1. Describe your organization (TESLA Motors) : What do they do, who are their primary competitors, what is your position within the organization.
2. Describe your organization’s position in the global supply chain.
- For its primary product line, describe the supply chain from the beginning to the end. Create a diagram similar to figure 1.1 and explain. Make sure to describe all participants and their roles, from the beginning to the end. Note the countries in which each participant is located.
- Conclude by explaining the significance of supply chain management for your organization’s success. How has supply chain management impacted your operations?
3. How does the purchasing function in your organization select suppliers? Discuss the factors on pg. 65 with a purchasing professional and ask them to order these factors from most to least important. Then, provide details on the top three ranked factors by explaining why they are a top priority for your organization. If any of your suppliers are international, are any special factors considered?
Supplier Selection The decision to select a supplier for office supplies or other noncritical materials is likely to be an easy one. However, the process of selecting a group of competent suppliers for important materials, which can potentially impact the firm’s competitive advantage, is a complex one and should be based on multiple criteria. In addition to cost and delivery performance, firms should also consider how suppliers can contribute to product and process technology. Factors that firms should consider while selecting suppliers include: Process and product technologies: Suppliers should have competent process technologies to produce superior products at a reasonable cost to enhance the buyer’s competitive edge. Willingness to share technologies and information: With the current trend that favors outsourcing to exploit suppliers’ capabilities and to focus on core competencies, it is vital that firms seek suppliers that are willing to share their technologies and information. Suppliers can assist in new product design and development through early supplier involvement (ESI) to ensure cost-effective design choices, develop alternative conceptual solutions, select the best components and technologies, and help in design assessment. By increasing the involvement of the supplier in the design process, the buyer is free to focus more attention on core competencies. Quality: Quality levels of the purchased item should be a very important factor in supplier selection. Product quality should be high and consistent since it can directly affect the quality of the finished goods. Cost: While the unit cost of an item is not typically the sole criterion in supplier selection, total cost of ownership is an important factor. Total cost of ownership or total cost of acquisition includes the unit cost of the item, payment terms, cash discount, ordering cost, carrying cost, logistical costs, maintenance costs, and other more qualitative costs that may not be easy to assess. An example of a total cost of ownership analysis is provided in the following section. The total cost analysis demonstrates how other costs besides the unit cost can affect purchase decisions. Reliability: Aside from a reliable product quality level, reliability can refer to other supplier characteristics. For example, is the supplier financially stable? Otherwise, it may not be able to invest in research and development or stay in business. Is the supplier’s delivery lead time reliable? Otherwise, production may have to be interrupted due to a shortage of material. Order system and cycle time: How easy to use is a supplier’s ordering system, and what is the normal order cycle time? Placing orders with a supplier should be easy, quick, and effective. Delivery lead time should be short, so that small lot sizes can be ordered on a frequent basis to reduce inventory holding costs. Capacity: The firm should also consider whether the supplier has the capacity to fill orders to meet requirements and the ability to fill large orders if needed. Communication capability: Suppliers should possess a communication capability that facilitates communication between the parties. Location: Geographical location is another important factor in supplier selection, as it impacts delivery lead-time, transportation, and logistical costs. Some firms require their suppliers to be located within a certain distance from their facilities. Service: Suppliers must be able to back up their products by providing good services when needed. For example, when product information or warranty service is needed, suppliers must respond on a timely basis. There are numerous other factors—some strategic, others tactical—that a firm must consider when choosing suppliers. The days of using competitive bidding to identify the cheapest supplier for strategic items are long gone. The ability to select competent strategic suppliers directly affects a firm’s competitive success. Strategic suppliers are trusted partners and become an integral part of the firm’s design and production efforts. A tiered supply chain model is widely used in the aerospace, automotive, and computer industries where the finished goods consists of many complex sub-assemblies that must comply with stringent quality standard and complex manufacturing process. Original equipment manufacturers (OEM) are the companies that make the final products. Tier-1 suppliers provide parts or services directly to the OEM; Tier-2 suppliers provide their outputs to Tier-1 suppliers, but not directly to the OEM; and Tier-3 suppliers sell their outputs to Tier-2 suppliers.