What factors should be considered when making sourcing decisions?
What will be an ideal response?
Answer: When designing a sourcing strategy, it is important for a firm to be clear on the factors that have the greatest influence on performance and target improvement on those areas. For example, if most of the spending for a firm is on materials with only a few high-value transactions, improving the efficiency of procurement transactions will provide little value, whereas improving design collaboration and coordination with the supplier will provide significant value. In contrast, when sourcing items with many low-value transactions, increasing the efficiency of procurement transactions will be very valuable.
When scoring and assessing suppliers, the following factors other than quoted price must be considered:
• Replenishment lead time
• On-time performance
• Supply flexibility
• Delivery frequency/minimum lot size
• Supply quality
• Inbound transportation cost
• Pricing terms
• Information coordination capability
• Design collaboration capability
• Exchange rates, taxes, and duties
• Supplier viability
Supplier performance must be rated on each of these factors because they impact the total supply chain cost.
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A. Unconscionable Contract B. Unclear Contractual Terms C. Unenforceable Contracts D. None of these
The strategy where workforce (capacity) is kept stable but the number of hours worked is varied over time in an effort to synchronize production with demand is the
A) flexibility strategy. B) chase strategy. C) level strategy. D) mixed strategy.