Managing Supply Chain Relationships

Supply Chain: a sequence of business and information processes that link suppliers and
products or services to operations, and which then link those operations through distribution
channels to end users

Supply Chain Management: planning, designing, organisation and control of the flow of
information and materials in order to meet customer requirements in an efficient manner
- Organized in levels of supply and demand called tiers
- Increasingly complex relationships, now more likely to be a network than a chain

Procurement Process - Selection
Request for information (RFI)
suppliers are asked for general information
about their capabilities/performance (range
of products, delivery speed, prices,
accreditations eg. ISO 14000)
Request for proposal (RFP)
present suppliers with a brief and ask them
for a business solution
Invitation to tender (IT)
requires suppliers to provide a full cost breakdown for their proposal
Request for quotation (RFQ)
more specific than a tender, suppliers quoting a price for a product/service defined by the buying
organization

Types of Contract
Direct Competition: buyer decides who to buy from on each occasion, high number of suppliers,
total purchase value relatively low (eg. office consumables)
Contracts in Direct Competition: suppliers compete against each other for a contract to supply
over a given time period (eg. this is common in the restaurant industry)
Operative Contracts: based on supplier performance, medium term contracts which are
renewed provided the supplier has performed well again pre-agreed criteria (airlines with flight
caterers)
Supply Side
Upstream Tiers:
- Suppliers
Procurement Activity:
- acquiring materials and services required
for the organisation
Inbound Logistics:
- activity of moving materials in from
suppliers
Demand Side
Downstream Tiers:
- customers
Sales and Distribution Management
- sales and movement of materials from the
operation to customers
Outbound Logistics:
- activity of moving materials out to the
customer
Supplier Evaluation
Often based on cost, quality, delivery
Will often be linked to Order Winners:
Cost
Quality
Dependability
Flexibility
Speed
Strategic Contracts: few suppliers in these arrangements, but value of contracts is likely to be
high, long term contracts, usually partnerships (eg. transport infrastructure and construction
environment)

Purchase Portfolio Mix











Single Sourcing: buying from a single supplier
economies of scale from large orders
communication and administration
simpler
partnership relationship

Trends in supply chain management:
- collaboration
- 3PL third party logistics specialist providers
4PL network of various providers
7PL combination of the two
- reverse logistics
- cross docking
- disintermediation

Reverse Logistics
- logistical flow follows the original flow from producer to user but in the reverse order
(repair of a customers product, reusing materials, sending packaging back to supplier for
recycling purposes)

Cross Docking
- when goods flow in an unbroken sequence from receiving to dispatching, eliminating
storage time and space
- also called flow through distribution in some industries, where goods are consolidated
in a distribution centre into smaller vehicles loaded with correct orders for onward
delivery further down the chain (many high street retailers use this technique)

Disintermediation
- Cutting out tiers of customers and delivering directly to the end user
- eg using the WWW for sales
Multiple Sourcing: buying from multiple
suppliers
reduces risk of supply disruption
flexibility in meeting changes in demand
creates competition between suppliers,
creates price competition