Question

This is related Sourcing and Supplier Relationships in Supply chain

(1) Using suitable examples, distinguish between “Strategic Items” and “Core Standard Items”.

(2) Should a company develop partnership relationship with all its suppliers? Why or why not?

(3) Is the “Diamond model” for supplier relationship superior to the “Bow-tie” model? Explain.

(4) What do you understand by “Supplier development” and why is it important?

(5) Clearly describe the benefits of centralizing procurement instead of decentralizing it.

Answer 1

Strategic items are those that have high impact on the profit making and high risk of supply. They demand most attention of the purchasing managers. They can be dealt by developing long term relationships with suppliers, regular risk management, producing item inhouse instead of buying from supplier. They are a part of Kraljic portfolio purchasing model. Purchasing of these items stagnate if the supplier cease to deliver them. They are mostly raw materials.

Core standard items are those which are to be kept in stock always and ready for real time delivery as they are frequently ordered and purchased. They are in a regular process of manufacture and delivery based on the turnaround demand in the market. The suppliers keep them always ready for procurement, storage and delivery and do not wait for customer demand for the manufacturing. They are the finished consumable products available in the market for regular use.