Description
This is a presentation explaining about the need of single sourcing and multiple sourcing.
Multi Sourcing vs Single Sourcing
Samarth Gulati 91047 Shefali Srivastava 91050
Problems in Supply Chain
• Disruptions: natural disasters, strikes, terrorism attacks • Uncertainty • Vulnerability • Complexity
What should be done
• • • • Build a resilient supply chain Prepare the firm against disruption respond to uncertainty effectively secure the supply-chain
STRATEGIC HIGH CRITICAL/BOTTLENE CK Availability is essential Supplier Technology essential Substitution Difficult
Unique Specification
Substitution Difficult
SUPPLY RISK
Usage fluctuates and unpredictable
NON CRITICAL/SPOT
LEVERAGE
Commodity type item
Competitive market Substitution possible
Unit cost management important
Competitive Supply market
HIGH
LOW
LOW
FINANCIAL IMPORTANCE
Need for Single Sourcing
Better Pricing through higher volumes Better quality through continuous improvements Build stronger and longer-term relationships Lower costs incurred to source, process and inspect
Streamline the procedure
Reduce Inventory and Lead Time
Need for Multiple Sourcing
Protect buyer during times of shortage, strikes and other emergencies
Maintain a Back up source
Maintain competition
Avoid complacency on part of single supplier
Meet local requirements for international manufacturing locations
When technology path is uncertain
Multiple Sourcing vs Single Sourcing
Multiple Suppliers
PRICE
INDIRECT COSTS
Single Supplier PRICE
INDIRECT COSTS
Ford Case
In 1998, supply problems at Ford resulted in the temporary, three-day shutdown of the Fiesta and Puma manufacturing facilities in Cologne and Dagenham, Germany.
The source of the supply problem was a computer glitch at Ford’s provider of door and trunk latches. Those three days cost Ford approximately £70 million in labour costs and the production of about 7000 vehicles.
Ericsson vs Nokia
• Philips suffered a fire in its plant of Alburque in march 2000. • Philips’s site became unable to produce the computer chips that its customers, Nokia and Ericson, needed to produce mobile phone handsets. • Nokia realized very early that there was a problem in the production of chips, and pressured Philips to reroute capacity. • Ericsson detected the problem slowly and when it turned to Philips, it was too late as Nokia had already claimed all the production. • The damages were very important for Ericsson as Philips was its only supplier: • Ericsson lost $1.8B, and almost 4% of market share to Nokia.
Conclusion
Single Sourcing
Multiple Sourcing
• high indirect costs • involvement with a single supplier • Risky • Eg- JIT
• low indirect sourcing costs • competitive bidding • Flexible • Eg- for stategic items
doc_904965227.pptx
This is a presentation explaining about the need of single sourcing and multiple sourcing.
Multi Sourcing vs Single Sourcing
Samarth Gulati 91047 Shefali Srivastava 91050
Problems in Supply Chain
• Disruptions: natural disasters, strikes, terrorism attacks • Uncertainty • Vulnerability • Complexity
What should be done
• • • • Build a resilient supply chain Prepare the firm against disruption respond to uncertainty effectively secure the supply-chain
STRATEGIC HIGH CRITICAL/BOTTLENE CK Availability is essential Supplier Technology essential Substitution Difficult
Unique Specification
Substitution Difficult
SUPPLY RISK
Usage fluctuates and unpredictable
NON CRITICAL/SPOT
LEVERAGE
Commodity type item
Competitive market Substitution possible
Unit cost management important
Competitive Supply market
HIGH
LOW
LOW
FINANCIAL IMPORTANCE
Need for Single Sourcing
Better Pricing through higher volumes Better quality through continuous improvements Build stronger and longer-term relationships Lower costs incurred to source, process and inspect
Streamline the procedure
Reduce Inventory and Lead Time
Need for Multiple Sourcing
Protect buyer during times of shortage, strikes and other emergencies
Maintain a Back up source
Maintain competition
Avoid complacency on part of single supplier
Meet local requirements for international manufacturing locations
When technology path is uncertain
Multiple Sourcing vs Single Sourcing
Multiple Suppliers
PRICE
INDIRECT COSTS
Single Supplier PRICE
INDIRECT COSTS
Ford Case
In 1998, supply problems at Ford resulted in the temporary, three-day shutdown of the Fiesta and Puma manufacturing facilities in Cologne and Dagenham, Germany.
The source of the supply problem was a computer glitch at Ford’s provider of door and trunk latches. Those three days cost Ford approximately £70 million in labour costs and the production of about 7000 vehicles.
Ericsson vs Nokia
• Philips suffered a fire in its plant of Alburque in march 2000. • Philips’s site became unable to produce the computer chips that its customers, Nokia and Ericson, needed to produce mobile phone handsets. • Nokia realized very early that there was a problem in the production of chips, and pressured Philips to reroute capacity. • Ericsson detected the problem slowly and when it turned to Philips, it was too late as Nokia had already claimed all the production. • The damages were very important for Ericsson as Philips was its only supplier: • Ericsson lost $1.8B, and almost 4% of market share to Nokia.
Conclusion
Single Sourcing
Multiple Sourcing
• high indirect costs • involvement with a single supplier • Risky • Eg- JIT
• low indirect sourcing costs • competitive bidding • Flexible • Eg- for stategic items
doc_904965227.pptx