BCP) |
|
Definition
| A process that a company uses to develop a plan to enable it to recover from a disruption in the shortest possible time |
|
|
Term
| Gilbert and Gips (2000) saw a business continuity system as consisting of four ket stages |
|
Definition
- Risk identification
- Risk assessment
- Risk ranking
- Risk management |
|
|
Term
| In order to fully understand risks around supply continuity the first step for procurement is to map the supply chain. Kildow (2011) notes that the following are key areas to review |
|
Definition
- Ascertain which suppliers are critical suppliers this will also include any critical sub-contractors if the supply chain has more than one tier.
- Are there any single points of failure, like sole or single-source agreements?
- Are there any internal dependancies to keep the supply chain functioning, such as IT systems? |
|
|
Term
| A buyer can work with both its supliers and internal stakeholders to improve risk management and continuity of supply in a variety of different ways |
|
Definition
- Include key internal stakeholders in supplier qualification and evaluation
- Risk could be reduced for core products and services by using a dual-sourcing or multiple-sourcing approach
- A buyer could create a realationship with its key suppliers in which they are able to provide early warning of potential issues rather than hiding them until it is too late to resolve them
- Stock could be held by either the supplier or a third parrty to minimise the impact of force majeure events
- Buyers could enter into escrow agreements |
|
|
Term
| Advantages of risk mitigation and securing continuity |
|
Definition
- It ensures the survival of the business
- It minimises financial losses from production stops and loss of customers to competitors
- It minimises loss of good reputation in the marketplace
- It supports the process of supplier relationship management
- It encourages an environment of monitoring and planning, which displays good business practice |
|
|
Term
| Limitations of risk mitigation and securing continuity |
|
Definition
- Some risks may remain unknown until they have happend
- Risk management can be costly and resource consuming, and many potential risks may never materialise |
|
|
Term
| The most common reasons for terminatin a supplier relationship |
|
Definition
- The contract comes to a natural end and is no longer a requirement
- Reached the end date specified in T&C's
- Another supplier can provide a more competitive offer
- Buyer could be undertaking a process of supply base rationalisation
- Terminated due to a material breach, such as poor performance
- Supplier involved in activities that could damage the buyers reputation
- Supplier becomes insolvent
- Supplier is aquired by another company
- Supplier may terminate as it no longer wishes to dal with the buyer as a customer
- Contract frustration |
|
|
Term
| Key stakeholders that should be involved in the process of managing supplier contract termination |
|
Definition
- Operations
- Sales
- Legal
- Finance |
|
|
Term
| Supplier termination process |
|
Definition
1. Supplier performance issues
2. Contract management, supplier fails to improve performance
3. Obtain business approval to terminate
4. Develop exit strategy
5. Review market/qualify new supplier
6. Give written notice of termination
7. Manage exit strategy/mew supplier on-boarding
- Circle back to 1. |
|
|
Term
| The exit plan needs to take into account the TUPE (Transfer of Undertakings Protection of Employment) provisions if the contract has a liability. It should also consider the onboarding of the new supplier. There are also other practical considerations for the buyer, such as |
|
Definition
- What will happen to any stock currently on supplier premises?
- What will happen to any assets or equipment that belong to the supplier or have joint ownership?
- What about any outstanding work the supplier is required to complete?
- What about outstanding payments to the supplier? |
|
|
Term
| Exiting a supplier relationship should be a well-managed process to ensure that |
|
Definition
| continuity of supply or service is maintained, a new supplier is successfully on-boarded and conflict is kept to a minimum |
|
|
Term
| Conflict and hostility may result in the parties having to enter into |
|
Definition
| mediation, arbitration or in the worst case having the case settled by a judge in court |
|
|
Term
|
Definition
| A method of settling disputes outside of court by using the services of a neutral third party, called a mediator. The mediator acts as a communicating agent between the parties and suggests ways in which the parties can resolve their dispute. |
|
|
Term
|
Definition
| the use of an arbitrator to settle a dispute, who may be named in the contract |
|
|
Term
|
Definition
| A contract that, by design or by default, does not have a specified duration. |
|
|
Term
| A well put together contract should have detailed provisions covering the responsobilities of both the buyer and the supplier on termination, in relation to |
|
Definition
| finance, confidentiality, IPR, security and employee rights, amongst others |
|
|
Term
| There can be financial penalties if contracts are |
|
Definition
| terminated early. Buyers should ensure that they have all the required information on termination so that they are able to make an informed decision |
|
|
Term
| After a contract has been terminated a byer will want to ensure that the confidential information it shared with the supplier will continue to be protected. The exit plan should clearly |
|
Definition
| detail how any confidential data belonging to the buyer should be transferred back to them once the contract ends. They should also agree on an acceptable method for the supplier to destroy all remaining propriety information that is not transferred |
|
|
Term
| There are four main types of IPR that are likely to be encountered in procurement and supply contracts |
|
Definition
- Patents
- Copyrights
- Trade secrets
- Trademarks |
|
|
Term
| Contract termination - Security |
|
Definition
| this relates to the security of data after a contract has been terminated. If there are no data security clauses the buyer will have no way of requiring the supplier to return the data or dispose of it in a manner that does not affect the security of the buying organisation |
|
|
Term
| ACAS (the Advisory, Conciliation and Arbitration Service) states that TUPE applies in the following situations when the identity of employer changes |
|
Definition
- Outsourcing
- Re-tendering
- Insourcing |
|
|
Term
| Before undertakng any procurement, a buyer will need to |
|
Definition
| review whether or not TUPE applies. If TUPE does apply this could affect the costs of the tendering supplier and the length of the mobilisation period for the new supplier |
|
|
Term
| Buyers should ensure that the business will be able to secure continuity of supply from another supplier before terminating agreements with the current supplier. This will involve |
|
Definition
| identifying an alternative supplier, qualifying it and undertaking all of the necessary due dilligence as well as negotiating terms and conditions |
|
|
Term
| An exit strategy should be agreed with all key stakeholders before the start of the contract, this should support the continuity of supply during the termination period. The exit strategy should detail some particular points in terms of continuity of supply, such as |
|
Definition
- An obligation for the current supplier to continue delivering the services as the same level of quality for the transition period
- Obligation for supplier to continue to abide by all T&C's
- A requirement for the supplier to provide access to all the necessary info that will be required to keep delivering the service after transition period
- Requirement for a parallel service for a given period of time while the new supplier gets the service up and running
- Requirement for the supplier to keep the same team performing the services during transition period |
|
|
Term
| Before entering into a partnership both partners will undertake a period of due dilligence to ensure that the partnership relationship is a good choice for both companies. This will involve |
|
Definition
| reviews of the other partners financial situation and performance and whether there is synergy between the companies visions, missions and objectives |
|
|
Term
| Three types of partnership relationships |
|
Definition
1. The organisations recognise each other as parters and co-ordinate activites and planning on a limited basis. Short-term focus, with only one function.
2. Both companies progress beyond co-ordination of activities to integretion. The partnership has a long-term focus and a number of function within both companies are involved.
3. The companies share a significant level of operational integration. The buyer and supplier view each other as an extension of eachs others firm. No end date is set for the partnership |
|
|
Term
| Type 1, 2 and 3 partnerships relationships are based on |
|
Definition
| how closely integrated the companies are, the number of functions involved in the relationship and the planned length of the relationship. Type 3 has the highest degree of integration between the buyer and supplier, and as a result will require more resources and time to maintain |
|
|
Term
| There are a number of characteristics that differentiate between having a partnership relationship with a supplier and having a traditional contracting relationship, such as |
|
Definition
- Early supplier involvement (ESI)
- No tender process or win-lose negotiations
- Shared costs and benefits
- Greater levels of information sharing and transparency
- Joint performance measurement and KPIs
- No defined end period
- Less contractual |
|
|
Term
| With partnership sourcing and early supplier involvement |
|
Definition
| the supplier will be involved at a much earlier point, usually at the specification development stage. Some products/services are likely to be jointly developed by the buyer and supplier |
|
|
Term
| With partnership sourcing and the tendering process |
|
Definition
| the buyer will not go to competitive tender for each different scope of work. CIPS notes that buyers will exclude other suppliers and suppliers will exclude other buyers, with the two partners focusing on each other and their objectives rather than on the supply market |
|
|
Term
| With partnership sourcing and performance measurement |
|
Definition
| both the buyer and suppliers performance will be measured and shared between the parties. These will recognise shared goals and objectives and help drive and deliver improved performance. |
|
|
Term
| Partnership relationships tend to have shorter and less specific |
|
Definition
| contracts or in some cases no formal contract at all, just a one to two page partnership agreement |
|
|
Term
| There are drivers and motivators for both the buyer and the supplier to enter into a partnership relationship, but they are unlikely to be the same. Possible drivers include |
|
Definition
- To generate synergies which are likely to result in reduced costs and increased profitability
- The need for businesses to develop products more quickly
- Changes in the marketplace may result in buyers and suppliers needing to work together in order to survive
- To improve performance to satisfy the ultimate customer
- Reduce stock-holding and move to JIT
- To reduce waste in the supply chain
- For access to a market
- Need for customised/highly complex products
- Increase security of supply
- Supplier wants to have core customers |
|
|
Term
| Partnership advantages for the buyer |
|
Definition
- As they are long-term, the buyer is likely to be able to gain price stability from the supplier
- Cost savings as a result of supply base rationalisation and leveraging volume with supplier
- Greater continuity of supply
- Supplier will view buyer as a core customer, so improved service eg increased responsiveness and quality
- Improved services for the customer of the buyer through reduced inventory, shorter cycle time and more timely and accurate info
- |
|
|
Term
| Partnership advantages for the supplier |
|
Definition
- The supplier will gain certainty of business
- It may gain an increased volume of business if the buyer was previously dual-sourcing
- It may have increased involvment in initiative, such as supplier development or early supplier involvement in ew projects, which could result in additional business for the supplier |
|
|
Term
| Joint disadvantages of partnership sourcing |
|
Definition
- Level of dependence the parters have on each other could have repercussions if one partner fails
- Locked in a relationship where they are incompatible
- Risk of confidential information being leaked
- planned advantages will not happen unless actively managed by both partners
- Can be costly in terms of resources required
- Reduces the flexibility of both the buyer and the supplier |
|
|
Term
| Partnership disadvatages for the buyer |
|
Definition
- Supplier could become complacent as it no longer has to compete for the buyers business
- The buyer is locked into a relationship, so unable to take advantage of offerings from other suppliers that might be more competitive |
|
|
Term
| Partnership disadvantages for the supplier |
|
Definition
- Can become over-dependant on the buyers business
- Ridk of bad buyer behaviour, eg exploiting transparency of costings to force suppliers prices down |
|
|
Term
| Financial benefits of partnership development for both buyer and supplier |
|
Definition
- Unit costs may be reduced for the buyer due to the economies of scale gained by placing all volume with one supplier
- costs reduced by removing waste from the supply chain
- Profitability for the buyer may be increased as a result of the cost base being reduced and the selling price to consumers staying the same
- Value sharing models may be used
- Savings made on stock holding if the partners developed lean or JIT sotck holding, improving cash flow |
|
|
Term
|
Definition
| the possibility that actual demand for a product or service will fall short of anticipated demand |
|
|
Term
| The benefit for buyers of developing partnership relationships for high-risk products is that |
|
Definition
| partners can undertake a joint risk management approach, which may provide additional mitigation. Partners can also share risk |
|
|
Term
| A buyer may enter into a partnership relationship with a supplier that provides products that are high spend or have high value for the organisation. In order to assess which suppliers are in this category the buyer should undertake a segmentation analysis using the |
|
Definition
|
|
Term
| Technically complecated supplies, ie those specially developed for the buer by the supplier, are likely to be of high |
|
Definition
| financial risk and high supply risk, located in the strategic quadrant of the Kraljic model |
|
|
Term
| Improvements in technology and innovation are also key ways that both the buer and the supplier can |
|
Definition
| reduce costs and increase profitability |
|
|
Term
|
Definition
|
|
Term
| New products and services can be costly, high risk and resource intensive to develop for the buying organisation, therefore |
|
Definition
| development of new services may be best supported by entering into a partnership relationship with a key supplier to share the costs and risks and enjoy access to additional resources |
|
|
Term
| As a result of reduced product lifecycles due to increasing innovation, there may be circumstances where a buyer will have to act quickly to develop a partnership relationship. This process could be helped by undertaking the following proactive tasks |
|
Definition
- Periodic scanning of the marketplace to understand new supplier entrants and the products/services they offer
- Undertaking research on what competitors in the buyers marketplace are doing |
|
|
Term
|
Definition
| A market where there are only a small number of capable and competent suppliers |
|
|
Term
| A buyer may seek to develop a partnership with a supplier if the suppliers is operating in a restricted marketplace that new suppliers are unlikely to enter. Marketplaces may be restricted for a number of reasons such as |
|
Definition
- High financial investment is required to enter the market
- Some markets have low levels of profitability, so new suppliers are not tempted to enter the marketplace
- Where brand loyalty is high, it would be difficult for a supplier to break into a marketplace and compete with strong established brands
- Some markets are heavily regulated by governments and legislation
- In some markets obtaining access to distributin channels is difficult due to pre-existing relationships
- In some markets, existing companies collude in order to deter new entrants |
|
|
Term
| Partnership life cycle model |
|
Definition
Vertical - Strength of partnership
Horizontal - Time
1. Embryonic
2. Growth
3. Maturity
4. Decline |
|
|
Term
| According to CIPS, the products and services most suitable for partnership sourcing are the vital ones that match the following criteria |
|
Definition
- They are used in products/services that represent a company's unique selling point (USP)
- They represent the buying organisations greatest opportunity for profit
- The buying organisations most important customers depend on them
- In the case of a public sector organisation, the general public relies on the buying organisation to provide them |
|
|
Term
| In order to select an item suitable for partnership sourcing, the buyer should do the following |
|
Definition
- Review each of the products/services in its portfolio in terms in terms of financial and supply risk
- Use the above info to plot these items onto the kraljic matrix
- The buyer should then review which suppliers provide these strategic products/services. These suppliers need to be plotted onto a supplier preferencing model
- Those suppliers located on the strategic quadrant should be targeted for developing partnership relatioships. Suppliers in the development quadrant should be reviewed to see whether there would be benefits to developing partnerships with them |
|
|
Term
| Three key elements to selling the philosophy of partnership sourcing |
|
Definition
- Selling the idea to senior management
- Selling the idea to the wider organisation
- Selling the idea to the potential partner |
|
|
Term
| It is likely that selling the philosophy of partnership sourcing to senior management will involve |
|
Definition
| the development of a formal business case, which will need to detail all the potential options for working with the uspplier market, such as developing a partnership, running a competitive tender for a single supplier of contracting with multiple suppliers |
|
|
Term
| Selling the philosophy of partnership sourcing to the rest of the buying organisation will require a |
|
Definition
| stakeholder mapping exercise, which will enable the buyer to identify any stakeholders who may oppose or resist |
|
|
Term
| Kotter's Eight-Step Plan for Implementing Change |
|
Definition
1. establish a sense of urgency by creating a compelling reason for why change is needed
2. form a coalition with enough power to lead the change
3. create a new vision to direct the change and strategies for achieving the vision
4. communicate the vision throughout the organization
5. empower others to act on the vision by removing barriers to change and encouraging risk taking and creative problem solving
6. plan for, create, and reward short-term "wins" that move the organization toward the new vision.
7. consolidate improvements, reassess changes, and make necessary adjustments in the new programs
8. reinforce the changes by demonstrating the relationship between new behaviors and organizational success |
|
|
Term
| In order to support the implementation of the partnership the buyer will need to ensure that it sells the philosphy to the wider business. In order to do this the buyer will need to |
|
Definition
| undertake stakeholder mapping to highlight supporters, and those internal stakeholders who are likely to resist the partnership |
|
|
Term
| For a partnership relationship to be successful it is key that the supplier understands the standards that the buyer is aiming to achieve. Sima and Balam commented that such standards could include the following factors |
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Definition
- Commitment to total quality management (TQM) and clearly defined quality management
- Ability to apply the just in time (JIT) method
- Ability to provide supplies locally and/or globally
- Willingness to take part in innovation programmes
- Flexibility management |
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Term
| Highly collaborative relationships such as partnerships, are required to develop JIT systems. This is because they can increase the supply risk as the process is so lean that there is no extra stock, meaning tolerance of mistakes is low |
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Definition
- The buyer will need to minimise the risk of a 'stockout' situation
- Implementing the JIT method requires the integration of buyer and supplier systems. This is a key part of partnership relationships, and the level of integration will increase as the partnership moves from type 1 to type 3
- Quality levels must also be high |
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Term
| In order to ensure that the partnership meets expectations and targets as part of the implementation process, the buyer needs to |
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Definition
| clearly define the standards it expects from the supplier at the start of the partnership process |
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Term
| By entering into a partnership , the buyer will expect to gain knowledge and skills from the supplier to enable it to make various improvements and innovations, for example |
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Definition
| reduced time to martker and improved product quality |
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Term
| Flexibility management refers to |
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Definition
| the suppliers ability to react to changes required by the buyer |
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Term
| At this point the buyer will need to clarify what the expected behaviours from themselves and the supplier are as part of the partnership relationship. These behaviours will include the following |
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Definition
- Open and honest communications between both parties
- Trust
- Fair/non-opportunistic behaviour |
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Term
| Communication is a key part of developing a successful partnership relationship with suppliers. In order to develop commitment via communication the buyer will need to do the following |
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Definition
- Establish a formal review structure
- Provide clear information on the knowledge to be shared by the buyer and supplier as well as informationon how this knowledge is to managed once it hasbeen shared.
- Both the buyer and the supplier must communicate the partnership information within their organisations to support commitment |
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Term
| Objectives should be developed for the performance of a partnership. Any objectives developed should be |
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Definition
| SMART, and they should be agreed by both parties |
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Term
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Definition
| Specific, Measurable, Attainable, Realistic, Timely |
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Term
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Definition
| The focus of the objective must be clearly defined and identified |
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Term
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Definition
| The objective must allow the buyer and supplier to measure the progress made from the start to the planned end point |
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Term
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Definition
| The objective must be achievable. Unachievable objectives are demotivatin and waste valuable resources |
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Term
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Definition
| The objective should be a target that is relevant to the company strategy. Irrelevant objectives waste valuable resources |
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Term
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Definition
| The objective should have a defined start and end period so that progress can be measured |
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Term
| Joint commitment needs to be established for the partnership to be successful. If both parties are not committed to the partnership then |
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Definition
| they are unlikely to provide the required resources. As a result, the anticipated benefits will not be achieved |
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Term
| It is important that regular reviews of the partnership are undertaken as it develops through the implementation stages towards business as usual. Reviews are required to ensure that the effort that has been put into developing the relationship by both the buyer and the supplier is resulting in |
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Definition
| tangible benefits and improvements for both partners |
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Term
| Project Steering Committee |
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Definition
| group that provides overall direction and ensures appropriate representation of the major stakeholders in the project's outcome; should be comprised of a senior representative from each relevant business area |
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Term
| Reviewing the partnership relationship is important for a number of reasons, such as |
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Definition
- The saying 'what gets measured gets done' is very true
- Reviews will ensure that the benefits and value-added abjectives are achieved with the timescales
- Documenting and celebrating success is important for motivating the partners and staff
- Need to review what is not working and how this can be changed
- Reviews can assess current levels of support
- Areas for further development can be identified
- Can serve to support the development of trust and commitment to the partnership
- The reviews can also be used as decision points |
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Term
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Definition
| The knowledge gained during a project which shows how project events were addressed or should be addressed in the future with the purpose of improving future performance. |
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Term
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Definition
| ongoing effort to improve products, processes and services |
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Term
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Definition
| A more formal prcess than a review; this would usually be undertaken by a party that is independent of the organisation being audited |
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Term
| There will be several benefits to undertaking an audit of the partnership relationship |
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Definition
- The audit will review how the partnership is progressing against the implementation plan and key milestones
- It provides an overview of what has gone well and what could be improved
- Audits can uncover problems which can then be address before they derail the partnership
- The audit will review whether the project is complying with the governance requirements as set out by the steering committee
- The audit will also serve to instil a sense of confidence in the management and shareholders that the partnership is meeting requirements |
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Term
| Reviews of the partnership project should be undertaken to allow the buyer and supplier to |
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Definition
| ensure they are receiving the expected benefits in relation to the resources allocated to the partnership relationship |
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Term
| Lambert et al found two primary reasons for partnership failure |
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Definition
- one or both partners had unrealistic expectations of waht could be achieved by the partnership
- their expectations, however reasonable, were never shared with the other partner with the result that no joint plan for achieving them was ever made |
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Term
| The collaboration framework |
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Definition
1. Both Assess Drivers
2. Aligh Expectations
3. Develop Action Plan
4. Develop Product and Service Agreement
5. Review Performance
6. Periodically Re-examine Drivers |
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Term
| Effective communication is key for the development and maintenance of any partnership relationship. Communication is required for |
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Definition
| exchanging important information, for building relationships, for persuading and for confirming requirements |
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Term
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Definition
| Recipient - Review - Route - Result - Response |
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Term
| Poor communication between the buyer and supplier could be due to the presense of several common communication barriers |
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Definition
- Distortion or omission
- Misunderstanding
- Communication overload
- Ineffective communication |
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Term
| Poor communication can cause a multitude of issues and problems, such as those outlined below, which can feed into the reasons that partnerships may fail |
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Definition
- A lack of understanding around roles and responsibilities can lead to misinterpretation of required tasks
- Errors and inefficiencies can reduce the cost and profitability benefits of the partnership and could affect the company's reputation if they affect customers
- Lack of transparency can result in lack of trust
- Poor buy-in to the partnership because it has not been effectively communicated to the wider business can affect commitment to the project
- Poor comms can be a source of conflict due to misunderstandings
- If communication is poor this reduces the ability of the buyer and supplier to feed back to each other and make improvements |
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Term
| Trust is developed through |
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Definition
| clear, two-way feedback and communication between the buyer ad supplier; it is developed overtime |
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Term
| Narain and Singh noted taht a lack of trust can |
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Definition
| affect supplier performance and ultimately the performance of the buying organisation. |
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Term
| Politis noted that trust brought several benefits |
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Definition
- Greater creativity
- Increased innovation
- Increased knowledge sharing |
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Term
| Trust is an important aspect of any partnership relationship. Before entering into the partnership, the parties should |
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Definition
| spend time undertaking trust-building activities. There is a clear link between low levels of trust and low levels of co-operation between partners |
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Term
| As the partnership develops over a period of time, so should levels of trust. However, this may not be the case. Lack of trust could occur for a number of reasons, such as |
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Definition
- One partner may fail to share the required level of info and may behave in a way that is not transparent
- Poor communication
- Lack of understanding of shared goals
- One may behave opportunistically at the expense of the relationship
- One may consistently fail to meet the agreed goals
- One may disclose commercially sensitive information to third party
- There may be issues around payment, eg, late payments made by the buyer to the supplier |
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Term
| When commitment to a partnership relationship is present there are various benefits including |
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Definition
- Efficiency
- Productivity
- Effectiveness |
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Term
| Lack of commitment to the partnership could be the result of a number of issues, such as |
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Definition
- Both parties do not demonstrate to each other that they are committed
- The buyer has chosen the wrong supplier to work with, as a result supplier not dedicated
- Senior management lacks commitment to the partnership
- There is a lack of joint decision-making
- There is a lack of supplier involvement in developing objectives and KPI's
- The supplier/buyer may have been tempted away from the partnership by short-term gain and value-added benefits elsewhere |
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Term
| Planning a partnership involves a number of key steps that should be linked to a clear timeline wth milestones. The following list shows what a plan for developing a partnership might include and why the partnership may fail if this plan is not in place |
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Definition
1. Undertake product/service segmentation and supplier preferencing to sunsure that the correct suppliers are targeted
2. Develop a cross-organistional team
3. Outline the objectives
4. Develop a business case to present to senior management
5. Undertake stakeholder mapping exercise
6. Undertake the required due dilligence, credit checks/audit of supplier premises
7. Develop any required contracts or non-disclosure agreements to protect confidential data
8. Undertake joint objective planning with the supplier using the partnership model
9. Identify resources
10. Develop a communications plan
11. Assess if IT systems integration is needed
12. Planning of operational activities to ensure both partners are working towards the acheivement of the agreed goals |
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Term
| The expected level of value-added benefits from the partnership may not materialise due to a number of reasons, such as |
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Definition
- The buyer may have selected the wrong supply partner
- Over time, one or both partners may have become complacement
- Over time, the market may have changed
- The relationship is not being actively managed and measured
- Lack of value-added benefits could also be caused by the buyer expecting unrealistic levels of value-added benefits |
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Term
| Buyers and suppliers enter into partnerships in order to achieve benefits. Value-added benefits are one aspect of this. If the buyer is not gaining tangible benefits then |
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Definition
| the resources that are being used to create and maintain the partnership relationship could be deployed more effectively elsewhere |
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Term
| As noted by Emmett and Crocker, the external environment is made up of a number of factors, such as |
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Definition
- External elements (STEEPLE)
- Levels of demand for the supplier
- Supply base of the buyer
- The buyer and supplier
- The partnership itself |
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Term
| Examples of change - External elements (STEEPLE) |
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Definition
- The economy enters a recesion
- A new technology enters the marketplace
- There is a natural disaster in the country where the supplier is based
- Import and export tariffs change
- Global pandemic |
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Term
| Examples of change - Levels of demand for the supplier |
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Definition
- A new buyer enters the marketplace and it is a more profitable customer for the supplier.
- A key buyer exits the marketplace. This would make the partnership buyer a more important customer
- Levels of demand from buyers in the market increase or decrease |
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Term
| Examples of change - Supply base of the buyer |
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Definition
- New suppliers enter the marketplace and they are able to offer the buyer greater business benefits thatn their current partnership relationship
- A previous supplier leaves the marketplace. This would make the partnership supplier a more important supplier
- Levels of supplier in the marketplace increase or decrease |
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Term
| Examples of change - the buyer and supplier |
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Definition
- Strategic intent, eg, exploiting competitors weaknesses or expanding into global markets
- Strategic match, eg, using JIT or TQM
- The buyer or the supplier gains more power in the marketplace |
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Term
| Examples of change - The partnership relationship itself |
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Definition
- Performance problems
- Change of key personnel |
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Term
| Handy's four types of organisational culture |
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Definition
- Power: Controlled by an individual, Agile decisions. Autocratic
- Role: Well-defined structure, Organisationl authority. Autocratic or Paternalistic
- Task: Matrix organisation, Cross Functional teams. Paternalistic or Democratic
- Person: Individual experts, Flat organisational chart. Democratic |
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Term
| Several types of corporate culture |
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Definition
- Bureaucratic
- Paternalistic
- Aggressive
- Laid-back
- Dominating |
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Term
| There are a number of distance barriers including |
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Definition
| Time differences and physical distances. Both of these factors can make managing a buyer-supplier partnership difficult |
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Term
| If there are physical distance barriers between a buyer and a supplier there are also likely to be language and cultural barriers. These issues can be both |
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Definition
- Technical difficulties: such as technical specifications, pricing and terms and conditions
- Behavioural difficulties: relates to culture, and how people interact with each other and form productive and beneficial business relationships |
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