Sourcing Risk Assessment
Briefly define why supplier selection is critical to successful supply chain effectiveness.
The supplier selection process is critical to the success or effectiveness of the supply chain. Various factors are considered during the selection process. Suppliers’ capabilities are vetted regarding quality standards, time, and performance history. The reliability of suppliers is deeply scrutinized during this process. As the complexity of the products or services heightens, the factors that are considered widen in scope and depth (Cheraghi et al., 2011).
The quality of the products and services that a supplier intends to provide is extremely important to an organization. The suppliers are expected to consistently meet the standards of quality required by an organization. This factor’s importance is connected to an entity’s ability to fulfill the needs of clients and produce the final goods. Other factors that play a role in the selection process include price, financial capability, technical capability to fulfill orders, as well as performance history. Vetting suppliers allows an organization to settle for the most efficient delivery and economical. This aspect contributes to an effective supply chain that enables the organization to access the required raw materials.
Discuss the various sources of information buyers can utilize when seeking potential sources of supply.
Buyers can obtain information about suppliers from a variety of sources. One of the sources includes sales representatives. Companies usually hire and train salespeople who move through various entities marketing the suppliers. Potential buyers can gain vast information regarding the goods and products that the company provides, their prices, delivery capability, and the history of operations. The salespeople are valuable to potential buyers because they provide information on new products and services and competitors.
Secondly, advertised tenders are reliable sources of information. An organization can place tender information on various media, print, or social. This advertisement invites suppliers to place their bids. Buyers gain loads of information regarding potential suppliers during the tendering process. The tendering process promotes fairness and eliminates corrupt activities.
Thirdly, organizations can use print and social media to obtain information about suppliers. For instance, newspapers and trade journals can provide information about a supplier’s process, current clients, as well as products and services. Social media is different as it allows buyers to assess a company’s performance based on reviews and popularity.
Finally, buyers can attend trade fairs and exhibitions and obtain varied information from different potential suppliers (Monczka et al., 2015). This opportunity allows the buyer to bargain for the best prices and even assess the quality of goods from varied suppliers. These are just a few of the sources that buyers can use to obtain basic information about potential suppliers.
Discuss the pros and cons of single and multiple sourcing and the various risks associated with each of these buying strategies.
Single sourcing offers varied benefits to buyers. Firstly, the buyer gains complete power over the sole supplier. Creating and maintaining a meaningful relationship between the supplier and the buyer is also possible. The buyer and the supplier can create value-adding programs, including the improvement of processes. On the other hand, multiple sourcing provides the buyer with an assurance of supplies. It is also possible to compare and identify any price increments. Based on the active competition among suppliers, each entity is motivated to provide the buyer with the most economical options that ensure quality (Sillanpää, Shahzad, & Sillanpää, 2015).
Both approaches present various challenges to buyers. When a buyer opts for single sourcing, they are only allowed to use the chosen entity. The buyer cannot explore cheaper options from other suppliers. If the sole supplier experiences problems that interfere with the capability to deliver, the entity is affected negatively. Reliance on one supplier increases the risk of failed deliveries, delays, and price increments. The approach can also be costly for the suppliers who need to manage their subcontractors. For organizations that choose multiple suppliers, communication, and information sharing are challenging due to multiple players. Various responsibilities are duplicated within an entity as they deal with more than one supplier. The process can be costly due to the management of multiple suppliers while resolving issues (Ford, Maughan, & Stevenson, 2011).
Discuss the issues purchasing need to address when evaluating whether a supplier is a candidate for a long-term relationship.
During supplier evaluation, it is important to determine whether a supplier is interested in a long-term commitment. Their willingness to commit resources to the development of such a relationship also matters. The supplier should have the necessary technical expertise to develop the relationship. The entity should also assess a supplier’s added advantage on boards. The desire to openly exchange information, confidentiality, sharing cost data, and understanding the company’s problems, values, and concerns are critical to this type of commitment.
Discuss the advantages of assigning numerical scores to the categories and subcategories included in a supplier survey.
The objectivity of the entire process is improved by including numerical scores in the suppliers’ survey. The process also becomes reliable, as subjectivity is eliminated using figures. Objectivity and reliability are obtained due to the meaning attached to each measurement on the scale. Regarding reliability, the groups and individuals that review these items arrive at a similar conclusion (Monczka, Handfield, Giunipero, & Patterson, 2015). Thus, measures that are well-defined lead to a clear understanding of the items.
Cheraghi, S. H., Dadashzadeh, M., & Subramanian, M. (2011). Critical Success Factors For Supplier Selection: An Update. Journal of Applied Business Research, 20(2), 91-108.
Ford, C., Maughan, A., & Stevenson, S. (2011). Single and multi-sourcing models. Practical Law Company.
Monczka, R. M., Handfield, R. B., Giunipero, L. C., & Patterson, J. (2015). Purchasing & Supply Chain Management. Boston: Cengage Learning.
Sillanpää, I., Shahzad, K., & Sillanpää, E. (2015). Supplier development and buyer-supplier relationship strategies – a literature review. International Journal of Procurement Management, 8(1/2), 227-250.
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Analyzing Risk in the Sourcing Process Paper
Businesses regularly encounter procurement needs for products and services that require in-depth research of the risks in the sourcing process to establish a reliable supplier base capable of meeting quality, cost and partnering expectations. This assignment prepares the student to understand the complexities of comprehensive supplier selection and its critical importance in the supply chain.
Read chapter 7 Supplier Evaluation and Selection. Based on your readings:
- Briefly define why supplier selection is critical to successful supply chain effectiveness.
- Discuss the various sources of information buyers can utilize when seeking potential sources of supply.
- Discuss the pros and cons of single and multiple sourcing and the various risks associated with each of these buying strategies.
- Discuss the issues purchasing need to address when evaluating whether a supplier is a candidate for a long-term relationship.
- Discuss the advantages of assigning numerical scores to the categories and subcategories included in a supplier survey.
- APA format must be used (cover page, references page, in-text citations etc.)
- 3-5 page minimum excluding the cover page and references.
- Include a minimum of 3 outside sources.
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