Managing Risks of Supply-Chain Disruptions: Dual ... - CiteSeerX

HIGHCritical/Bottleneck•Unique specificationStrategic•Availability is essential•Substitution is difficult•Supplier Technology is importantSUPPLYRISK•Usage fluctuates and unpredictableNon-Critical/Spot•Commodity type item•Substitution difficultLeverage•Unit cost management is important•Competitive supply market•Competitive supply market•Substitution availableLOWLOWHIGHFINANCIAL IMPORTANCESource: “Purchasing and Supply Management: Supplier Management”, Piaw, (2002), National Universityof Singapore.Figure 3.2: Purchasing MatrixEach of these commodities requires a different purchasing strategy towards suppliers. The structureof the supplier base and more particularly, the number of suppliers, must permit to managesuccessfully the supplier relationships as defined through this framework. For example, forstrategic items, the company must maximize cost reductions, minimize risk and create competitiveadvantage. As a result it must seek long-term “Supplier Partnering” agreements and consider jointventures with selected suppliers and customers to gain mutual advantage. In that case, the fewersuppliers, the easiest and the better.3.2 Lean Manufacturing and Single SourcingIn the 80’s firms started to adopt new manufacturing strategies and technologies such as just-intimemanufacturing, lean manufacturing or Kanban. Those approaches allowed them to reducedrastically costs and compete better in different markets.In particular, many companies have streamlined their supplier base following the example of theJapanese manufacturing firms. Some firms adopted single sourcing. Others turned to “tiering” –rearranging the supplier network so that manufacturer deals with limited number of ‘main28