Role of Vendors

8/14/2019 Role of Vendors

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Role of Vendors

Central Vendor Supply of dry items to centrlised location Located in and around delhi

Local Vendor Supply of preishable items (milk, cream,

etc) locally

Citywise supply

Food Vendors Daily Supply of all eatables

Cold Supply Chain maintained


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Baristas Key Features

Inventory costs are 2.6% of sales, while theindustry

average for such formats is 4.5%

Keep stocks on the road more stocks moving on trucks instead of beingheld at a central point (inventory turnover 9days; industry 15 days)

From a static model to a dynamic system charged for part-load moved rather than on a

per truckload payment system

Regionalise, rationalise Contracts with vendors were signed on a


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Vendor Management

Depth of relationship: costs associatedwith developing and maintaining astrategic relationship with the vendor

Five Steps of Vendor Management


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Step 1

Match the vendor managementmodel to organizational goals

Creating a dedicated vendor

management staff Creating a project/program management

office

Creating a vendor management office


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Step 2

Categorize existing relationships

Strategic, tactical, commodity, or nicheplayers

Dry, Perishable, Food, etc


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Step 3

Establish a selection process

Establishing the degree and openness ofinteractions with the vendor during the

process Establishing proper Standards of

Procedure

Engaging outside consultants or legalcounsel to assist in selecting the rightvendor


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Step 4

Measure, monitor, and resolve

Establishing a governance structure forworking with the vendor

Continuous evaluation of the vendor Standards of Procedure for Evaluation

Proper training of vendors

Lending personnel & technical support


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Step 5

Define the partnership

Determining when to share organizationalgoals and future strategy

Determining accountability for the overallsuccess of the relationship

Agreeing on the circumstances for

terminating the relationship


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Role of Inventory

Centralised inventory for dry items withinventory turnover of 9 days

Part Load warehousing

Perishable inventory sourced locally ondaily basis

Food inventory sourced locally on daily

basis

It is the inventory management thatallows Barista to keep the operational

costs down.


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Inventory Model

Requirements

Minimize Inventory Costs

Keep it as fresh as possible

High Inventory Turnover Solution

Just in Time Inventory Model

Average inventory required can becalculated using existing data.


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Benefits of JIT

Improved Quality Freshness

Lower Costs Holding costs are lowered

Economic Order Quantity Savings Lower

total cost of ordering Safety Stock Reductions Reduces lead

time & varitions in lead time

Vendor Managed Inventory Regionalisedcontract fullfillment


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Role of 3PL

Delivery Costs Reduced 3PLs CoreCompetenct, Part Loading

Liability Minimized Warehousing &

transporting done by 3PL Enables JIT inventory Helps to focus on core competency Administrative Costs Lowered Capital Investment in Vehicles Eliminated Delivery Costs Are Defined and

Consistent


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Evaluation of 3PL

Linear weighting models - place a weighton each criterion and provide a totalscore

Artificial intelligence - expert systems andcase-based reasoning (CBR)

Statistical/probabilistic approaches

Mathematical programming models Hybrid Intelligent Model- Combination


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Hybrid Intelligent Model

Evaluation Criteria 1 Strategic Aspects

Financial stability

Successful trackrecord

Similar size

Comparable culture

Similar values andgoals

Fit to develop asustainable

relationship

Evaluation Criteria2 BusinessAspects

Informationtechnology

Performance

Quality

Cost Services


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Organizational Structure

Functional Structure - O rg a n ize se m p lo ye e s a ro u n d sp e cific k n o w le d g e

( ,o r o th e r re so u rce s m a rke tin g su p p ly)ch a in

Benefits Permits greater specialization & simplifies training Easier supervision due to similar issues Creates an economy of scale owing to common pool of

talent

Limitations Poorer coordination hence requires more controls Barriers in communication & cooperation Rigid and separate chains of command

Response time to changes in the environment will beslow


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Organizational Structure

Decision Making Authority Decentralised Better for quick decision making &

empowerment

Span of Control Narrow Higher Expenses

Formalisation Low Greater Freedom but no Operating

Procedures

Departmentalisation - High Common Resources


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Improved OrganizationalStructure Organic Structure

Low horizontal differentiation Collaboration (vertical & lateral)

Relaxed hierarchy; free flow of information

Wide span of control

Decentralized decision making

Low formalization

Informal communication, face-to-face

Teamwork

Adaptable duties


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Supply Chain OperationsReference Model (SCOR)

The Primary Use of SCOR: To describe, measure and evaluate supply chain

configurations.

SCOR contains:

Standard descriptions of management processes A framework of relationships among the standard

processes Standard metrics to measure process performance Management practices that produce best-in-class

performance

Enables the companies to: Evaluate and compare their performances with other

companies effectively Identify and pursue specific competitive advantages

Identify software tools best suited to their specificprocess requirements


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SCOR Boundaries

SCOR spans:

All customer interactions, from orderentry through paid invoice.

All product (physical material andservice) transactions, from supplierssupplier to customers customer,including equipment, supplies, spare

parts, bulk product, software, etc.All market interactions, from the

understanding of aggregate demandto the fulfillment of each order


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Five Distinct ManagementProcess

- - - -Plan Source Make Deliver Return

Supplier s

Supplier

Make Deliver

Source

Make DeliverMakeSourceDeliver SourceDeliverSource

Customers

Customer

Plan

Supplier(Internal

or)External

Your Company

Customer(Internal

or

)External

Return

Return ReturnReturn

Return

Return

Plan-Source-Make-Deliver-Return provide the organizational structure of theSCOR-model


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Scopes of Basic ManagementProcesses Plan (Processes that balance aggregate demand and supply to

develop a course of action which best meets sourcing,production and delivery requirements) Balance resources with requirements Establish/communicate plans for the whole supply chain

Source (Processes that procure goods and services to meet plannedor

actual demand) Schedule deliveries (receive, verify, transfer)

Make (Processes that transform product to a finished state to meetplanned or actual demand)

Schedule production Deliver(Processes that provide finished goods and services to meet

planned or actual demand, typically including ordermanagement, transportation management, and distributionmanagement)

Warehouse management from receiving and picking product

to load and ship product.

P t f P f


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Parameters for PerformanceMeasurement

Outbound Freight Cost Inventory Count Accuracy Order Fill Finished Goods Inventory

Turns

On Time Delivery Customer Complaints Over/Short/Damaged Out of Stock Returns & Allowances

Inbound Freight Cost Perfect Order Fulfillment Cost to Serve Cash to Cash Cycle time Inquiry response time Equipment utilization vs.

Inventory Obsolescence Order Cycle Time Incoming Material Quality Overall Customer

Satisfaction

Inventory Carrying Cost Days Sales Outstanding Third Party Storage Cost Forecast Accuracy Invoice Accuracy

Labor Utilization vs.Capacity

Equipment Downtime Processing Accuracy Order processed/ Labor

Unit Order processed/ Time Unit


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Learnings

Supply Chain Management Industry SpecificOverview

Vendor Relationship Management Organisational Structure and its impact on

SCM SWOT & PESTE Analysis and its utility IT Enabling SCM for better efficiency Inventory Models & Management

Effective Utilisation of 3PL Importance of Performance Measurement

Systems Flow of Information through the supply chain


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Documents

Role of Vendors