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Best Practice in Inventory Management Chapter 9 Procurement
Dr Tony Wild
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Figure 9.1 Kraljic's Matrix
Figure 9.1 Kraljic's Matrix Dr Tony Wild Unimportant Important Importance to Customer Leverage Items Description Customer controls supply Relationship Small Supplier reacts to large customer’s whims Solution Benevolence, planned demand Situation Supplier has to be agile and therefore inefficient Strategic Items Description Products important to both parties Relationship Collaboration, Mutual Dependency Solution Single source, Communication Kanbans Situation High Volume A class items, Low stock Standard Items Description Standard products ex-stock, many potential suppliers Relationship Not close unless price advantage Solution Rationalise vendors, contracts, VMI Situation C class items, use alternative suppliers Risk Items Description Vendor dictates supply to Customer Relationship Large supplier, small customer. Usually poor delivery performance Solution Seek alternative supply Situation Patented product or bulk manufacturer Unimportant Important Importance to Customer
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Figure 9.2 Supplier Attitudes
Manufacturing Attitude Customer Attitude Compromise Provides products Requires solutions Supplier increases profit thought solutions Supplier wants narrow range of options Customer sources wider range from each supplier Increased range secures customer Bulk Low cost production Require time-phase deliveries Lean Production Master Schedule Own design, efficient to produce Fits in with products from other suppliers Demand sensitive design Fill Capacity Consistent Lead time Manufacturer adopts lean supply Delivery when available with lead time Fast reliable service, ex-stock where possible Agreed delivery cycle plan Long term fixed plan Flexibility, respond to reasonable demand changes Schedule with flexibility options Generic service Different service for each customer Develop agile processes Make margin Reduce cost Improve efficiency & design Avoid waste Reliable products Quality Stystems operating Efficient Manufacture Small batches Reduce production change-over times Minimise cost to fulfil demand Convenient ordering process Integrated systems, VMI ‘Provide products’ philosophy Packaged items ready for customers to use or sell Customise products Dr Tony Wild Best Practice in Inventory Management
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Figure 9.3 Single Sourcing Advantages & Disadvantages
Dr Tony Wild
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Figure 9.3 Single Sourcing Advantages & Disadvantages
Dr Tony Wild Best Practice in Inventory Management
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Figure 9.4 Partner Selection Checklist
• Size • Market compatibility • Corporate Objectives and Strategy • Management Style & Ethics • Marketing approach • Profitability • Geographic location • Product Consistency • Supply Reliability • Operational Capability • Information Structure • Interpersonal Match • Development Opportunities • History Figure 9.4 Partner Selection Checklist Compatibility Dr Tony Wild
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Figure 9.5 Classification of suppliers
Vendor Class Status Inspection Certified First choice. Close relationship Trusted Suppliers. Industry Accreditation Capability Audit No inspection Qualified Select group of suppliers Business Quality Audited O ffered expanding business Audit and Sample Approved Used occasionally or Standard items Items not available elsewhere Prototypes, non - inventory items, office supplies Conformance Certification or full inspection Proscribed Avoid using exce pt where unavoidable 100% detailed Dr Tony Wild Best Practice in Inventory Management
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