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From the BUYER'S SEAT 3.1 ALWAYS A SHARE—OR NOT Bryan Caccavele, VP of supply chain management for Newport News Shipbuilding (they build aircraft carriers and submarines), says that whenever possible, they prefer at least two vendors. "Our products have to last decades and you don't want to rely on only one vendor. If they go out of business, who will replace their product if it wears out? Or if they have a manufacturing problem and slow the production of a ship, the cost over-runs can be enormous." At the same time, however, when they find a good vendor, they stay with it. For example, when the shipyard orders pipes, the pipes have to be capped to prevent rust inside the pipes while they lie waiting for installation. Versability, an organization that employs the disabled and mentally handicapped, is the sole provider for the shipyard. A sole source procurement agreement can work because the caps are not permanent products going into a submarine that might need to be replaced later and any production issues are unlikely to slow construction of a ship. The one constant, though, is mitigating risk. One important project that Brian and his team are working on is mapping the supply chain of their vendors so that they can understand what risks their suppliers might face. One surprising fact is how many fans are on an aircraft carrier or submarine, but most are installed as part of another product. So who makes the fans that go into these parts? If an analysis of the supply chains of differ- ent vendors turns up the fact that most fans are made by the same company, then there is more risk to the shipyard than was obvious. Computers, communication systems, radar, sonar, and other systems all rely on fans to cool the equipment; if only one fan manufacturer makes them all, then a problem with the fan company affects many supply chains. "Cost is an important factor in any decision, but for us, risk adds unseen potential costs," says Bryan. "Our job is to make sure the parts are available when they're needed, which includes for some parts, over the fifty years-plus life of an aircraft carrier, and that means we have to manage risk." SRM software is being used by companies like Volvo, whose Australian truck division uses Intelex software to track suppliers' performance along metrics such as delivery reliability and invoice accuracy. At the same time, however, the software supports a larger strategy that includes early supplier involvement in product innovation because the company can combine purchases for better pricing and inventory management. 24 SRM isn't always about improving profits. Sustainability, for example, is an important trend in purchasing and means making purchasing decisions that reduce a company's carbon footprint. Coca-Cola, for example, is trying to reduce its dependence on new plastic, working with vendors who can substitute plastic bottles with either plant-based materials or recycled plastic taken from oceans. The company has worked closely with Wisconsin-based Virent and Texas-based Gevo to create bottles made from plants. 25 thinking it through Review the stages in the decision-making process described earlier in the chapter. Do you go through those stages when making an important purchase? How does the Internet affect the way you buy products and ser- vices? What effect does it have on each stage of the process? 80 CHAPTER 3: Buying Behavior and the Buying Process

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