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Savvy purchasing managers develop a sound supply base to support the firm’s overall business and supply chain strategies, based on an expanded role for suppliers. It is thus vital to understand the strategic role of suppliers. Besides supplying the obvious purchased items, key or preferred suppliers also supply: 1. Product and process technology and expertise to support the buyer’s operations, particularly in new product design and value analysis; 2. Information on the latest trends in materials, processes, or designs; 3. Information on the supply market, such as shortages, price increases, or political situations that may threaten supplies of vital materials; 4. Capacity for meeting unexpected demand; and 5. Cost efficiency due to economies of scale, since the supplier is likely to produce the same item for multiple buyers. When developing the supply chain, preferred suppliers are developed to provide services to the firm. Supply base plays an important role in the success of the supply chain. SUPPLIER SELECTION The decision to select a supplier for office supplies or other noncritical materials is likely to be an easy one. However, the process of selecting a group of competent suppliers for important materials, which can potentially impact the firm’s competitive advantage, is a complex one and should be based on multiple criteria. In addition to cost and delivery per- formance, firms should also consider how suppliers can contribute to product and process technology. Factors that firms should consider while selecting suppliers include: 1. Process and product technologies: Suppliers should have competent process tech- nologies to produce superior products at a reasonable cost to enhance the buyer’s competitive edge. 2. Willingness to share technologies and information: With the current trend that favors outsourcing to exploit suppliers’ capabilities and to focus on core compe- tencies, it is vital that firms seek suppliers that are willing to share their technolo- gies and information. Suppliers can assist in new product design and development through early supplier involvement (ESI) to ensure cost-effective design choices, develop alternative conceptual solutions, select the best components and tech- nologies, and help in design assessment. By increasing the involvement of the supplier in the design process, the buyer is free to focus more attention on core competencies. 3. Quality: Quality levels of the purchased item should be a very important factor in supplier selection. Product quality should be high and consistent since it can directly affect the quality of the finished goods. 4. Cost: While the unit cost of an item is not typically the sole criterion in supplier selection, total cost of ownership is an important factor. Total cost of ownership or total cost of acquisition includes the unit cost of the item, payment terms, cash discount, ordering cost, carrying cost, logistical costs, maintenance costs, and other more qualitative costs that may not be easy to assess. An example of a total cost of ownership analysis is provided in the following section. The total cost analysis demonstrates how other costs besides the unit cost can affect purchase decisions.