case #1: Reducing Supplier Evaluation Cycle Time.
Paper details:
Read, analyze and answer the questions of the case: Reducing Supplier Evaluation Cycle Time.
Emily Burns, a commodity team leader for a consumer food products company, just returned from a seminar that addressed current sourcing and supply chain topics. One session really caught her attention. The speaker presented the results of a study that showed concept-to-customer new product development cycle times were getting shorter by 50 percent (on average) every five years. While in some industries this rate of change was less severe, in other industries the rate of change was even more rapid.
The speaker used the automotive industry as an example. In the late-1980s, GM, Ford, and Chrysler required 60 months to design and produce a new car or truck. During the early 1990s, the benchmark for development time became 48 months. By the mid-1990s world-class producers were aiming for development times of 36 months. By the late 1990s, Japanese companies had reduced development time to 24 months. In 2002, an article appeared in the Wall Street Journal quoting the CEO of Honda as saying his company needed to reduce development times to 18 months. From the mid1980s to 2003, new product development cycle times changed from 60 months to a target of 18 months, or a reduction of 70 percent! The speaker also made an offhand comment that any activities or subprocesses that support new product development must also shorten.
As Emily thought about what she had heard, she came to two conclusions. First, the food products industry was beginning to see the same kinds of market pressures that rapidly changing industries, such as automobiles and electronics, have experienced for many years. For example, she knew that the life cycles of her company’s products were getting shorter and shorter. Second, Emily knew very well that while not all supplier evaluation and selection decisions originated during the development of new products, many of the critical selection decisions were the result of new product needs. As her company reduced product development cycle times, it was logical that the time it takes to evaluate and select suppliers will also need to shorten. Emily wondered what it would take to reduce the time it takes to evaluate and select suppliers by 30 percent, 40 percent, or even 50 percent.Another part of the seminar that Emily attended required her to diagram her company’s supplier evaluation and selection process. The seminar instructor was adamant that a company cannot improve (i.e., shorten) a process until it understands what the process looks like.
1. Why should companies commit time and resources to evaluate and select suppliers?
2. Identify when supplier evaluation and selection decisions typically occur.
3. What is forcing companies to reduce the time it takes to develop new products?
4. Identify a process (with the steps clearly defined) that a company can follow when evaluating, selecting, and negotiating supply agreements with suppliers.
5. Discuss ways to reduce the time it takes to evaluate, select, and negotiate agreements with suppliers without diminishing the effectiveness of the process. Identify what part(s) of the evaluation and selection process that your ideas will affect and improve.

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