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CHAPTER 1
PRINCIPLES OF SUPPLY CHAIN AND PROCUREMENT MANAGEMENT
Astrategic alliance has been defined as a purposive relationship between two or
more independent firms that involves the exchange, sharing, or co-development
of resources or capabilities to achieve mutually relevant benefits [3]. However,
once formed, these strategic alliances need to be developed through effective
relationship management. Examples of strategic partnerships that have been
successful include the Sony-Ericsson alliance and La Tapatia Tortilleria and
El Aguillea Tortillas alliance. In the La Tapatia Tortilleria and El Aguillea Tortillas
partnership, the strategic alliance opened the new market of California to fresh
tortillas. Neither of the companies had the production ability to service the market
alone, but together they were able to capture a huge market and become very
successful.
1.3.7 DEVELOP PERFORMANCE MEASURES
The importance of measuring performance cannot be overstated since it affects
strategic, tactical and operational planning and control. Measuring performance
has an important role to play in setting objectives and determining future courses
of action. Performance needs to be measured across the supply chain so
that suitable action can be taken to ensure that the performance of the entire
supply chain remains optimum. Performance measures are usually applied in
the context of supply chain activities or processes such as planning, sourcing,
making or assembling, delivery and customer satisfaction.
Planning procedures include activities such as order entry methods, order lead
times and customer order paths. The order entry method determines the way
and extent to which customer specifications are converted into information
and exchanged along the supply chain. Order lead time, derived from the total
order cycle time or order-to-delivery cycle time, refers to the time between
the receipt of the customer order and the delivery of the finished goods to the
customer. Measuring the time spent in the different channels of the customer
order path allows one to identify the non-value-adding activities that need to
be eliminated [18].
Evaluation of supply links includes the evaluation of suppliers, strategic
level measures, tactical level measures and operational level measures.
The evaluation of suppliers in the context of the supply chain involves the
measurement of efficiency, flow, integration, responsiveness and customer
satisfaction at the strategic, operational and tactical level. Strategic level
measures include comparing lead time against the industry norm, quality
level, cost-saving initiatives and supplier pricing against market. Tactical
level measures include gauging the efficiency of the purchase order cycle
time, booking-in procedures, cash flow, quality assurance methodology and
capacity flexibility. Operational level measures include the day-to-day technical
representation, adherence to developed schedule, ability to avoid complaints
and the achievement of defect-free deliveries.