Lecture 5: Supply

Positioning Model
AHAD NAZIR
 Formulation of supply
Positioning Model

Agenda Stage 1: Creation of

impact-risk model
Stage 2: Creation of
impact/risk and Cost
Model
 The Supply Positioning Model

Takes into account:

The level of annual expenditure

on an item

The potential impact on the

enterprise of not meeting supply
targets

Supply opportunities & risks

Ranking
purchased
items by
expenditure:
Pareto Rule
 The supply positioning model
H

Impact
L

$ 400 $ 14,700 $ 16,000 $ 63,000

Min. Max.
N
80% of items = 20% of value 20% of items = 80% of value

Expenditure
The supply positioning model: placing the items
H Micro-
valves
Speakers

Tuning Electric
M devices motors

Impact
Tran- Valves
L sistors

Confce. Casings
room
hire
Welding
Nuts & Cleaning mater.
bolts Suppl.
N
80% of items = 20% of value 20% of items = 80% of value

Expenditure
The supply positioning model as a basis for prioritising
H Micro-
valves
Speakers

Give your highest priority

to items that represent
high levels of both
expenditure and of impact!
H
Tuning Electric
M
M
devices motors

Impact

L
Tran- Valves
L sistors

Confce. Casings

N
room
hire
Welding
Nuts & Cleaning mater.
bolts Suppl.
N
80% of items = 20% of value 20% of items = 80% of value

Expenditure
 The degree of difficulty or
uncertainty that you face in
? ?
achieving your supply targets
?
because of market conditions ? ?
is called supply risk. ? ?
?
You may not know the level of
supply risk if:

You are buying a new product

Your supply target has been raised
You have not looked at the market for some time and
the supply market conditions may have changed
Stage -1 Impact / supply risk ratings
Speakers Micro-
valves

H
H

M
Electric Tuning
M motors devices

Impact

L
rating
L Valves Tran-
sistors

N
Confce. Casings
room
N hire
Nuts & Cleaning Welding
bolts suppl. mater.
N L M H
Supply risk rating
Stage -1 Impact / supply risk ratings
item: Speakers
Give each item the
highest rating applied Reduce

H
to its supply targets. delivered
H cost by 15%

M
Maintain 2- Upgrade
M weeks avge quality
stock at each rating to
99.9%
Impact centre

rating

L
Secure Reduce
L contract with delivery
supplier by lead-time by
30 Nov. 10 days

N
N .

N L M H
Supply risk rating
 The supply positioning model - Stage 2
H Micro-
valves

Speakers
Tuning
devices
M
Electric
Casings motors

Impact/ Tran-
supply sistors

risk L
Valves

Confce. Welding
room mater.
hire Cleaning
suppl.
Nuts &
bolts
N
80% of items = 20% of value 20% of items = 80% of value

Expenditure
 Stage 2-The supply positioning model -consolidated priorities

H Micro-

H
valves
Give highest priority to
items that represent high
levels of both expenditure
and of impact / supply risk! Speakers
Tuning
devices
M
Casings
M Electric
motors

Impact/ Tran-
supply sistors

risk L
Confce.
L Valves
Welding

N
room mater.
hire Cleaning
suppl.
Nuts &
bolts
N
80% of items = 20% of value 20% of items = 80% of value

Expenditure
 The Supply Positioning Model
H Item
Item F
J
Item
Item H
B
Item A Item

Impact/
M
G M K

supply
opportunity/
risk rating Item
LD
L Item
L
Item
H

Item
E
N Item
M
Item
C
N
80% of items = 20% of value 20% of items = 80% of value

Expenditure
The Supply Positioning Model: 4 types of purchase items

M
Impact/ Bottleneck Critical
supply
opportunity/
risk rating Routine Leverage
L

N
80% of items = 20% of value 20% of items = 80% of value

Expenditure
 The Supply Positioning Model

Helps you to:

Prioritise your time and effort

Develop your supply strategies

Thank
you