Supply Chain Management Elements 5 and 6
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Supply Chain Management Elements 5 and 6

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Questions and Answers

What happens to SOWs in outsourcing relationships?

  • They are only used for internal departmental purposes
  • They become flexible and adaptive to new requirements
  • They dictate conventional and less-than optimal ways of performing tasks (correct)
  • They prioritize innovation and continuous improvement
  • Why do internal departments create requirements that only the incumbent supplier can provide in an RFP process?

  • To favour the incumbent supplier and prevent change (correct)
  • To ensure a level playing field for all bidders
  • To reduce the cost of the procurement process
  • To encourage innovative solutions from new suppliers
  • What is the 'Honeymoon Effect' in outsourcing relationships?

  • The stage where both parties go through a period of excitement and high expectations (correct)
  • The point of contract termination and renewal
  • The phase of contract negotiation and agreement
  • The initial period of high performance and innovation
  • What prevents partners from raising service levels beyond what's contained in the Service Level Agreements?

    <p>The lack of incentive to improve performance</p> Signup and view all the answers

    What opportunity is frequently dismissed in outsourcing relationships?

    <p>The opportunity to bring innovations to the table</p> Signup and view all the answers

    What is 'Sandbagging' in contract manufacturing or logistics?

    <p>The practice of withholding innovations until the contract end date</p> Signup and view all the answers

    Why do suppliers bring innovations to the table towards the end of the contract?

    <p>To secure a new agreement and maintain the relationship</p> Signup and view all the answers

    What is the outcome of not managing outsourcing relationships effectively?

    <p>Rigid and conventional ways of performing tasks</p> Signup and view all the answers

    What is the primary purpose of determining metrics and reports in supplier management?

    <p>To manage the business and determine the frequency of reports</p> Signup and view all the answers

    What is an example of a fully integrated reporting process for sharing sales data?

    <p>Walmart's Retail Link</p> Signup and view all the answers

    What should be included in a well-structured contract?

    <p>A balanced risk versus shifting risk to a supplier</p> Signup and view all the answers

    Why is it important to regularly review pricing models and risk assignment?

    <p>To ensure the supplier is compensated appropriately</p> Signup and view all the answers

    What is the benefit of a longer-term contract?

    <p>Encourages suppliers to make long-term investments</p> Signup and view all the answers

    What should be considered when determining the contract length?

    <p>The payback period for suppliers' investments</p> Signup and view all the answers

    What is the purpose of developing a thoughtful plan to introduce improvements?

    <p>To reduce total program risk</p> Signup and view all the answers

    What may happen as the supplier gains more experience?

    <p>The contract type evolves into a more strategic form</p> Signup and view all the answers

    What is a typical characteristic of strategic contracts?

    <p>Contract terms in excess of five years</p> Signup and view all the answers

    What is the purpose of including incentives in a pricing model?

    <p>To promote behaviors and outcomes that benefit both parties</p> Signup and view all the answers

    What is a key component of a good contract, as mentioned in the Element 7 Relationship Management Framework?

    <p>Clear outlines of all six relationship management components</p> Signup and view all the answers

    What is the primary purpose of transformation management in a supplier contract?

    <p>To ensure the supplier meets necessary milestones</p> Signup and view all the answers

    What is an example of a change that may impact key elements of a supplier agreement?

    <p>Change in the bill of materials for a component supplier</p> Signup and view all the answers

    What is a provision that may be included in more strategic supplier relationships?

    <p>A provision for the parties to develop a continuous improvement process</p> Signup and view all the answers

    What is a key aspect of a formal change management process in a supplier agreement?

    <p>The process outlines how changes will be handled by both parties</p> Signup and view all the answers

    Why is it important to have a clear outline of the relationship management framework in a supplier contract?

    <p>To clearly define the relationship management components</p> Signup and view all the answers

    Study Notes

    Element 5 Performance Management

    • Trading partners should determine metrics reports and frequency to manage the business
    • Performance reporting can be as simple as an Excel spreadsheet or fully automated and integrated, like Walmart's Retail Link
    • Partners can access sales data via an Internet portal, tracking product performance in near real time

    Element 6 Pricing Model

    • Contracts should outline pricing or the pricing model to compensate suppliers
    • Pricing models should consider balancing risk and include a plan to introduce improvements that reduce total program risk
    • Partners should regularly review pricing models and risk assignments over the contract's life
    • Contracts can evolve from transaction-based to outcome-based pricing models as the supplier gains experience
    • Contract length should be commensurate with the payback period for suppliers' investments
    • Incentives should be included in the pricing model, promoting behaviors and outcomes that benefit both parties

    Element 7 Relationship Management Framework

    • Contracts should clearly outline the relationship management framework
    • A good contract will outline all six relationship management components

    Element 8 Transformation Management

    • Contracts should outline transition expectations, including project milestones, reviews, and escalation paths
    • A formal change management process should be outlined, including how to handle changes impacting the agreement
    • More strategic relationships may include provisions for continuous improvement processes

    The Honeymoon Effect

    • Both parties go through a honeymoon stage at the beginning of a relationship
    • The level of excitement wanes after the initial ramp-up, and performance levels may not improve beyond the contract's expectations
    • There is an opportunity to use lessons learned to develop innovative new ways to deliver desired outcomes, but it's often dismissed due to lack of incentives

    Sandbagging

    • Suppliers may bring innovations to the table near the end of the contract to secure a new agreement

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    Description

    Learn about elements 5 and 6 of supply chain management, including performance management and pricing models. Understand how to determine metrics, access sales data and compensate suppliers.

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