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The main goals of this chapter are to: Understand how important sourcing decisions go beyond simple material purchasing decisions, demonstrate the “bullwhip effect” and how it is important to synchronize the flow of material between supply chain partners, describe how characteristics of supply and demand have an impact on structuring supply chains, . | Global Sourcing and Procurement Chapter 13 McGraw Hill Irwin Copyright 2013 by The McGraw Hill Companies Inc. All rights reserved. Learning Objectives 1. Understand how important sourcing decisions go beyond simple material purchasing decisions. 2. Demonstrate the bullwhip effect and how it is important to synchronize the flow of material between supply chain partners. 3. Describe how characteristics of supply and demand have an impact on structuring supply chains. 4. Know the reason for outsourcing capabilities. 5. Illustrate what green sourcing is. 6. Analyze the total cost of ownership. 7. Calculate inventory turnover and days of 13 2 Strategic Sourcing Strategic sourcing - the development and management of supplier relationships to acquire goods and services in a way that aids in achieving the immediate needs of the business In the past sourcing was another name for purchasing As a result of globalization sourcing implies a more complex process suitable for products that are strategically important 13 3 Strategic Sourcing continued Specificity - refers to how common the item is and in a relative sense how many substitutes might be available Commonly available products can be purchased using a relatively simple process A request for proposal RFP is used for purchasing items that are more complex or expensive and where there may be a number of potential vendors Vendor managed inventory - when a customer actually allows the supplier to manage an item or group of items for them 13 4 The Bullwhip Effect Bullwhip effect - phenomenon of variability magnification as we move from the customer to the producer in the supply chain A slight change in consumer sales ripples backward as magnified oscillations upstream like the result of a flick of a bullwhip handle Continuous replenishment - inventory is replaced frequently as part of an ongoing process 13 5 Functional Products 13 6 Innovative Products 13 7 Uncertainty Framework De mand Unc e rtainty Low Functional High .
