Class 6 & 7

Class 6 & 7 – SCM (Prof. Suhas Rane)

SRM – Supplier relationship management.

Key characteristic –

· Paying critical vendors on time

· Account manager is single source of contact between vendor and company

Graph –

X-Axis (Importance of part - VED from top to bottom); Y-Axis (Expenditure - ABC from left to right)

	Routine	Bottleneck	Critical	Leverage
Location in graph	Bottom Left	Top Left	Top Right	Bottom Right
Example	MRO	Type Washer 0 low value, but critical in production	Engines, Fuel injection pump	Music system
Characteristic	Desirable, C-Item	Vital, C-Item	Vital, A-Item	Desirable, A-Item
	Standard item	Often non std, but could be either	Often non std, but could be either	Standard
	Bulk buy	Small lot purchase	Small lot purchase	Bulk buy

· Routine – Fountain pens; Keep on continuously buying from the vendor directly; rates are fixed once in the beginning of the year. Normally one supplier is there for such MRO items. In case price of the goods increases, company then quotes a range of price.

· Leverage – High priced but bought in bulk. Hence, price is negotiated with many suppliers. Hence, switching cost is low. Here, the purchase manager is in distant relationship as Sales team deals with the suppliers.

· Bottleneck – Relationship with suppliers is most important. This is not attractive for vendors, hence, company should have at least 2 vendors. Vendors are negotiated for volumes. A team player should be the purchase officer.

· Critical – Few items, very high valued hence, very high risk associated. The vendor should be the REAL supply chain partner. Trust is most important. Hence, share Point of Sale, use CPFR, long term commitment.

Freshness Index (Used by Tata) – (FI) = Sales from products (less than a year old) / Total Sales

Postponement – It is a strategy where the finished product is postponed by preparing all / major standard parts first. Reason for the delay is assemble the standard parts in a fashion to prepare a different yet desired output product as demanded by user. Hence, new customized products are made from the standard components and hence, new finished products are available for the customer.