Chapters_10_and_11_-_Purchasing_and_Sourcing_Decisions

Chapters_10_and_11_-_Purchasing_and_Sourcing_Decisions -...

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BUS 370: Sourcing Decisions and Purchasing Chapters 10 and 11 Tracy Freeman Poole College of Management North Carolina State University 1
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Chapter 10 Objectives Sourcing Decisions Be able to: Describe why sourcing decisions are critical. Develop a total cost of ownership model. Discuss the various strategic issues surrounding sourcing decisions and identify some of the key factors favoring one approach over the other. Perform a simple total cost analysis. Explain what a sourcing strategy is, and show how portfolio analysis can be used to identify the appropriate sourcing strategy for a particular good or service. Show how multi-criteria decision models can be used to evaluate suppliers, and interpret the results. Discuss some of the longer-term trends in supply management and why they are important. 2
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Insourcing – The use of resources within the firm to provide products or services Outsourcing – The use of supply chain partners to provide products or services Sourcing decisions are high-level, often strategic decisions that address: Do we use resources within the firm or will the material or service be provided by supply chain partners? The Sourcing Decision Make-or-Buy Decision 3
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Would you outsource any of the following and why? Dell – Manufacture of computer components Nike – Manufacturing of shoes Intel – Design of computer chips IBM – Cafeteria Services 4
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Advantages and Disadvantages of Insourcing Advantages High degree of control Ability to oversee the entire program Economies of scale and/or scope Disadvantages Required strategic flexibility Required high investment Loss of access to superior products and services offered by potential suppliers 5
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Advantages and Disadvantages of Outsourcing Advantages High strategic flexibility Low investment risk Improved cash flow Access to state-of-the-art products and services Disadvantages Possibility of choosing a bad supplier Loss of control over the process and core technologies Communication and coordination challenges “Hollowing out” of the corporation Increased risk of SC disruption 6
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1. Environmental Uncertainty Examples Financial risks Market risks Product and technology risks In general, the greater the environmental uncertainty, the more attractive outsourcing becomes 7
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2. Competition in the Supplier Mkt. Supply base: How many suppliers and how much competition exists? What are the potential suppliers’ capabilities? Is it easy to switch between suppliers if necessary? In general, the stronger the supply base, the more attractive outsourcing becomes 8
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3. Ability to Monitor Supplier Supply base: Will they be responsive to my needs? Will the supplier agree to my terms?
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Chapters_10_and_11_-_Purchasing_and_Sourcing_Decisions -...

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