1. How Many Suppliers Do You Need? Blake Holmes Blake Holmes Mike Telmar Mike Telmar Jason Harman Jason Harman Kaptaan Hickey Kaptaan Hickey Ryan Beugli Ryan Beugli

2. Customer Expectations Drives overall business strategy Drives overall business strategy What is most important to the customer What is most important to the customer Cost Cost Time Time Innovation Innovation

3. Organizational Strategy Basis of all business decisions including how many suppliers you should use Basis of all business decisions including how many suppliers you should use When innovation is a core strategy for your business fewer suppliers are optimal When innovation is a core strategy for your business fewer suppliers are optimal When price is a core strategy for your business many suppliers are optimal When price is a core strategy for your business many suppliers are optimal

4. Supplier Criteria Product Capacity Product Capacity Quality Quality Brand Name Brand Name Warranty/Product support Warranty/Product support Price (not always the most important) Price (not always the most important)

5. Aspects of Many vs. Few Suppliers Increased competition may promote better quality and reduced cost Increased competition may promote better quality and reduced cost Low likelihood organization will be left without production inputs Low likelihood organization will be left without production inputs Suppliers gain considerable amount of bargaining power. Suppliers gain considerable amount of bargaining power. Less resource to potentially exploit. Less resource to potentially exploit. High risk of suppliers defaulting on delivery. High risk of suppliers defaulting on delivery. Many SuppliersFew Suppliers

6. Aspects of Many vs. Few Suppliers Suppliers will experience decreased demand, driving sales down and costs up. Suppliers will experience decreased demand, driving sales down and costs up. Logistics and operations become complex and difficult to manage. Logistics and operations become complex and difficult to manage. Increased demand makes it easier for suppliers to experience economies of scale. Increased demand makes it easier for suppliers to experience economies of scale. Streamlined logistics and operations are easy to manage. Streamlined logistics and operations are easy to manage. Many SuppliersFew Suppliers

7. Aspects of Many vs. Few Suppliers Utilizing many suppliers can undermine trusting relationship and display a lack of commitment to long term business. Utilizing many suppliers can undermine trusting relationship and display a lack of commitment to long term business. Difficult to collaborate with suppliers, allowing inputs to be developed in parallel with organizations products. Difficult to collaborate with suppliers, allowing inputs to be developed in parallel with organizations products. Shows commitment to long term relationships which can promote trust. Shows commitment to long term relationships which can promote trust. Often easier to collaborate with suppliers to develop products in parallel with organizations products. Often easier to collaborate with suppliers to develop products in parallel with organizations products. Many SuppliersFew Suppliers

8. Systematic Methods for Managing Supplier Selection Categorical Methods Categorical Methods Data Envelopment Analysis Data Envelopment Analysis Case-Based Reasoning Case-Based Reasoning Linear Weight Models Linear Weight Models Artificial Intelligence Model Artificial Intelligence Model

9. (QFD) Quality Function Deployment Process QFD (aka “House of Quality”) was first implemented by Yoji Akao at Mitsubishi Industries Kobe Shipyard to integrate the “voice of the customer” into the design and delivery of oil tankers”. The concept can be applied to supplier selection by integrating the voice of the customer into selection criteria. QFD (aka “House of Quality”) was first implemented by Yoji Akao at Mitsubishi Industries Kobe Shipyard to integrate the “voice of the customer” into the design and delivery of oil tankers”. The concept can be applied to supplier selection by integrating the voice of the customer into selection criteria.

10. Draft a list of supplier requirements that contribute to the fulfillment of customers needs. Draft a list of supplier requirements that contribute to the fulfillment of customers needs. Formulate evaluation criteria for suppliers. Formulate evaluation criteria for suppliers. Determine the importance (weight) of the criteria. Determine the importance (weight) of the criteria. Rank your suppliers, and make appropriate selection that will accommodate customer needs. Rank your suppliers, and make appropriate selection that will accommodate customer needs. QFD & Choosing Suppliers

11. Supplier Priority Matrix (Considers Tangible & Intangible Criteria)

12. Producing Commodity or Specialty Product Producing Commodity or Specialty Product Importance of Suppliers Brand name Importance of Suppliers Brand name Importance of time constraints Importance of time constraints Technical competency among candidates Technical competency among candidates Production volume requirements Production volume requirements Need for collaboration Need for collaboration Few Suppliers Many Suppliers

13. Conclusion Customer expectations govern organizational strategy, which will define supplier selection criteria. Customer expectations govern organizational strategy, which will define supplier selection criteria. Systematic methods can be used to rank suppliers. Systematic methods can be used to rank suppliers. Both positive and negative aspects are associated with few/many suppliers. Both positive and negative aspects are associated with few/many suppliers. Choosing the optimal number of suppliers is not an exact science. Choosing the optimal number of suppliers is not an exact science. You can use tools and techniques to guide decision making process. You can use tools and techniques to guide decision making process.

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