Table of Contents

Abstract ......................................................................................................................................................... 2
Introduction ................................................................................................................................................... 3
Task 1 ........................................................................................................................................................ 3
Task 2 ........................................................................................................................................................ 5
Task 3 ........................................................................................................................................................ 8
Conclusion .................................................................................................................................................. 10
REFERENCES ........................................................................................................................................... 11

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 Abstract
Globalization has forced organizations to move beyond their local boundaries and reach
out to the emerging demand from different regions across the globe. Today buyers are interacting
with suppliers all over the globe in order to meet the emerging demand from new markets. This
paper is purely conceptual and aims at providing discussion on relevant issues regarding supplier
development. Supplier development is an activity that has got a lot of attention in both practice
and academia.

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Introduction
In a consistantly growing competition of the world, business organizations or companies
are inevitably forced to lessen their cost with improved quality and service. In the conventional
approaches, it has been limited to eliminating wastage within a firm. However, in mordern
approaches in the current years, there has been another way which is now extensive through
supplier development. Establishing cooperation with suppliers enables buyer more efficient. This
can lead to the probability that goods can be bought at lower prices and also makes purchaser to
seek for his key competency to remain more competitive. This paper is purely conceptual aiming
at providing discussion in area of supplier development and supply networks as well as several
relevent issues around Strategic procurement and logistics. The paper starts with a general
background followed by a theoretical review defining supplier development. Finally some general
conclusions about supplier development research today and future directions are given.

Task 1
In its initiality, the term Supplier Development was mentioned by Leenders (1966). He
used this concept with referring to the efforts made by manufacturers aiming at rising the number
of feasible suppliers and get supplier's performance improved. In more specific consideration, the
definition of supplier development has been described as any effort by an industrial buying firm
to improve the performance or capabilities of its suppliers (Krause & Ellram, 1997). If suppliers
are assisted to make them more competitive and efficient, it will automatically helps buyers to
become more competitive and efficient. Supplier development is used with regard to the situation
when an organization tries to create and maintain a network of competent suppliers. From a narrow
perspective, supplier development can be defined as identifying new sources of supply where no
adequate ones exist. In some respects, there is also a long term cooperative effort between a buying
company and its suppliers to improve capacities regarding techniques, quality, delivery and
expenses in order to enhance ongoing impovement. This situation is also regarded as supplier
development (Laughen et al, 2005).
When working with supplier development there is a need to stress the importance of long-
term cooperation as well as short-term. Krause notes that most firms working with supplier
development have short-term performance goals rather than long-term goals such as capability
increase (Krause, 1997). Also Watts and Hahn (1993) found that short-term objectives often were
emphasised over long-term performance in supplier development programs thus limiting the
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possibilities for a fruitful interaction process to take place. This in some senses limited view on
supplier development show us that many firms do not view supplier development as a long term
process involving both the buyer and the supplier that both parties can gain from. It also seems
like many companies see supplier development as an operational tool rather than a strategic one.
If used properly supplier development can be a strategic tool that can determine how efficient the
firm uses its resource base.
According to Hartley and Jones (1997), supplier development is developed through four
step process as. These include processes of assessing the supplier's readiness for change, building
commitment through collaboration, implement system-wide changes, transition out of the
suppliers organization, establish follow-up and recognition procedures (Kanna and Tan, 2002).
This step aims is to find out which supplier or suppliers should be involved in supplier
development. It concerns with choosing the right supplier to get things moving. It is worth noticing
that one should think about the process of assessing he suppliers readiness as strategic decision
and avoid to be reactive to actual suppliers problems. The business man can be delighted with one
supplier because he just delivered in very short lead time what they needed for their next
production order or upset with second one how just failed to deliver material in line with their
quality requirements. The first process is used by the supplier and is expected to be one of the
decision criterias for assessing the right supplier for development. The challenging thing in this
process is to select the right evaluating techniques which may be more effective for suppliers using
labor-intensive process than the ones with capital-intensive processes. In the second step with
regard to building commitment through planning and communication ( or collaboration), it
involves all areas during the preparation stage. The manager is encouraged to be aware about the
strategic sourcing, purchasing and logistics as well as the plan to do something with supplier. What
is more, in this step the preparation for inviting design department, incoming inspection and
furthermore the participants who may not be in direct contact with supplier but if anything goes
wrong, it has influence on their work. The output of the first series of meetings are supposed to
include baseline information as background for fact-based problem analysis, supplier
communication plan with the potential supplier participants. The critical success factor in supplier
development is to get the involvement of suppliers top management commitment. The third step
is implementation, in this step, there is an agreement with which supplier we want to develop
our business, give information to inform them and get their commitment to support and cooperate

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on the development process. It is the time to get things done with right people from both teams.
The suppliers project team leader plays a critical role to achieve the success of the supplier
development program. This person must understand the companys processes and have strong
problem-solving skills. He or she is expected to have the ability to talk to different levels inside
the organization (from operator to top management). Project leader must be able to communicate
and persuade others that the change is necessary and important. Just like in any other project
involving team work, it is essential to create a project implementation plan that should address
activities required to complete project, expected completition time, project milestones, resources
assigned to activities and expected completion time of the project itself.
In addition to these above classifification of steps in supplier development Handfield et al. (2000)
in their article of "Avoid the Pitfalls in Supplier Development" proposed a process map for supplier
development. They mentioned seven steps for supplier development such as identify critical
commodities, identify critical suppliers, form a cross-functional team, meet with supplier's top
management, identify key projects, define details of agreement, monitor status and modify
strategies.
The theoretical framework of supplier devolvement show that supplier development is an
important activity that has gotten a lot of attention from large firms and academia. It can also be
noted that this review of supplier development research is quite narrow as it excludes a lot of the
purchasing research that at least implicitly deals with these aspects, and that the number of studies
focusing on supplier development are limited.
Task 2
All operations are a piece of a larget system of clients and providers ( or also referred to as
customers and suppliers). Taking a wide point of view, the operation system can be traced back to
the first sources of products and services and forward to the last end customers. The majority of
the operations on the supply side and the demand side of an operation, taken together, are known
as the total supply network for the operation. The customers and suppliers with which an operation
has contact are known as the supply network.
Very often, enterprises concentrates only on their organisation; what they manufacture or offer
and not what the end customer receives. By exmanining a supply chain network, companies are
enabled to look at the overall movement of materials or information from the beginning to the end,
allowing firms to see the value in establishing partnerships; and the value in cooperating to provide

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the best possible value is provided to the end-customer. The supply networks depict the flow and
movement of materials and information, by connecting enterprises together to serve the end-
customer. The term Network illustrates a more complicated system, where allow companies to
be cross-linked and there are two-way exchanges between them (Harland et al., 2001). From
another perspective, the integration of the entire network is unable to lessen to contract and
ownership rather, there should be an expansion into power emerging wherever the economic
dependence of one supplier party on the other is effectively significant. The ownership does not
provide power is not exclusively but they provide control and access to critical resources. The
more critical resources, the stronger the whole power. The raising of such complicated companies
means to indicate that it is of paramount significance to develop an understanding of network logic
that relies on various constructs which would come from various origins as there is an inevitable
involvement of economics, legal theory and other social sectors (Teubner, 2002). Without
consideration of the range of employment protection laws and beyond politico-legal liability, the
theorization of the network-firm as a single real entity emphasizes some issues in law. Through
this, it is obvious that the legal entity status provided by the law is extremely important and should
be thoroughly considered (Hodgson, 2002. However, it is clearly not sufficient to apprehend the
nature of the firm.
A standout amongst the most critical outlook changes of present day business is that individual
businesses no longer compete as merely independent organizations, but rather as supply chains.
Therefore, the supply network side of an organization should challenge the view of supplier
boundaries and separate entities in a network. This is a significant point. First of all, business in
this time has goned into the era of inter-network competition. In this rising competitive
environment, the definitive success of the single business will rely on the capacity of management
to incorporate the organization's intricate network of business connections. Hermann (2002)
imagines, that the conventional value chain, which made the most effective use of a resource as
sequence of functions for one business, is transforming into a global value web, which can make
the best use of the supply, demand, and product design activities for an entire network of partners.
According to Hermann, instead of thinking in terms of a linear value chain, we are encouraged to
consider about a value web where there is a parallel in the flow of material, information, and
money, taking various unrelated track through a complicated network of suppliers, service
providers, distributors, and customers. In mass-customization, where, for instance, processes,

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technology and products should be reconfigured with a specific end goal in order to satisfy the
individualized requests of customers, the comparable enterprise networks cannot stay fixed, but
they are supposed to be adjusted dynamically.
In the second point, the supply chain network and manufacturing footprint are also the entities
concern while making strategic decisions. It is a requirement for enterprises at the beginning to
decide the optimal manufacturing footprint which along side facilitating the overall supply chain
strategy. This is done to meet the customer service requirements and normally cost mostly effective
solution. Furthermore, flexibility and adaptability are also built into distribution networks to dealt
with changes in demand. The most effective manufacturing footprint and distribution network has
the ability to change over time as alteration occurs. Network optimisation exercises should be
launched when signals for network improvement occur, for example after M&A or expansion to
new markets. Such a network optimisation exercise helps organisations create a robust solution
that balances all the strategic objectives, while considering all constraints and inputs to drive
profitable revenue growth, increased operating margin and increased asset turns. This balancing
exercise can prove to be daunting as network challenges occur at every stage along the supply
chain.
Thirdly, supply networks are growing achieving more and more important position, especially in
the automotive industry. To illustrate, in work of Dodel ( 2004), it is mentioned on the logistic
criticality in the automotive business a logistics manager of an organization named
DaimlerChrysler AG, who says that the processes and skills of the direct suppliers are well
known. What is missing is the transparency on the complete supply network, which serves behind
the direct suppliers. If a supply problem occurs, great efforts have to be taken to identify the cause
of the problem. Additionally, in spring 2004 DaimlerChrysler had to retrieve a huge number of
1.3 million cars because of issues with the combination of system modules provided by different
supply partners. Jrgen Schrempp, CEO of the company, stated during an interview prior to the
annual general meeting, the company underestimated the complexity of networking partners, who
deliver complete system modules. In term of structure, organizational structure can refer to the
individual firm and the supply chain; there will be use of cross-functional teams. When these teams
cross organizational boundaries, such as in-plant supplier personnel, the supply chain is expected
to be more integrated. Product flow facility structure refers to the network system for sourcing,
manufacturing, and distribution across the supply chain. Since inventory is essential in this system,

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many may expect supply chain members of the network keep a disproportionate amount of
inventory. At this point, there will be challenging regarding supplier boundaries and separate
entities in a network. As it is less expensive to have unfinished or semi-finished goods in inventory
than finished goods, upstream members may bear more of this burden. Rationalizing the supply
chain network has implications for all members. The sort of information passed among channel
members and the frequency of data updating has a significance impact on the efficiency of the
supply chain. To have an overall picture of an organisations supply chain network; one is expected
to map information and material flow.
Task 3
Because of the fact that there is an extensive research range regarding operations management of
logistics, it is impossible to make a comprehensive review in one paper. In this section, several of
the most important aspects in relevant to the issue will be ponited out. There are two significant
aspects that are relevant in relation to operations management and logistics strategy when
considering supplier delivery risk.
To begin with, inventory and transportation is one of such significant aspect worth considering.
The inventory management of perishable goods (or in other word deteriorating product) is a
historic and fully grown field in logistics and supply chain management. Within practical concern,
a couple of decades prior, a few organizations adopted and shaped possitive feedback of consumer
to move their concentration from regulating logistical expenses to looking at inventory. The
customer service in addition turned into a critical competitive distinction point for organizations
to focus on creating and bringing value for end buyers. In that situation, inventory is held for two
primary reasons, to lessen costs and to enhance customer service. Each of these two is motivated
differently since the firms have to make a balance between problem of having excessively
inventory (which can lead to high cost) and having too little inventory (which can result in lost of
sales). It is commonly believed that supply chain management can postively result in cost savings,
largely through reductions in inventory. In academic research, this kind of operation management
generally deals with two sorts of perishable loss including loss of quantity value and loss of quality
value, which are likely to happen very often with any perishable goods. In a sutdy of Cai et al
(2010, a stochastic model was embraced to work on an inventory through which a quantity of a
fresh product is delivered to the distributor. During the transportation process, the wholesaler must
try to keep the freshness of the goods, and his success in this regard influence on both the quality

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and quantity of the product conveyed to the market. Cai et al. (2013) additionally develop the
model into a 3-stage supply chain with the involvement of outsourcing transportation. Another
similar aspect of significance within this consideration of operation management is transportation.
It is for all intents and purposes in today's economy for every business to function under the great
support of transportation. Transportation is a fundamental and a noteworthy sub-capacity of
logistics that creates benefits in term of time and place in products. Indeed, the foundation of the
whole inventory network is the transportation management that enables the business to achieve the
well-known seven Rs- the right product in the right quantity and the right condition, at the right
place, at the right time, for the right customer at the right cost. Transportation, thereby, play a
critical role in any international logistic effort due to the long distances that can separate a company
from its customers. Logistics is regarded as a part of the supply chain process. In this process, the
plans and implementation are created. In addition, there are actions to handle the efficient, effective
forward and reverse flow and storage of goods, services, and important relevant data between the
point of beginning and the point of consumption. All of these things are to meet customers
requirements. At this point, supplier delivery risk can take place. Within all of the above respects,
transportation is an important relevant aspect. With well developed transportation systems only
the logistics could bring its advantages into full play. An efficient transport system in logistics
activities helps to bring about effective logistics performance, reduce operation cost, and promote
service quality. In order to improve the transportation systems, effort needs to be made from both
public and private sectors. A well-functioned logistics structured can raise both the
competitiveness of the government and firms. In the literature, Kaufman (2002) investigates one
of the multi-purpose (or sometimes refered to as the intermodal) operational issues. Within this
consideration, he investigate the way to choose best routes for shipments through the worldwide
intermodal arrange. The issue is figured as a multiobjective multimodal multicommodity stream
issue with time windows and sunken expenses, and a well-regulated heuristic is proposed. Albani
et al (2014) display a first endeavor for the improvement of an analytical framework for planning
rail-truck multi-purpose transportation of unsafe materials by building up a biobjective
optimization model to arrange and manage intermodal shipments to present the present practice;
the routing choices in the model are driven by delivery times determined by the clients.
One more important relevant aspect that needs to consider in relation to operations management
and logistics strategy when considering supplier delivery risk is the delivery delay. This problem

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is due to internal factors of both in the production stage and the planning process. To be more
specific, unexpected incidents like malfunction of machinary equipment, insufficience of human
resources, absence of employees and staff, not enough materials, and in the planning process. The
incidents regarding this may also be blamed to carelessness or errors in decisions regarding
planning and scheduling, as well as selection of an unreliable supplier. All of these unexpected
factors results in the shortages of the final products and the impossibility of satisfying the
customers requirement. However, it is important to notice that a firms delivery reliability is not
an exclusively internally determined performance. In reality, in a multi-tiered supply chain, the
performance of an actor has impacts on the performance of the following aspects; for instance, a
delay in delivery from supplier A to a firm B are likely to jeopardize the delivery reliability of X
with respect to its customer E and, eventually, to its end customer C. Within this domino effect,
the performance of one business should contemplate his or her suppliers performance. However,
from the perspective of quantitative evaluation, it is the common situation that most enterprises
are often encountered with the insufficience of past and quantifiable data and information
regarding the past performance or operation of the supplier. Consequently, in today business
environment characterized by its changeable features, many decisions are made usually without
high level of reliability and normally based on incomplete or even non-existent information.
Considering the aspect of the delivery reliability, for instance, information regarding distribution
on the earlier delivery performance of a supplier may be limited or missing when it comes to deal
with a new supplier. Sometimes, such a lack of numerical data is compensated for by an educated
guess of the mean and the variance of the data distribution. According to Azadegan (2011), while
being in these conditions, it is encouraged to employed a normal distribution in the computational
models, regardless of the probability that such an assumption does not offer the best decision in
cases when other probability distributions with the same mean and variance occur.

Conclusion
This paper has provided a discussion and addressed several critical issues concerning supplier
development, supplier network and other relevant issues around the topic. Challenges in todays
economy are more and more transforming formerly closely-linked value chains into flexible
networks, thus significantly changing the buyer or producer-supplier relationship. In order to
accomplish this extension, complexity issues connected with the modeling of supplier networks

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have to be overcome. Having identified the need for managing the complexity of supplier network
modeling, a reference model for the domain of strategic supply network development has been
developed. It contributes to the class of theoretical constructs of potential business challenges and
describes functional, data and process aspects in strategic sourcing in order to optimize the the
most effective management function in a network perspective.

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