Vendor

Vendor Selection
Selection and
and
Development
Development
Prepared
Prepared by
by Asher
Asher Ramish
Ramish

Lecture 13-14

1
 Synopsis
► Developing a supply base
► Building an advantaged supply network
 Overlapping capabilities
 Integrated production design and R&D
 Corrective and preventive actions
 Strategic sourcing commitments
► Basisof integration
► Top companies and their supply network plans
► Comments

2
 Building an advantaged
supply network (ASN)
► Planning/designing an ASN is different from
traditional supply planning

a) Close customer-vendor relationship

b) Inefficiencies & waste are removed at both ends
c) Coordinated business strategies
d) Shared resources, benefits, risks & opportunities
e) Less total cost of ownership
f) Economic stability for both
3
 Building an advantaged
supply network (ASN)
► Of course it doesn’t develop OVERNIGHT
► Focus of the company (global, big) should be:

► Restructuring of existing supply base

► Fewer but more capable business partners
► To build an advantaged supply network i.e. ASN

► Itcan take TIME for some of the benefits of the

ASN to show
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 A-Overlapping capabilities

► Few suppliers with a good percentage of

overlapping capabilities
 promote healthy supply network competition
 backup manufacturing in case one of the supplier is
failed

► Same strategy can be practiced in single sourcing

How?
5
 B- Integrated production design
& R&D
► Bilateral
integration in the production design &
R&D processes
 Helps reduce overall lead times
 Helps reduce development times for new products
 Less chances of failure due to coordination

► Supply base equipment / infrastructure analysis

 In order to utilize maximum vendor’s capabilities

► Process capability studies at supply chain level

6
 C-Getting to the root cause
► Sharing of resources i.e. equipment etc. bilaterally

 Help vendors find the root cause of many technical

problems
 Increases trust and transparency
 Guarantees win-win results
 Decreases total cost of ownership

7
 D-Strategic sourcing commitments
► Commitment to buying a certain volume of
products after awareness of true demand.

► Tentativevolume forecasts to be shared so as to

make the investment RIGHT at the supplier’s side

► Dual sourcing will work for global companies,

provided competition is properly designed

8
 More features of ASN
► Focus of inventory in the supply chain and not in
any one organization i.e. targeting less TCO

► Bilateraladaptation
► New product development teams
► Cross functional
► cross location teams
► Point to point communication linkages

9
 Traditional Communication
Linkages

Engineering Engineering

Quality Quality
Control Control

Purchasing Sales

Production Production
Planning Planning

Transportation Transportation

10
 Point-to-Point Communication
Linkages

Engineering Engineering

Quality Quality
Control Control

Purchasing Sales

Production Production
Planning Planning

Transportation
Transportation

11
 Integration / Alignment
As the basis is

SHARING
CLOSENESS
TRANSPARENCY

So ultimately the organizations get integrated fully

12
Toyota Supplier Development Practices
► Toyota has detailed knowledge
 About the cost of its supplier’s technology &
 The cost of its supplier’s manufacturing processes
► Contract management in Toyota is a long careful
activity based on win-win results

Network Identity Co-existence & co-

Knowledge is most prosperity
effectively generated,
Toyota’s suppliers believe
combined and transferred by
that their success is tied
individuals who “identify”
to Toyota’s
with a larger collective 13
 Fire at the KARIYA # 1 Plant of AISIN
SEIKI 4:18 AM February 1, 1997

Source: SMR
 How did Toyota face crisis?
► Kariya is Toyota’s sole source of P- ► 22 of 30 plants closed; TPS self
valves (for brakes) organizes to save system e.g.
► Entire TPS faces shutdown within 72  Nippon Denso volunteers as the logistics
hr manager
► Aisin, Toyota and other tier 1  Toyota turned to its R&D prototype
department
suppliers collaborate on emergency
 Koritsu Sangyo, a tiny tier 2 supplier to
production plan Aisin was first to deliver P valves
► Tier 2 suppliers team up, under ► First 1000 P valves shipped to
leadership of their tier 1’s
Toyota
► Aisin distributes blueprints, raw
material, undamaged drills and
assigns staff

Daily Production of Vehicles

18,000
16,000
14,000
12,000
Units

10,000
8,000
6,000
Source: SMR, WSJ
4,000
2,000
0
Fri SatSat Sun Mon Tues Wed
Wed Mon
02/01/97
01/31/97 04/02/97 02/02/97
02/01/97 02/02/97 02/03/97 02/05/97 02/10/97
Supplier’s working relations
index

Reference: Detroit-PPI 23rd May, 2011

 Boeing Supplier Development
Practices
► In aerospace, Boeing has started sharing its
technology plans with their top suppliers in joint
forums so that the suppliers can focus their R&D
in alignment with Boeing’s technology plans.
► Boeing is adopting new ways to engage key
suppliers earlier in the development process by the
use of dual sourcing strategy.
► Boeing works with these suppliers separately in
order to protect the supplier’s proprietary data.

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 Comments
► Witha more capable, efficient and stable supply
base,
 companies do not only lower costs
 but also create better products and
 achieve the right cost structure
 to grow mutual market share and profits

► The guiding principle is to maintain the close

relationships with a manageable no. of key
suppliers
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 Comments
► Effective
supplier development requires a
commitment of

 capital
 human resources
 a sharing of timely and accurate information between
the customer and supplier.

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