You are the chief executive of a large restaurant chain that is about to rebrand and specialise in strictly 100% organic and sustainable ingredients. The mainstay of your menu will be a special type of rice, which you know is currently produced by a very small minority of growers. Thus, you can assume that at least one of your main suppliers will ultimately be vital partners to your operation. Given this situation, you are to:
In every successful operational function and sustainable partnership, a good supplier selection process must be put in place to ensure the best supply chain performance. This is a process which many companies identify, evaluate and offer contracts to suppliers. Competitive international business circumstances made many companies to focus on supply chain management and supplier selection. Once a supplier becomes part of a well-managed and established supply chain, the relationship between the buyer and supplier will have a viable effect on the competitiveness of the entire supply chain. Also, most of the companies have been spending considerable amount of their revenues on purchasing, therefore supplier selection process has become one of the most important issues for establishing an effective supply chain management system
Develop requirements for supplier selection in your supply chain; and
In this era, every company has a plan of upgrading to supply organic products, since many customers this day wants to live in a chemical free lifestyle. Green restaurant venture being one of the best restaurants around, it must also put more effort to ensure that all products given to customers are 100% organic. This will attract more customers and they will make huge profits from this initiative. To achieve this, we must set up some requirements for every supplier during selection stages such that they are well informed on what they will be suppling to the restaurant. Typically, there are two kinds of supplier selection approaches: single sourcing and multiple sourcing. In the first kind of supplier selection, one supplier can satisfy all the buyer’s requirements but in multiple sourcing company need to select a collection of selected suppliers and their allocations. Purchase manager makes a strategic plan for the number of suppliers according to the specifications of the company, product and market. Let’s take a look on some of the requirements that should be developed.
(a) Review company requirements and literature. Make a set of candidate criteria and determine evaluation factor for ranking criteria based on company preferences;
(b) Conduct pairwise comparisons of evaluation factors by expert team manager, and calculate evaluation factors weights using AHP technique;
(c) Score candidate criteria based on evaluation factors, construct decision matrix and rank candidate criteria using evaluation factors weights and TOPSIS technique
(d) Calculate high ranked criteria weights in similar way to evaluation factors weights;
(e) Find potential suppliers by initial screening. Score potential suppliers based on high ranked criteria, then rank potential suppliers using high ranked criteria weights and Fuzzy GRA technique.
Figure 1 step by step procedure of green restaurant venture suppliers selection
Discussion
(In A) Criteria selection is based on evaluation factors. Evaluation factors determine and prioritize the characteristics which company expected from criteria. According to company preferences four evaluation factors of frequency in references, adaptation with kind of product, easily understanding and easily measurement selected to examine candidate criteria. (In B) Weights of four evaluation factors are calculated based on pairwise comparisons which represent the importance of evaluation factors.
(In C) Candidate criteria are ranked by TOPSIS technique using a nine point Likert scale with 1 as lowest and 9 as highest. TOPSIS is a multiple criteria decision-making method, the technique is based on the idea that the optimal solution should have the shortest distance from the positive ideal solution and the farthest from the negative ideal solution. A solution is determined as a positive ideal solution if it maximizes the benefit criteria or minimizes the cost criteria. On the other hand, the solution which maximizes the cost criteria or minimizes the benefit criteria is called the negative ideal solution.
(In D) Company decided to use four high ranked criteria (service, qualitative, EMS and financial criteria) for supplier selection, because more than four criteria make the process too complicated and less may decrease certainty of the decision. (In E) After initial screening, some candidates (i.e. potential alternatives for PMS) are selected by experts but the names are not given and abbreviated in a1, a2 and a3 for steel sheet suppliers and b1, b2 and b3 for PET granule suppliers.
- Develop contractual/service-level agreement principles in terms of data sharing, cost optimisation, and risk sharing, all for managing the future partner relationship.
Service-level agreements are contracts between service providers and customers that define the services provided, the metrics associated with these services, acceptable and unacceptable service levels, liabilities on the part of the service provider and the customer, and actions to be taken in specific circumstances. (SME, 2011). The purpose of setting service levels is to enable the customer to monitor and control the performance of the service received from the provider against mutually agreed standards. Mutually agreed service levels are benchmarked for both customers and providers. Specifically, for customers, the minimum acceptable level of service is that required to meet the present requirements of a particular function, activity or organisation, and against which required levels can be increased, reduced or deleted in the future.
Data sharing – agreement is an agreement between two or more organizations about how to share data. It will define what data is being shared and for how long, and any restrictions on its use. Data sharing agreements can take many forms, depending on the scale and complexity of the data sharing. For example, memoranda of understanding, service level agreements and formal legal contracts could all be data sharing agreements. A data sharing agreement is a set of common rules binding for all the organizations involved in a data sharing initiative. The agreement should be drafted in clear, concise language that is easily understood.
Cost optimization
A main challenge for service providers is managing service-level agreements (SLAs) with their customers while satisfying their business objectives, such as maximizing profits. Most current systems fail to consider business objectives and thus to provide a complete SLA management solution. This work proposes an SLA-driven management solution that aims to maximize the provider’s profit by reducing resource costs as well as fines owning to SLA violations. Specifically, this work proposes a framework that comprises multiple, configurable control loops and supports automatically adjusting service configurations and resource usage in order to maintain SLAs in the most cost-effective way. The framework targets services implemented on top of large-scale distributed infrastructures, such as clouds. Experimental results demonstrate its effectiveness in maintaining SLAs while reducing provider costs.
risk sharing
It is vital to understand that risks do not go away because a contract document states that they are shouldered by someone else (normally the supplier). Certainly, for high materiality projects risks must be monitored and controlled. Should risks materialise and become issues, then there could be knock-on consequences to the client. These consequences may themselves become new risks. Contract negotiators need to be realistic. Risk mitigation which aims to off-load all risk to the other contracting party may achieve this outcome only at an uneconomically high price, thus undermining the project concept. Off-loading all risk may encourage the supplier to become overtly ‘contractual’ in their dealings with the client, to the overall detriment of the concept/ project. Directors of companies and public sector bodies should have a good appreciation of any risks to their business that could impact the way that they interact with their key stakeholders – especially customers. Special risks arise as a result of supply/procurement activity. The purpose of this Review is to identify common risks in supply/procurement contracts, whether capital buys, direct services or outsourcing, and to suggest methods for addressing and managing those risks.
REFERENCES
Beil D (2010) Supplier selection. Encyclopedia of operations research and management science, Wiley, New York
Boer LD, Wegen LVD, Telgen J (1998) Outranking methods in support of supplier selection. Eur J Purch Supply Manage 4:109–118
Chai J, Liu JNK, Ngai EWT (2013) Application of decision-making techniques in supplier selection: a systematic review of literature. Expert Syst Appl 40:3872–3885
Cheraghi SH, Dadashzadeh M, Subramanian M (2004) Critical success factors for supplier selection: an update. J Appl Bus Res 20(2):91–108
Deng J (1989) Introduction to grey system theory. J Grey Syst 1(1):1–24
Dikson GW (1996) An analysis of vendor selection: systems and decisions. J Purchasing 1(2):5–17
Ghodsypour SH, Obrien C (1998) A decision support system for supplier selection using an integrated analytical hierarchy process and linear programming. Int J Prod Econ 56–57:199–212
Govindan K, Rajendran S, Sarkis J, Murugesan P (2013) Multi criteria decision making approaches for green supplier evaluation and selection: a literature review. J Clean Prod 1:1–18
Australian National Audit Office (2010), Effective Cross-Agency Agreements, Audit Report No. 41, Canberra: Australian National Audit Office, http://www.anao.gov.au/uploads/ documents/2009-10_Audit_Report_41.pdf
Beaumont, N. (2003), Insourcing, Outsourcing and Service Level Management, Working Paper 60/03, Melbourne: Monash University
Blackwell, M., and J. Dixon, (2003), Service level agreements: a framework for the quality management and improvement of central support services http://citeseerx.ist.psu.edu/ viewdoc/download?doi=10.1.1.84.3704&rep=rep1&type=pdf