Presentation 1:The Toyota Group and the Aisin FireQuestions:1. Compare and contrast single sourcing and multiple sourcing. What are pro and

cons of each?Single sourcing: the buying firm depends on a single company for all or nearly all of a particular item or service. A single source purchase is the purchase of a commodity or equipment, which is available from one source only. Whereas in multiple sourcing: the buying firm shares its business across multiple suppliers.

multiple sourcing

Single sourcing

Advantages Disadvantages Advantages DisadvantagesCreates competition Reduces supplier

loyalty – suppliers may not be willing to go the extra mile for the purchaser

Results in volume leveraging – when vol goes up, cost per unit decreases as the supplier spreads fixed cost over larger vol.

Can result in higher costs when the supplier, knowing it has the business, decides it can actually increase prices in short term

Spreads risks – in the event of fire, strike etc

Can increase risk in the event of a shortage – suppliers may only supply to preferred customers

Reduces transportation costs, with fewer shipments and lower per unit transportation costs

Increases supply risk – if a disaster occurs, the buyer can be left without a source of supply

Is preferred if the purchased vol is too great for one supplier

May result in different product attributes with varying quality

Reduces quality variability and provides a standardized product

Can result in the buyer becoming ‘captive’ to a supplier’s technology – while other suppliers are surging ahead with new tech

2. What is JIT purchasing?

Just-In-Time (JIT) purchasing is a system of buying which improves effectiveness and efficiency. In JIT concept, "materials are purchased or parts are produced in an exact quantity and just as they are needed”. In a traditional organization purchasing is done in larger volumes. These stocks are stored and then used when required. There will be few deliveries in larger time intervals. But in just in time purchasing, the requirement for purchasing comes from manufacturing process. When they require raw materials, purchasing must be triggered and then purchasing will be taken place in smaller quantities and will have frequent deliveries.

Benefits reported by JIT purchasing customers include improved communication between customer and supplier and the reduction of lead times, on-hand inventories, space needed for storage, and paperwork.

3. Discuss the Japanese model of collaborative partnership between firms and their suppliers. Why many US and European firms in the recent past have attempted to use this model to establish similar partnerships.

Collaborative partnerships between companies and their suppliers are a recent development in the business world. Standardization of parts was the norm for most organizations. This sparked the requirement that suppliers produce large volumes of product and offer the lowest price possible. In turn, this created intense rivalry between competing firms, which was actually encouraged by the organization demanding the product. At the time, many large organizations were vertically integrated to ensure a steady, uninterrupted supply stream. Given the fact that Japan is such a densely populated nation and does not have a seemingly endless supply of resources like the U.S., they have to utilize all of their resources to the fullest. Because of this situation, the Japanese had to cooperate extensively with each other in order to succeed, leading Japanese businesses to form an integrated network known as the keiretsu. This type of integrated network was characterized by informal but strict cooperation among members.Given the success that Japanese companies were able to achieve with this tight-knit network, it is no wonder that U.S. firms’ interests were piqued. However, it has taken time for this philosophy to take hold in many organizations. This can probably be attributed to the vertical integration that characterized most company’s practices during the first half of the 20th century. The evolution of supplier collaboration over the last 100 years parallels the progress of business models. At the beginning of the century sound business practice could be characterized by a single-focused enterprise with mass-produced products. By the end of the century the trend was that firms had begun to move to multiple enterprise/mass customized producers.

4. What lessons were learnt by the rest of the world from the Aisin’s crises?

The fire and the subsequent production crisis held many lessons for Toyota. It showed them that their implementation of the Just In Time production system worked, and that they had "the right balance of efficiency and risk". Toyota also learned to reduce the number of variations in its parts to make production easier as well as to reduce risk. Toyota's suppliers also had the benefit of increasing efficiency in their production as well as learning the lessons of building redundancy into their production methods.

The efficiency with which production was re-established also showed the value of the Japanese keiretsu system, where businesses have "interlocking" relationships with each other. The loyalty shown by Toyota's suppliers to the company showed it the value of long-term business relationships: the suppliers reportedly did not ask what they would be paid for rushing out the valves; Aisin and Toyota later reimbursed them for the work,

including the valves, overtime and re-tooling of their machine, as well as providing a $100 million bonus to the suppliers involved.

5. Give some instances of Indian companies extending support (technological, financial etc.) to their vendors / to develop their vendor base.

The Maruti way of doing things

The VENDOR development programme of Maruti was formulated to meet the following main objectives:❏To implement the government policy of 95% indigenization in5 years in a phased manner;❏To observe Suzuki’s policy of outsourcing all but the most critical components. In house value addition was planned to be about 26%;❏To be totally transparent in all vendor dealings;❏To ensure quality standards were maintained and cost targets fulfilled.

The Maruti board approved a vendor development policy. This recognized that car-maker’s ability to meet quality and cost targets depended on upgrading vendor capabilities, and ensuring continuous improvement. Long-term mutually beneficial relations were to be developed with vendors.They were to be given assistance to improve technology and manufacturing standards. Maruti helped to bring together foreign manufacturers and Indian companies. Engineers worked with vendors to improve plant layouts and manufacturing systems. Vendors were helped to establish quality practices and acquire ISO certification. Where necessary, financial support was also given, including supply of costly tooling.

Maruti entered into joint ventures with a number of suppliers, taking minority equity positions, but being fully involved in ensuring that quality and productivity levels were as high as possible. There are now 11 such joint venture companies and they greatly helped in attaining localization targets, as well as maintaining high quality.

Presentation 2:1. What is E-procurement? Discuss its benefits and constraints?

E-procurement (electronic procurement, sometimes also known as supplier exchange) is the business-to-business or business-to-consumer or Business-to-government purchase and sale of supplies, Work and services through the Internet as well as other information and networking systems, such as Electronic Data Interchange and Enterprise Resource Planning. Typically, e-procurement Web sites allow qualified and registered users to look for buyers or sellers of goods and services. Depending on the approach, buyers or sellers may specify costs or invite bids. Transactions can be initiated and completed. Ongoing purchases may qualify customers for volume discounts or special offers.

E-procurement software may make it possible to automate some buying and selling. Companies participating expect to be able to control parts inventories more effectively, reduce purchasing agent overhead, and improve manufacturing cycles. E-procurement is expected to be integrated into the wider Purchase-to-pay (P2P) value chain with the trend toward computerized supply chain management. E-procurement is done with a software application that includes features for supplier management and complex auctions. The new generation of E-Procurement is now on-demand or a software-as-a-service.

ADVANTAGES/BENEFITS:

E-procurement can provide real-time business intelligence to the vendor as to the status of a customer's needs. For example, a vendor may have an agreement with a customer to automatically ship materials when the customer's stock level reaches a low point, thus bypassing the need for the customer to ask for it

Companies can track purchases being made in all departments and ensure compliance to standards. For example, a marketing agent might want to purchase a new laptop for his business trip. In a manual setup, the agent might be instructed to go to a local supply chain store, purchase the laptop and submit the receipt back to the company for reimbursement. Such purchases are difficult to track. With an electronic procurement system in place, the entire purchase runs through approval work flows and the person who approves of such requests ensures the laptop is bought only for the configuration needed in a business use. The turnaround time in making phone calls to suppliers, placing orders and delivery is reduced as buyers can place the order instantly. This ensures purchases, especially the critical ones are made on time, thus contributing to the overall process efficiency.

Constraints:

Many of the problems that occur are supply related. The ability to order quickly creates an expectation in customers that the remainder of the process will proceed smoothly and quickly. But, the same capability that enables quick ordering also enables demand fluctuations that can inject a certain amount of chaos to the system, almost guaranteeing that there won’t be a smooth or quick delivery.

2. E-procurement by IBM (Reading from text book: Chapter: supply chain)

IBM’s e-procurement strategy is to exploit the web in all aspects of procurement process through global and replicable solutions. IBM implemented e-procurement in 1999, wherein it began doing business with 12000 suppliers over the web. Doing business with 12000 suppliers over the web was far more easier than linking them to EDI ( Electronic Data Interchange). The EDI system required them to purchase the EDI software and VAN, which meant extra costs. The mission of IBM Global Procurement is to acquire goods and services efficiently and effectively for internal and external customers with the most competitive supply chain cost. They use e-Procurement services across all steps of the acquisition process from

initial market intelligence, strategic sourcing, tactical implementation, invoicing, and electronic payments. These e-Procurement processes are an integral part of an optimized end-to-end supply chain, which benefits their customers and suppliers.More and more IBM clients are taking advantage of IBM's ability to integrate with their eProcurement system. When you add IBM as an IT supplier in your system you can extend all the benefits of your eProcurement efforts to the IT category:

• Convenient and efficient electronic ordering• Shorter requisition and fulfillment cycles• Centralized spending controls• Standardized global IT catalog• Inventory and logistics management.

By establishing a B2B eProcurement connection with IBM, you can research IBM products and services, view entitled pricing and make purchases through a secure Web connection. IBM is compatible with leading eProcurement solutions and supplier networks such as Ariba, SAP and Oracle, or our specialists can also help create a customized solution for your needs.E-Procurement has enabled IBM to focus on those business areas that are driving companies to improve the effectiveness of their operations to achieve better advantaged pricing, greater efficiency, tighter control of spending and improved service levels.

3. Reverse Auctioning

A reverse auction is a type of auction in which the roles of buyers and sellers are reversed. In an ordinary auction (also known as a forward auction), buyers compete to obtain a good or service, and the price typically increases over time. In a reverse auction, sellers compete to obtain business, and prices typically decrease over time.In a regular auction, purchasers are allowed to place a bid on an item, which is the amount they are willing to pay in order to buy the item. The person who places the highest bid usually ends up with the item.With a reverse auction, however, the opposite is true. More specifically, the buyer advertises a need for an item or service. Sellers then place bids for the amount they expect to be paid in order to perform such a service or provide such an item. Generally, the seller who places the lowest bid will win the job or sell the item.