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Week 3 summary

This week explores the questions we need to ask, with the information we need to process, to ensure that we are making good buying decisions.

5 key questions fundamental to any sourcing decision

What needs to be purchased:

In this section we look at the key question ‘what needs to be purchased’ and we discuss the values associated with the purchasing decision:

  • What are our needs and what features do we require
  • How much do we need and how frequently
  • What are our constraints e.g. cash, storage
  • Do we buy the same thing for different uses e.g. beef for stew vs roast

What does a potential supplier look like

In this section we explore the characteristics of the supply market and how this informs our buying decision:

  • Identify the types of suppliers or market segments that best match our needs and values
  • How attractive are we to them
  • Have we learnt anything new that might change our specification e.g. products, features or services that we were unaware of before?

Which buying approach suits best

‘Which buying approach suits us best’ is the focus of this block, including exploring the types of relationship that would satisfy our different buying needs:

  • Do we shop around and bargain for each purchase
  • Do we create a relationship or loyalty
  • Do we need to work closely with the supplier e.g. off the peg cloths vs tailored or standard car model vs highly customised (RR, Ferrari)
  • Are there advantages in bulk buying

Which supplier (s) do we select

The supplier selection question is addressed looking at priorities and trade offs in this section:

  • What things are of most importance to us in the specification and our values
  • How do the targeted suppliers match up to these
  • Do suppliers want the same type of relationship as we do
  • Do we understand the true and total costs e.g. delivery terms, storage costs, add ons (e.g. airlines), product returns (cost and ease)

How can we improve

This section considers the importance of having appropriate relationship development mechanisms in place:

  • What has been our experience and what needs to improve to better match our needs and values
  • Has the market changed since our last purchase. Is there someone better placed, have our needs or values changed, has the market changed *Do we need an exit strategy

Summary

The key inputs to the buying decision are summarised encapsulating how we make strategic sourcing choices.

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This article is from the free online course:

Supply Chains in Practice: How Things Get to You

The University of Warwick

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