CSCM Chapter 6 sourcing cscm
- 1. Sourcing CONSTRUCTION SUPPLY CHAIN MANAGEMENT (MGT60803/QSB 2433)
- 2. Objectives Today • Definition of Sourcing • The sourcing process • Sourcing information - analysis of market conditions - locating supplier - supplier appraisal • Discussion 2
- 3. What is sourcing? • Sourcing is the process of identifying, selecting and developing supplier. • Sourcing is a key purchasing activity. • Sourcing can be either at tactical and operational or strategic levels. 3
- 4. What is sourcing? 4 Tactical Sourcing Environment Strategic Sourcing Environment Clearly defined requirements and specifications Development of a deep understanding of requirements Open bid process with little or no ability for suppliers to offer alternative designs or specifications Development of a deep understanding of the supply industry, product and service offerings and performance drivers of key suppliers Purchase price focus Long-term relationship focus Non critical items Critical items Table 1: Comparison of tactical and strategic sourcing business Adapted: Lysons and Gillingham (2003, p.367)
- 5. The Sourcing Process 1. Identify or re-evaluate needs 2. Define or evaluate users’ requirements 3. Decide to make a buy 4. Identify type of purchase - Straight rebuy or routine purchase - A modified rebuy (Changed to existing supplier) - A new buy (New user need) 5. Conduct market analysis 6. Identify possible suppliers 5
- 6. The Sourcing Process 7. Prescreen or prequalify possible suppliers 8. Evaluate the remaining supply base 9. Request for proposal/quotation/tender 10. Choose supplier 11. Negotiation 12. Deliver product/performance 13. Post purchase/make performance evaluation 6
- 7. Sourcing Information • Information is the key for a successful sourcing process. • The information is important to determine: - When to buy (the right timing) - Where to buy (location) - Who to buy (which supplier) 7
- 8. Sourcing Information • Information can be obtained from: - analysis of market conditions - locating supplier sources - supplier assessment - supplier historical performance 8
- 9. Sourcing Information ANALYSIS OF MARKET CONDITIONS •What is market? - a place where goods and services are brought and sold. - large groups of buyers and sellers of wide classes of goods. - demand and supply of a single class of community. 9
- 10. Sourcing Information ANALYSIS OF MARKET CONDITIONS •What is the analysis of market conditions important to sourcing? Forecasting the long-term demand for the product. It assists in forecasting the price trends of brought-out items and how material costs are likely to affect production costs and selling prices. 10
- 11. Sourcing Information It indicates what alternative goods and supply sources are available – it might be more economical to source items from abroad. Information relating to pay trends, commodity prices, political factors and the like can assist in deciding whether to adopt a strategy of forward buying and stock piling. 11
- 12. Sourcing Information LOCATING SUPPLIERS •Suppliers can be located by checking a wide range of sources. •This process has been made faster and easier by the World Wide Web. •Some unions or professional societies provide database for sourcing suppliers. •Access to such databases may be free and unrestricted or subscriber only. 12
- 13. Sourcing Information • However, there maybe several problems that limit the value of these online searchable databases: The effort and time required to access several databases User friendliness of the search engine The quality data content – time out-of-date, incorrect data content or basic data only 13
- 14. Sourcing Information LOCATING SUPPLIERS •Other useful ways to locate suppliers include:- Salesperson – the usefulness salespeople is dependent on their knowledge of the product they are seeking to promote. Exhibitions – provide an opportunity to compare competing products, meet representatives of suppliers and attend presentations by exhibitors and exhibition catalogues. 14
- 15. Sourcing Information Trade journals – provide buyers not only with information regarding new products, substitute materials, trade gossip and keeps buyers informed about changes in the policies of suppliers. Informal exchange of information between purchasing and other professionals. 15
- 16. Sourcing Information SUPPLIER APPRAISAL •Supplier appraisal is situational. What to appraise is related to the requirements of the particular purchaser. 16
- 17. Sourcing Information • Five methods used in assessing supplier capability in this connection are based on:- Past performance – for existing supplier Reputation – word of mouth Visit and appraisal – visit the supplier in order to make assessment of quality capability Third party certification – hire third party to assess the supplier Evaluate of sample product 17
- 18. Discussion 1. Management Level decision-making:- •Strategic level •Tactical level •Operational level 2. Differences between:- •Data •Information •Knowledge 18
- 19. Challenges of Global Sourcing in Malaysia – Risk Assessing in Construction Industry • Extensive and efficient infrastructure • High quality of telecommunication network • Legal system in protecting buyers • Data security and intellectual property protection • Geopolitical distance between supplier and customer 19