Identifying Potential Sources

Identifying Potential Sources

 

There are three potential supply options for any new need/requirement of an organization: (1) the make/buy decision; (2) acquire from a current supplier; and (3) search for new potential suppliers.  We discussed the make/buy decision during the strategic cost phase.  This involves doing a cost analysis between to cost to make and the cost to buy.  If a firm decides to buy, then it will either choose from a current approved supplier or a new supplier.  This decision is based upon the product and the its specialized nature.  When no suitable supplier can be found, the supply professional still has the option of using supplier development or redesign or re-specification to see if a suitable source can be found or developed.  There is a remote chance that, despite all efforts, no solution is found.  The supply professional then gets together with the requisitioner to see if an alternative or substitute solution can be found.

 

  • Information Sources – Knowledge of potential sources is a key driver of the ultimate success or failure of the supplier solution effort.  Every supply professional is always on the alert for potential new sources.  Knowledge of sources is therefore a primary qualification for any effective supply manager. 
    • Online Sources – The Internet and the World Wide Web provide rapidly growing and ever-changing body of information for supply professionals.  The challenge is not just finding information, but identifying, sorting, analyzing, and using relevant information.  Examples of online information include Dun and Bradstreet (D & B), Thomas Register, Worldpages.com, World Wide Yellow Pages, and Ziff Davis Media Publications. 
    • Catalogs – A well managed purchasing and supply department must have catalogs of the commonly known sources of supply, covering the most important materials in which a company is interested.
    • Trade Journals – Also a very valuable source of information about potential suppliers.  Journals have two main uses: (1) to gain general information from the articles that might suggest new products and substitute materials as well as information about suppliers and their personnel; (2) use advertisements to stay current on offerings.
    • Trade Directories – Trade registers or trade directories are volumes that list leading manufacturers, their addresses, number of branches, affiliations, products, and, in some instances, their financial standing or their position in the trade.  They also contain listings of the trade names of articles on the market with names of the manufacturers and classified list of materials, supplies, equipment, and other items offered for sale, under each of which is given the name and location of available manufacturing sources of supply.
    • Sales Representation – Sales Representatives may constitute one of the most valuable sources of information available, with references to sources of supply, types of products, and trade information generally.
    • Supplier and Commodity Databases – A commodity database classifies material on the basis of the product and includes information related to the sources from which the product has been purchased in the past, perhaps the price paid, the point of shipment, and a link or cross-reference to the supplier database.
    • Visits to Suppliers – Some supply managers feel that visits to suppliers are useful when there are no difficulties to discuss.  The best results from visits come from (1) developing, in advance, a general outline of the kinds of information sought; (2) gathering, in advance, all reasonably available information, both general and specific, about the company; and (3) preparing a detailed report of the findings after the visit.
    • Samples – Samples can be taken to test to see if the sample from the supplier meets the requirements.
    • Colleagues – Internal business partners are valauble sources of information about potential suppliers.
    • References – Buyers will request references in the RFQ, RFP, or RFB.  References should be with companies of similar size and objectives as the potential supplier, people who have firsthand knowledge of the supplier’s performance, and can answer open ended questions that allow the reference to describe the performance of the supplier and the relationship
  • Standard Information Requests – This a cursory review of the communication process by the buyer as discussed in Week 10.
    • Request for Information (RFI) – this signals that a supply professional has identified a potential supplier, and that the buyer has indicated a willingness to enter into a potential business relationship.
    • Request for Quotation (RFQ) or Request for Bid (RFB) or Invitation to Bid or Tender – represents a serious inquiry of the supplier on a specific requirement or a variety of requirements.
    • Request for Proposal (RFP) – used when it is difficult to describe a requirement adequately, or the supply organization lacks the ability to create an RFQ, or when the supply professional expects that innovation or creativity in the market might result in a superior solution.