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Strategic Supply Chain Management: Supplier Selection - Essay Example

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SUPPLY CHAIN MANAGEMENT THE STAGES OF SUPPLIER SELECTION AND THE COMPARISON OF PROCUREMENT IN THE PUBLIC & PRIVATE SECTORS INTRODUCTION Organisations all over the world have the need to purchase various assets and inputs to enable them render their primary service to society…
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Download file to see previous pages Thus, the management of procurement is vital. This paper sets out to critically examine the four stages of supplier selection. This will look at the various decisions, criteria, approaches, and challenges at each stage of the supplier selection process. It then goes further to examine and evaluate the differences and similarities in supplier selection in private sector and the public sector. STAGES IN SUPPLIER SELECTION The main things organisations analyse and examine critically in supplier selection are quality, reliability, price and other performance factors1. This is done by using structured systems to evaluate the purchasing need of the organisation exhaustively and also identify the capabilities of an ideal supplier. When this is done, organisations seek potential suppliers and invite them to bid for the procurement. When the bids are obtained, the business critically examines each supplier bid against set standards and also against other potential suppliers. This way, an organisation can only acquire the best of materials and services from the best suppliers. The process is summed up scientifically in four steps: 1. Initial Supplier Qualification 2. Agree Measurement Criteria 3. Obtain Relevant Information 4. Make Selection INITIAL SUPPLIER QUALIFICATION This stage is concerned with the identification of the importance of the item being procured to the organisation and the details of the ideal supplier to procure it from. This is a very rudimentary but important stage in supply chain management because it matches the resources available for the purchase with the strategy of the organisation and then carves out an ideal supplier. According to Kraljic, a business will identify the profit impact of the purchase and the supply risk impact2. The profit impact analysis is where a company matches its purchase with its overall strategy and profitability targets. This is done by comparing the purchase with the internal factors in the business. This way, the business will be able to identify and document exactly what it needs and where to look for it. Supply risk is about main factors of the supply markets that affect the purchase at hand. Supply risk is assessed by examining the prevailing conditions of the markets in relation to supplier scarcity, pace of technology and/or material substitution, entry barriers, logistics cost or complexity, monopoly and oligopoly in the markets. Supply risk analysis is therefore vital to identify the position of the business in relation to where it stands on the market for a given procurement transaction in relation to the buyer-seller power situation. When this is completed, a business can get a good idea of the kind of supplier it would want to contract for the purchase at hand and plan a strategy. These broad standards are set by identifying the minimum manufacturing capability, vendor assessments and financial viability that an ideal supplier must possess. In practice, most businesses have procurement committees and teams that take the purchasing and supply needs of the various units of the organisation for the next year. They critically analyse the profit impact and supply risk and get the supplier specification based on the resources available, importance of the purchase, and the kind of supplier to source from. The challenge at this stage is that there is a lot of work to be done in analysing each purchase at every point in time. This comes with administrative ...Download file to see next pagesRead More
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