Eskom Procurement Book 2015

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. 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.

1.3.7 DEVELOP PERFORMANCE MEASURES

7 CHAPTER 1