chapter 3 sourcing and procurementchapter 3 sourcing and procurement ... benefits of outsourcing?...
TRANSCRIPT
Chapter 3
Sourcing and Procurement
Operations Management
Maktab Khooneh
Ehsan Elahi
2
Build in-house or outsource
What should be outsourced
Role of sourcing in operations management
Supplier selection and negotiation
Agenda
3
Build In-Houseor Outsource
Examples functions that can be outsourced?
IT services
Legal services
Transportation
Security
Accounting
Production of components
…
4
Build In-Houseor Outsource
Benefits of outsourcing?
Access to larger pool of resources
Greater focus on core competency and customer
requirements
Reduced costs through lower labor and talent costs
global growth through access to critical local information
and markets
more employee flexibility
lead-time reduction
5
Build In-Houseor Outsource
Benefits of build in-house?
Avoiding dependency concerns
Avoiding intellectual concerns
6
Build in-house or outsource
What should be outsourced
Role of sourcing in operations management
Supplier selection and negotiation
Agenda
7
What should be Outsourced?
Everything that is not core competency should be
outsourced
How can we distinguish core competency
functions?
We can decide whether to outsource a function or
not based on two factors:
Our relative capability to perform the function
How critical is the function for our business?
8
What should be Outsourced?
Criticality
Low High
Relative Capability
High
Low
outsource
transactional outsourcing
collaborative outsourcing
retain in-house
??
? ?
9
Build in-house or outsource
What should be outsourced
Role of sourcing in operations management
Supplier selection and negotiation
Agenda
14-10
The Role of Sourcing
in a Operations
Sourcing is the set of business processes required to
purchase goods and services
Sourcing processes include:
Supplier scoring and assessment
Supplier selection and contract negotiation
Design collaboration
Procurement
Sourcing planning and analysis
14-11
The Role of Sourcing
in a Operations
Benefits of single sourcing:
Closer relationship with the supplier
Cost advantage due to large volumes
Lower risk of losing intellectual property
…
Benefits of multi-sourcing
Lower dependency risk
Cost negotiation power due to competition
Better quality due to competition
…
12
Build in-house or outsource
What should be outsourced
Role of sourcing in operations management
Supplier selection and negotiation
Agenda
14-13
Supplier Assessment Factors
Replenishment Lead Time
On-Time Performance
Supply Flexibility
Delivery Frequency / Minimum
Lot Size
Supply Quality
Inbound Transportation Cost
Pricing Terms
Information Coordination
Capability
Design Collaboration Capability
Exchange Rates, Taxes, Duties
Supplier Viability
14-14
Supplier Selection- Auctions and Negotiations
Supplier selection can be performed through competitive bids, reverse
auctions, and direct negotiations
Supplier evaluation is based on total cost of using a supplier
Auctions:
Sealed-bid first-price auctions
English auctions
Dutch auctions
Second-price (Vickery) auctions