A decision-making approach for investigating the potential effects of near sourcing on supply chain

Purpose - Near sourcing is starting to be regarded as a valid alternative to global sourcing in order to leverage supply chain (SC) responsiveness and economic efficiency. The present work proposes a decision-making approach developed in collaboration with a leading Italian retailer that was willing to turn the global store furniture procurement process into near sourcing. Design/methodology/approach - Action research is employed. The limitations of the traditional SC organisation and purchasing process of the company are first identified. On such basis, an inventory management model is applied to run spreadsheet estimates where different purchasing and SC management strategies are adopted to determine the solution providing the lowest cost performance. Finally, a risk analysis of the selected best SC arrangement is conducted and results are discussed. Findings - Switching from East Asian suppliers to continental vendors enables a SC reengineering that increases flexibility and responsiveness to demand uncertainty which, together with decreased transportation costs, assures economic viability, thus proving the benefits of near sourcing. Research limitations/implications - The decision-making framework provides a methodological roadmap to address the comparison between near and global sourcing policies and to calculate the savings of the former against the latter. The approach could include additional organisational aspects and cost categories impacting on near sourcing and could be adapted to investigate different products, services, and business sectors. Originality/value - The work provides SC researchers and practitioners with a structured approach for understanding what drives companies to adopt near sourcing and for quantitatively assessing its advantage

Supplier base management : the contrast between Germany and the UK

Supplier base management is an important aspect of the management of manufacturing operations, as reducing the number of suppliers – the supplier base – is a key approach in many companies including the US and the UK. By having fewer suppliers, manufacturers have more time to work closely with each remaining supplier, for instance, on improving quality and product innovation. However, is this approach being adopted in Germany as fast as it has been in the UK? This paper describes research which addresses this question and which also investigates how German companies are managing contacts with their suppliers. The study was conducted in two stages. Firstly, a survey of manufacturers in Germany and the UK identified the trends in the supplier base of companies in each country. Secondly, a follow-up telephone survey was carried through with purchasing managers at a random sample of 34 German plants to identify, for example, the advantages experienced by manufacturers, which had reduced their supplier base. The findings show that German manufacturers have not reduced their supplier base by as much as companies in the UK. The second part of the research showed that German manufacturers, which have reduced their supplier base, perceive the benefits of this. However, other companies appear to have failed to take the opportunity to gain advantages from a reduced supplier base

Determining sourcing strategies : A decision model based on activity and cost driver information.

Determing sourcing strategies for different material groups provides a major challenge to most companies. There has been little research on the choice of the optimal number of different suppliers for a given product group and the determination of their market shares. In this paper we propose a mathematical programming model using activity based costing information to determine optimal order splitting among suppliers on the basis of the different costs associated with the purchasing decision. We argue that sourcing strategies should be based on the minimisation of the total cost of ownership resulting from external purchases. The model is applied to the case of ball bearings at Cockerill Sambre S.A., a Belgian multinational company in the steel industry.Model; Sourcing; Strategy;

Eco-efficient supply chain networks: Development of a design framework and application to a real case study

© 2015 Taylor & Francis. This paper presents a supply chain network design framework that is based on multi-objective mathematical programming and that can identify 'eco-efficient' configuration alternatives that are both efficient and ecologically sound. This work is original in that it encompasses the environmental impact of both transportation and warehousing activities. We apply the proposed framework to a real-life case study (i.e. Lindt & Sprüngli) for the distribution of chocolate products. The results show that cost-driven network optimisation may lead to beneficial effects for the environment and that a minor increase in distribution costs can be offset by a major improvement in environmental performance. This paper contributes to the body of knowledge on eco-efficient supply chain design and closes the missing link between model-based methods and empirical applied research. It also generates insights into the growing debate on the trade-off between the economic and environmental performance of supply chains, supporting organisations in the eco-efficient configuration of their supply chains

Supply chain risks: an automotive case study

The supply chain is a complex system exchanging information, goods, material and money within enterprises, as well as between enterprises within the value chain. An effective supply chain management contributes to large corporate profits and it is therefore a valid path to reinforce the enterprises' competitiveness. However, supply chain is exposed to influences from undesirable factors both from the outside environment and the entities in the chain. Moreover, industrial trends towards lean production, increasing outsourcing, globalisation and reliance on supply networks capabilities and innovations, increase the complexity of the supply chain . Therefore, managers need to identify, and manage risks, as well as opportunities, from a more diverse range of sources and contexts. This paper contributes to identify and categorise supply chain risks based on a literature study and an automotive manufacturer’s viewpoint. The empirical results indicate suppliers and raw material prices as the major internal and external potential risks

Effective sourcing strategies for perishable product supply chains

Purpose – The purpose of this paper is to assess whether an existing sourcing strategy can effectively supply products of appropriate quality with acceptable levels of product waste if applied to an international perishable product supply chain. The authors also analyse whether the effectiveness of this sourcing strategy can be improved by including costs for expected shelf life losses while generating order policies. Design/methodology/approach – The performance of sourcing strategies is examined in a prototype international strawberry supply chain. Appropriate order policies were determined using parameters both with and without costs for expected shelf life losses. Shelf life losses during transport and storage were predicted using microbiological growth models. The performance of the resulting policies was assessed using a hybrid discrete event chain simulation model that includes continuous quality decay. Findings – The study's findings reveal that the order policies obtained with standard cost parameters result in poor product quality and large amounts of product waste. Also, including costs for expected shelf life losses in sourcing strategies significantly reduces product waste and improves product quality, although transportation costs rise. Practical implications – The study shows that in perishable product supply chain design a trade-off should be made between transportation costs, shortage costs, inventory costs, product waste, and expected shelf life losses. Originality/value – By presenting a generically applicable methodology for perishable product supply chain design, the authors contribute to research and practice efforts to reduce food waste. Furthermore, product quality information is included in supply chain network design, a research area that is still in its infancy

Modeling Overstock

Two main problems have been emerging in supply chain management: the increasing pressure to reduce working capital and the growing variety of products. Most of the popular indicators have been developed based on a controlled environment. A new indicator is now proposed, based on the uncertainty of the demand, the flexibility of the supply chains, the evolution of the products lifecycle and the fulfillment of a required service level. The model to support the indicator will be developed within the real options approach.overstock, stock management, real options

A Continuous Review Inventory System with Lost Sales and Emergency Orders

We analyze a continuous review lost sales inventory system with two types of orders—regular and emergency. The regular order has a stochastic lead time and is placed with the cheapest acceptable supplier. The emergency order has a deterministic lead time is placed with a local supplier who has a higher price. The emergency order is not always filled since the supplier may not have the ability to provide the order on an emergency basis at all times. This emergency order has a higher cost per item and has a known probability of being filled. The total costs for this system are compared to a system without emergency placement of orders. This paper provides managers with a tool to assess when dual sourcing is cost optimal by comparing the single sourcing and dual sourcing models