L4M6 Summarised Note

1. The dynamics of relationships in supply chains

1.1. Differentiate between different types of commercial relationships in
supply chains
a. Internal and external relationship:
• What is internal relationship
• What is external relationship
• Advantages and disadvantages of each type of relationships
b. The relationship spectrum
• Types of relationships on the spectrum: adversarial, arm’s
length, transactional, closer tactical, single sourcing,
outsourcing, strategic alliance, partnership, and co-destiny
• Typical characteristics of these relationship types
• When to use these relationship types
c. The relationship life cycle
• On-boarding: what buyer does at this stage
• Qualification: what buyer does at this stage
• Segmentation and risk assessment: what buyer do
• Performance management: what buyer does
• Development and innovation: what buyer do
• Phase out: what buyer does
1.2. Appraise portfolio analysis techniques to assess relationship in supply
chains
a. Matrices to identify supply, supplier, and purchaser positioning
• Pareto analysis
− 80/20 rule
− ABC analysis
• Kraljic’s model
− What is profit impact/importance of a product/service
− What is supply risk/complexity of a product/service
− The four quadrants of Kraljic’s model: Non-critical,
Leverage, Bottleneck and Strategic
− Possible strategies applied to each quadrant
− Advantages and disadvantages of Kraljic’s model
b. Develop value-adding relationships with strategic suppliers
• Supplier preferencing matrix
− What is relative value of a business
− What is attractiveness of a business
 − The four quadrants of supplier preferencing model:
Nuisance, Exploit, Development, Core
− Possible actions that supplier may take
− Advantages and disadvantages of supplier
preferencing model
• Market management matrix
− How to combine Kraljic’s model with supplier
preferencing model
c. Development of action plans
• Select the right type of relationship to develop with each
supplier
• How to improve buyer’s attractiveness
1.3. Identify the competitive forces that impact on relationships in supply
chains
a. Sources of competitive advantages
• Cost leaderships: typical attributes
• Differentiation: typical attributes
• Focus: cost focus, differentiation focus
• Roles of procurement in each competitive strategy
• The value chain: primary and secondary/support activities
b. Porter’s Five Forces
• Rivalry among existing competitors
− Types of market: perfect competition, monopolistic
competition, oligopoly, monopoly
− Relative power between buyer and supplier in each
type of market
• Threat of new entrants: which factors may influence
• Threat of substitute product or services: influencing factors
• Power of suppliers: influencing factors
• Power of buyers: influencing factors
c. STEEPLE analysis
• Factors in STEEPLE analysis: social, technological,
economic, environment, political, legislative, and ethical
1.4. Compare the sources of added value that can be achieved through
supply chain relationships
a. The link between relationships as a process and the achievement
of added value outcomes
• Added values of good relationship
• Return on relationship investment
 b. Sources of added value: pricing and cost management, improving
quality, timescales, quantities, and place considerations in
procurements from external suppliers
• Pricing and cost management: How to manage cost and price
through the following:
− Specification development
− Competitive tender, remember the importance of
whole life cost and the use of open book costing
− E-sourcing
− Post-tender negotiations
− Contract management
• Improving quality
− The use of conformance and performance
specifications
− Process of quality management: quality planning,
quality control, quality assurance, quality improvement
− Value analysis/value engineering
• Timescales: the need for delivery on time
• Quantities
− Reason for holding/not holding stock
− Costs of inventories
− What is just-in-time method, vendor managed
inventory method, consignment stock
− Risks of implementing just-in-time
• Place considerations
c. The link between organisation in supply networks
• Lean and agile supply chain
• Concept of total quality management
2. Understanding processes and procedures for successful working with
stakeholders
2.1. Analyse the purpose of organisational procedures and processes in
sourcing goods and/or services
a. Achieving value for money
• What is value for money
• Which factors are considered in value for money?
• Procurement procedures and processes
− Typical processes
− Financial thresholds
− The use of competition and negotiation in the
procurement processes and procedures
 • Simplified procurement cycle
− Understand the need: make or buy decision, value
mapping and waste elimination
− Review the market
− Develop strategy
− Contract management
b. Supplier identification, assessment, and selection
• Supplier identification
− In private sector
− In public sector: UK and EU
• Supplier assessment stage, pre-qualification, and selection
− In private sector: the use of RFI
− In public sector: the use of PQQ
c. Award stage – selection and awarding criteria
• In private sector:
− The weighted criteria
− When cost or quality has the most weigh
• In public sector:
− Five procedures: open tender, restricted tender,
competitive procedure, competitive dialogue,
innovative partnership
− Most economically advantageous tender
2.2. Compare team management techniques to ensure positive stakeholder
relationships
a. Positive relationships through positive contributions
• Stakeholder mapping
• Mendelow’s theory
• Quadrant in Mendelow’s matrix
• Advantages and disadvantages of Mendelow’s matrix
b. Overcoming resistance
• Overcoming resistance matrix
• Drivers of resistance
• Kubler-Ross change curve
c. Identifying conflict and coping processes
• Force field analysis
• Thomas-Kilmann model
d. Cross-organisational team
• When to use cross-organisational team
• Advantages of cross-organisational team
• Who attends the cross-organisational team?
 e. Stages of team development – forming, storming, norming,
performing
• What typically happen in each stage
• What cause a team not working together?
2.3. Compare the practical considerations of stakeholder management
a. Accurate cost modelling
• What is cost modelling
• When to use cost modelling
• The five principles of cost modelling
• How to increase the accuracy of cost modelling
b. Reduce impact of price fluctuations
• Reasons for price fluctuations
• Techniques for risk mitigation
c. Early supplier involvement
• Definition
• ESI objectives
• Who is involved in ESI?
• Levels of ESI: None, White box, Grey box, Black box
• Factors to be considered to ensure the success of ESI
• Benefits and risks of ESI
d. Knowledge transfer and access to innovation
• Definition
• Benefits and risks
• Barriers for supplier
e. Common metrics to drive change for both organisations
• Differences between traditional KPIs and relationship based
KPIs
• Typical relationship based KPIs
• Process for measuring relationship based KPIs
f. Improving risk management and continuity of supply
• Key stages of business continuity systems
• Key areas to review
• Benefits and risks of risk mitigation
2.4. Identify the process for terminating stakeholder relationships
a. Reasons for termination
b. The process of termination
• Identify performance issues and contract management
• Obtain business approval to terminate
• Develop exit strategy
• Review market and qualify new supplier
 • Give written notice of termination
• Manage exit and new supplier on-boarding
c. Relationship impacts – amicable v. hostile
• Dispute resolution
d. Legal considerations
• Finances
• Confidentiality
• Intellectual property rights
• Security
• Employee rights
e. Succession issues – continuity of supply
3. Understanding the concept of partnering
3.1. Analyse the concept of partnering and where it is a suitable approach
a. The three types of partnering
b. Partnering versus ‘traditional’ contracting agreements
• Early supplier involvement
• No tender process or win-lose negotiations
• Shared costs and benefits
• Greater levels of information sharing and transparency
• Joint performance measurement
• No defined end periods
• Less contractual
c. The drivers for partnership sourcing
• Typical drivers for partnership sourcing
• The relationship between drivers, facilitators, and type of
partnership
d. Advantages and disadvantages of partnership relationship
• Advantages and disadvantages for both parties
• Advantages and disadvantages for buyer
• Advantages and disadvantages for supplier
e. High spends
f. High risk
g. Technically complicated supplies
h. New services
i. Fast-changing technologies
j. Restricted market
3.2. Appraise the process of partnership implementation
a. Identify items potentially suitable for partnership sourcing
b. ‘Sell’ the philosophy to senior management and other functions of
the organisation
 • Sell the idea to senior management
• Sell the idea to the wider organisation
• Sell the idea to potential partner
• Processes that support selling the philosophy
c. Define the standard that potential partners will be expected to meet
• Commitment to total quality management
• Ability to apply the just in time method
• Ability to provide supplies locally and/or globally
• Willingness to take part in innovation programme
• Flexibility management
• Behaviours
d. Establish joint commitment to the partnership
• Communication
• Contractual commitment and partnership governance
• Driving commitment and allocation of resources from top
down
• Joint objective setting
• Joint planning and decision making
• Benefits and resource allocation
• Quick wins
e. Reviews and audit
• Who is responsible for reviewing the partnership?
• Content for revision
• Project audit
3.3. Identify the reasons why partnership fail
a. Poor communication
• Standards for effective communication
• Barriers to communication
b. Lack of senior management support and trust
• Lack of senior management support
• Lack of trust
c. Lack of commitment
• Signs of lack of commitment
• Reasons for lack of commitment
d. Poor planning
• Correct plan for partnership sourcing
e. Lack of value-added benefits
• Reasons for lack of value-added benefits
f. Changes in the market
• Changes in competition
 • Changes in external factors
g. Corporate cultural differences
• Typical culture types
• Why cultural differences may lead to partnership failures
h. Logistics and distance barriers
• Logistics
• Distance barriers
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