CHAPTER 4: SUPPLY MANAGEMENT INTEGRATION FOR COMPETITIVE ADVANTAGE

Integration: What Is It?

Internal Integration

External Integration

The Critical Role of Cross-Functional Sourcing Teams

Integrating Supply Management, Engineering, and Suppliers to Develop New Products and Services

the process of incorporating or bring- ing together different groups, functions, or organizations, either formally or infoRmally, physically or by information technology, to work jointly and often con- currently on a common business-related assignment or purpose.

Methods applying intergration

Forms of intergration

Knowledge and expertise

Business advantages

Information

Different perspective on an issue, which may drive a team to look at the problem from a new perspective that they hadn’t thought of before

About their markets

About their own plans and requirements

Product and service knowledge and technology

Process knowledge and understanding of how to make it work

Favorable cost structures that can benefit customers

Economies of scale, which can also help reduce costs

Information systems such as videoconferencing and webmail

Integrated performance objectives and measures that drive a common goal

Cross-functional or cross-organizational committees and teams

Process-focused organizations that are dedicated to certain processes

Co-location of suppliers and customers

Buyer or supplier councils that provide input and guidance to a steering committee

Supply Management’s Internal Linkages

Quality Assurance

Engineering

Operations

Accounting and Finance

Marketing/Sales

Legal

Environmental Management, Health, and Safety

Supply Management’s External Linkages

Government

Local Communities

Suppliers

Collaborative Buyer-Seller Relationships

Obstacles to Closer Buyer-Seller Relationships

Advantages of Closer Buyer-Seller Relationships

Critical Elements for Supplier Relationship Management

Development of global operations strategy

Sales and operations plan (S&OP)

Traditional close relationship through direct support

Often colocated

Growing % of outsourced requirements

Supplier quality training and development

Supplier process capability studies

Joint corrective action planning

Increasing in importance

New product ideas

Sales forecasts, production plans

Voice of the customer

Trust

Long-term contracts

Confidentiality

Limited interest by suppliers

Legal barriers

Resistance to change

Specific tasks

General tasks

Consist of various internal functional areas and, increasingly, suppliers

Supplier selection

Product design

Reducing purchased item costs

Improving quality

Benefits Sought from the Cross-Functional Team Approach

When to Form a Cross-Functional Team

Improving Sourcing Team Effectiveness: to answer these questions

Potential Drawbacks to the Cross-Functional Team Approach

Increased innovation

Joint ownership of decisions

Reduced time to complete tasks

Enhanced communication among functions or organizations

Realizing synergies by combining individuals and functions

Better identification and resolution of problems

Need to build internal relationships

Team process loss

Negative effects on individual members

Use does not guarantee success

Poor team decisions

Facing a complex or large-scale business decision

CFT is likely to make better quality decision

Assignment directly affects firm's competitive position

No single function has sufficient
resources to solve problem

  1. Does our organization consider CFT planning issues when establishing sourcing teams?
  1. Does executive management practice subtle control over sourcing teams?
  1. Does our organization recognize and reward team member participation and team performance?
  1. Do we have right person selected as sourcing team leader?
  1. Do our sourcing teams effectively establish performance goals?
  1. Are key suppliers part of sourcing team process?

Supplier Suggestion Programs

Buyer-Seller Improvement Teams

On-Site Supplier Representative

Common Themes of Successful Supplier Integration Efforts

Potential Benefits of On-Site Supplier Representatives

Supplier Integration into Customer Order Fulfillment

  1. Joint Education and Training Efforts
  1. Sharing of Technology between Buyer and Supplier Companies
  1. Formal Business Unit Trust Development Efforts
  1. Co-Location of Buyer and Supplier Personnel

  1. Direct Cross-Functional Intercompany Communication during the Project
  1. Supplier Membership and Participation on the Team

  1. Early Supplier Selection for Design and Volume Work

  1. Use of Cross-Functional Team for Supplier Evaluation and Selection
  1. Formalized Process for Selecting Items for Supplier Integration

Buyer-supplier improvement teams

On-site supplier representative

Supplier suggestion programs

Feasibility

Resources required

Potential savings

Go/no-go decision

Feedback to supplier

Providing cost reduction ideas

Providing quality improvement ideas

Supporting actions to improve material delivery

Offering process technology suggestions

Supporting material-ordering cycle time reductions

Supply Management

Sales

Engineering

Transportation

Daily interface with customer

Increased supplier production efficiency

Increased supplier insight to customer needs and access to new designs

Fewer schedule changes and surprises

Supplier performs some buying and planning activities

Reduced transaction costs

Supply management staff increased

Supplier personnel work on-site

On-site material plan development in real-time

Increased buyer-supplier coordination and integration

Reduced inventory